Grand Strand Real Estate News - February 2023

February 2023

Volume 2023 Issue 2

Dear Gene Carter Team,

Summary

For oceanfront and resort condos, we are seeing a good number of cash buyers and relatively few new listings - resulting in stable prices despite the high interest rates. Market details below.

Oceanfront condo owners are likely to see increases in HOA fees if they have not already. A combination of factors are causing commercial insurance rates to skyrocket, particularly for oceanfront properties. More details below.

New-home sales are booming, largely because of incentive programs and also because of greater availability compared to desirable resales. In the month of February, 55% of all single family home closed sales were new construction. More details below.

Market Update

The number of active oceanfront condo listings dropped substantially again, 370 in February vs 406 in January. This is the seventh month in a row the number of active listings has declined. The number of active condo listings off the beach also decreased again, from 769 in January to 757 in February. See chart in newsletter.

In February, there were only 139 new oceanfront condo listings, a sharp decline from the 191 new listings in January (a 27.2% decrease). As previously mentioned, the number of active listings decreased from 406 to 370, an 8.8% decrease. Meanwhile, the number of pending sales increased 16.7%, from 203 to 237. With listings selling faster and new listings coming in slower, it makes sense that the number of active listings continues to decline. See chart in newsletter.

Sellers: Our market environment remains great for selling. Reasonably priced smaller condos are selling steadily and larger condos (anything from a deluxe one bedroom up), are selling almost as soon as they hit the market, even at prices higher than recent sales in many cases.

There are fewer buyers than there were a year ago but the low inventory is keeping prices strong. I hope this continues indefinitely but there is no guarantee. Please contact me if you would like a customized market analysis for your property.

Buyers: We are seeing attractive new listings every day but they are selling quickly. Many buyers have said they are waiting for prices to come down but I’m not sure we're going to see that any time soon - if ever. 

It appears that last year’s increases were not an anomaly or a bubble. They were simply overdue. Oceanfront condos in our area are still selling for 30% to 40% below rebuilding costs and are still far lower priced than comparable properties in any coastal resort market in the country. 

Also, rental incomes increased 20% to 40% across the board starting in 2021 and continuing into 2022. This added real value to the investment properties in our area. Please contact Teressa or Kevin if you’re interested in purchasing.

Increasing Insurance Rates and HOA Fees

HOA fees have generally been pretty stable for the past decade or so. This year, and possibly next year, we could see significantly bigger increases as insurance premiums for commercial buildings are expected to increase sharply. Since insurance currently comprises around 20% of an HOA’s budget, this could have a big effect.

First, insurance costs, particularly in coastal areas, are increasing largely because of climate change induced weather events. In the United States, there were almost $100 billion in insurance claims due to natural disasters in 2022, mostly weather related and many in coastal areas. When insurance companies have to pay out lots of claims, they increase their premiums to replenish their reserves and also because the future risks are perceived to be higher.

The second factor is that construction costs have increased dramatically in recent years, especially for commercial buildings. Many insurers are requiring re-estimations of replacement costs (on which insurance is based). 

The third and biggest factor is a result of these first two. Insurance companies have limits for how much they can insure. If they want to sell more insurance, they can do so by buying reinsurance. With the building cost increases and more coverage needed because of higher risks, many insurance companies are above their coverage limits. Unfortunately, the reinsurance companies are also reaching their limits and pulling out of markets. 

A condo HOA is required by its master deed to carry a certain amount of insurance, regardless of how much it costs. In 2006 and 2007, virtually all of the insurance companies left our market because of a similar chain of events. About the only resource left to fill the gap for insurance was Lloyd’s of London. They will insure just about anything for the right price. They basically said, “Sure, we will insure your condo towers but it will cost you 500% more”. The HOAs had no choice but to accept these huge increases. Since insurance typically comprises about 20% to 25% of an HOA’s budget, this 500% increase caused HOA fees to double.

