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Grand Strand Real Estate News
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January 2021
Volume 2021 Issue 1
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If you would like to receive this monthly newsletter CLICK HERE
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Dear Gene Carter Team,
Summary
Hopefully everyone had a safe and happy holiday season. This time of year offers the opportunity for each of us to get a fresh start - to make changes that improve our personal lives, our family’s lives and our financial situations. Our booming real estate market in combination with today’s historically low interest rates present some wonderful opportunities.
2021 has started out with a bang as illustrated by the chart below showing current winter sales activity beating all previous summer activity since 2012. Teressa and I have been exceptionally busy in multiple segments of the market.
Do not take the current interest rates for granted. Use them - to buy or to sell. See the chart below showing the $55,000 increase in buying power for the same $1000/month payment with current interest rates versus those from just two years ago.
Condo Sellers - The buyer pool is much larger than it would be with higher interest rates. If you are selling so that you can buy another property, low interest rates give you the same advantages as any buyer. The lowest inventory levels in years have caused prices to increase.
Condotel Sellers - Activity level is picking up as investors re-enter the market with the expectation of better rental income this year.
Condo Sellers Who Are “Upside Down”. Many current owners who bought at the peak of the market back in 2005 and 2006 have mortgage balances significantly higher than the current market values and most are racking up substantial losses each year, even with rental income. If you have enough equity in your home or other property, you could take advantage of the incredibly low interest rates to do a cash out HELOC (Home Equity Line of Credit) for the difference between your mortgage balance and the market value of the property you want to sell. See the details in the example at the bottom of this newsletter. If you are in this situation, plug in your own numbers and see if it makes sense. Then contact me and we can come up with a reasonable selling price.
Condo Buyers - You have a lot more buying power at 2.5% than you would at 4% or 5%. You can qualify for a bigger loan and go all out for that bigger, nicer, property.
Condotel Buyers - Even though they are higher than current conventional rates, condotel interest rates are the lowest they’ve been in years. There are lots of bargains on the market right now. Rental incomes should be far better this year. For some buyers, a HELOC (home equity line of credit) could be used to purchase a condotel with essentially a cash offer (from the seller’s perspective), maximizing your negotiating power, while locking in a super low interest rate too!
Single Family Home Buyers Moving to The Grand Strand - Low interest rates increase your buying power and there are hundreds of new homes from which to choose. The Beach Pro Team has become much more active in this segment of the market. Teressa is working with a number of clients at this time who are buying new homes all along the Grand Strand. We feel this goes hand-in-hand with our resort condo market. If you own a condo here now and want to sell and move here for good, we can help you with both!
The Myrtle Beach/North Myrtle Beach/Conway metro region was second in the nation in population growth between 2010 and 2019 (See chart). The population in the southeast is expected to grow 58.1% between 2020 and 2040 (See chart).
That’s all for now. Please check out our usual Grand Strand Market Reports, Sales and Listing Updates, new Beach Pro team reviews, and my Best Buys.
Greetings from the Grand Strand!
Hopefully everyone had a safe and happy holiday season. The food, family and festivities were great but, in many ways, now is my favorite time of the year. It offers the opportunity for each of us to get a fresh start - to make changes that improve our personal lives, our family’s lives and our financial situations. Our booming real estate market in combination with today’s historically low interest rates present some wonderful opportunities.
Maybe you’ve always wanted a second home at the beach or on the golf course. Maybe you live in the northeast and long to live in a warmer climate. Maybe you’ve been holding on to a property (or multiple properties) in our area for many years instead of pursuing other plans, paying off bills, or re-investing in real estate which more closely matches your current needs. Why not make this the year to finally act? You wouldn’t be reading this newsletter if real estate on the Grand Strand wasn’t already a part of your life or in your plans for the future. So let’s take a look at what to expect in 2021 and what opportunities there are to improve your life.
Well, 2021 has started out with a bang as illustrated by the following chart which was presented at an expo this morning with our local Board of Realtors. It shows current winter sales activity beating all previous summer activity since 2012.
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Teressa and I have already been involved in several multiple offer situations, both for condos and houses. The