The situation does not appear to be as dire this time but the shortage of insurance carriers is already causing premiums to increase (supply and demand!). An insurance source I consulted said she is expecting to see some cases in which insurance premiums increase 50% to well over 100%. If so, this could result in HOA fees increasing by 15% to 30% or more. She does not expect any relief before 2024. 

I’m hoping this situation will resolve itself relatively quickly. What happened before was that other reinsurance companies came into the market and/or insurance companies were able to increase their capacities and competition between them resulted in premiums coming back down. After a few years, insurance rates were in the same general range they had been before (other than adjustments for increases in rebuilding costs).

New Home Sales (Resales Too)

After reading last months newsletter, several current owners of resort condos contacted my team to indicate that they are interested in purchasing primary homes in our area. We hope you will think of us when you are ready to make the move!

As previously noted, new home sales comprised 55% of all closed sales in February in our market. The new construction median selling price in February was $371,990 compared with $352,500 for resales. Also, note that there were more new listings during February for new homes than for resales. See chart in newsletter.

Although we certainly handle resales, new construction provides a number of benefits. The houses are brand-new and under warranty. In many cases, you can make choices regarding flooring, appliances, etc. Also, many of the builders are offering great incentives. 

At least one builder can set up its buyers with fixed rate financing at exceptionally low interest rates. Currently, they are offering fixed rate 30 year financing at 5.5% versus the 6.5% to 7% rates available through typical mortgage lenders. This represents huge savings over the life of the loan. Many builders are also offering closing costs and other buyer incentives. 

Incentives of this type can come and go quickly. They often result from builders’ efforts  to reach quarterly and yearly sales goals. Once the goals are met, the incentives go away. For this and many other reasons, if you’re thinking of buying, you need a local buyer’s agent to keep you up-to-date.

There are lots of other reasons for working through a buyer’s agent versus just calling up builders directly. Please contact me or Teressa or Kevin if you are interested in purchasing a single family home.

Please Contact The Beach Pro Team If:

You are thinking of buying or selling an oceanfront or resort condo in our area.

You are considering moving to our area or know someone else who is.

You are an agent who has clients thinking of moving here or buying or selling in our area.

You currently own a condo in our area and want a permanent home.

Check out our usual Grand Strand Market Reports, Sales and Listing Updates, my Best Buys, and new Beach Pro Team reviews.

Greetings from the Grand Strand!

We are being treated to an early spring this year with generally mild weather since mid February. My wife and I visited Arizona this past week and the folks out west have not fared quite so well with storms in the air and snow on the ground. 

For oceanfront and resort condos, we are seeing a good number of cash buyers and relatively few new listings - resulting in stable prices despite the high interest rates. Market details below.

Oceanfront condo owners are likely to see increases in HOA fees if they have not already. A combination of factors are causing commercial insurance rates to skyrocket, particularly for oceanfront properties. More details below.

New-home sales are booming, largely because of incentive programs and also because of greater availability compared to desirable resales. In my last newsletter I reported that new-home sales made up 39% of all single-family home sales in 2022. In the month of February, 55% of all closed sales were new construction. More details below.

Market Update

Here’s the updated chart for active oceanfront condo listings. The number of active oceanfront listings dropped substantially again, 370 in February vs 406 in January. This is the seventh month in a row the number of active listings has declined. The number of active condo listings off the beach also decreased again, from 769 in January to 757 in February.

The chart below shows several month-to-month metrics for oceanfront condos. Average sale price decreased 12.2%. I don’t think this is really indicative of values going down. It appears to be because the majority of sales were efficiencies and one bedroom condos. Of 109 closed sales, 64 were efficiencies or one bedrooms. There were only 139 new listings, a sharp decline from the 191 new listings in January (a 27.2% decrease). As previously mentioned, the number of active listings decreased from 406 to 370, an 8.8% decrease. Meanwhile, the number of pending sales increased 16.7%, from 203 to 237. With listings selling faster and new listings coming in slower, it makes sense that the number of active listings continues to decline.

Sellers: It continues to be a great environment for selling. Reasonably priced smaller condos are selling steadily and larger condos (anything from a deluxe one bedroom up), are selling almost as soon as they hit the market, even at prices higher than recent sales in many cases. I received three cash offers for one new listing last week and it ended up selling for substantially above an already aggressive asking price. 

There are far fewer buyers than there were a year ago but the low inventory is keeping prices strong. I hope this continues indefinitely but there is no guarantee. Please contact me if you would like a customized market analysis for your property.

Buyers: We are seeing attractive new listings every day but they are selling quickly. Many buyers have said they are waiting for prices to come down but I’m not sure we're going to see that any time soon - if ever. 

Grand Strand resort property prices had been flat for a dozen years prior to the recent sharp increases. More and more, it’s appearing that last year’s increases were not an anomaly or a bubble. They were simply overdue. Oceanfront condos in our area are still selling for 30% to 40% below rebuilding costs and are still far lower priced than comparable properties in any coastal resort market in the country. 

Also, rental incomes increased 20% to 40% across the board starting in 2021 and continuing into 2022. This added real value to the investment properties in our area. Please contact Teressa or Kevin if you’re interested in purchasing.

Increasing Insurance Rates and HOA Fees

HOA fees have generally been pretty stable for the past decade or so with nominal increases from year to year mainly due to inflation (higher electric bills, water bills, maintenance costs, etc.). This year, and, and possibly next year, we could see significantly bigger increases as insurance premiums for commercial buildings are expected to increase sharply. Since insurance currently comprises around 20% of an HOA’s budget, this could have a big effect.

A chain reaction of factors is causing insurance rates, and subsequently HOA fees, to increase. First, insurance costs, particularly in coastal areas, are increasing largely because of climate change induced weather events. In the United States, there were almost $100 billion in insurance claims due to natural disasters in 2022. Almost $60 billion of that was from Hurricane Ian alone. There were also over 70,000 wildfires in western states. In addition, there were quite a few weather catastrophes in other parts of the world.

When insurance companies have to pay out lots of claims, they increase their premiums to replenish their reserves and also because the future risks are perceived to be higher. If this was the only thing going on then insurance rates would increase somewhat but only marginally.

The second factor is that construction costs have increased dramatically in recent years, especially for commercial buildings. Many insurers are requiring re-estimations of replacement costs (on which insurance is based). In one recent instance of which I’m aware, the replacement value for a building almost doubled, leading to a big increase in premiums. 

The third and biggest factor is a result of these first two. Insurance companies have limits for how much they can insure. If they want to sell more insurance, they can do so by buying reinsurance. Yes, there are large companies out there that will sell something called reinsurance. The current problem is that with the building cost increases and more coverage needed because of higher risks, many insurance companies are above their coverage limits. Unfortunately, the reinsurance companies are also reaching their limits and pulling out of markets. The only other time I’ve seen this situation was in 2006 and 2007 when Hurricane Katrina and skyrocketing building costs created the same scenario. 

A condo HOA is required by its master deed to carry a certain amount of insurance, regardless of how much it costs. In 2006 and 2007, virtually all of the insurance companies left our market because of a similar chain of events. About the only resource left to fill the gap for insurance was Lloyd’s of London. They will insure just about anything for the right price (movie star’s faces, pitcher’s arms, zombie apocalypse, alien invasion,...),. They basically said, “Sure, we will insure your condo towers but it will cost you 500% more”. The HOAs had no choice but to accept these huge increases. 

Since insurance typically comprises about 20% to 25% of an HOA’s budget, this 500% increase caused HOA fees to double.

The situation does not appear to be as dire this time but the shortage of insurance carriers is already causing premiums to increase (supply and demand!). One insurance source said she has lost 20 carriers in the past year. She said she is expecting to see some cases in which insurance premiums increase 50% to well over 100%. If so, this could result in HOA fees increasing by 15% to 30% or more. She does not expect any relief before 2024. 

I looked at several HOA budgets that we had on file. In one case there was a 57% increase in insurance from 2022 to 2023 which resulted in a 14% increase in HOA fees. 

I’m hoping this situation will resolve itself relatively quickly. What happened before was that other reinsurance companies came into the market and/or insurance companies were able to increase their capacities and competition between them resulted in premiums coming back down. After a few years, insurance rates were in the same general range they had been before (other than adjustments for increases in rebuilding costs).

Sorry to be the bearer of bad news (Don’t shoot the messenger!)  but I wanted to give you a heads up as to what’s going on and what to expect.

New Home Sales (Resales Too)

After mentioning new homes in my most recent newsletter, several current owners of resort condos contacted my team to indicate that they are interested in purchasing primary homes in our area. We hope you will think of us when you are ready to make the move!

As previously noted, new home sales comprised 55% of all closed sales in February in our market. The chart below provides further insight.

Grand Strand Single Family Home Sales February 2023

The average selling price for resales was slightly higher than the average selling price for new construction homes but a handful of multimillion dollar sales can skew these figures. For that reason, the median selling price is a better measure. The new construction median selling price in February was $371,990 compared with $352,500 for resales. Also, note that there were more new listings during February for new homes than for resales. The gap is probably bigger because some new homes are sold before they are ever entered in MLS.

New Homes in Waterbridge

Although we certainly handle resales, new construction provides a number of benefits. The houses are brand-new and under warranty. In many cases, you can make choices regarding flooring, appliances, etc. Also, many of the builders are offering great incentives. 

For instance, at least one builder can set up its buyers with fixed rate financing at exceptionally low interest rates. Currently, they are offering fixed rate 30 year financing at 5.5% versus the 6.5% to 7% rates available through typical mortgage lenders.This represents huge savings over the life of the loan. Many builders are also offering closing costs and other buyer incentives. 

Incentives of this type can come and go quickly. They often result from builders’ efforts  to reach quarterly and yearly sales goals. Once the goals are met, the incentives go away. For this and many other reasons, if you’re thinking of buying, you need a local buyer’s agent to keep you up-to-date.

There are lots of other reasons for working through a buyer’s agent versus just calling up builders directly. I’ll cover these in more detail in future newsletters. Please contact me or Teressa or Kevin if you are interested in purchasing a single family home.

Please Contact The Beach Pro Team If:

You are thinking of buying or selling an oceanfront or resort condo in our area

                                                                  Or

You are considering moving to our area or know someone else who is

                                                                  Or

You are an agent who has clients thinking of moving here or buying or selling in our area

                                                                  Or

You currently own a condo in our area and want a permanent home

That’s all for now. Check out our usual Grand Strand Market Reports, Sales and Listing Updates, my Best Buys, and new Beach Pro Team reviews.

See you at the beach!

Here is a new review published on Google. 

• Gene Carter and his team did a fantastic job listing and selling our condo. Gene kept us informed and stayed in constant contact throughout the process. Pleasant experience! Rory. Crescent Shores. North Myrtle Beach.

We just started collecting Google reviews. At this time we have over 150 Zillow reviews which can be seen on our website Beach Pro Team reviews. 

Grand Strand Market Report - January 2023

OF/OV Homes Brochures:    Link to Listings 

OF/OV Homes Spreadsheet:   Link to Spreadsheet 

OF/OV Condo Brochures:    Link to Listings

OF/OV Condo Spreadsheet:   Link to Spreadsheet

Non-OF Condo Brochures:     Link to Listings 

Non-OF Condo Spreadsheet:  Link to Spreadsheet

Gene Carter

Beach Pro Team

Cell Phone:  843-455-4785

Email: GeneCarter@BeachProTeam.com

Website: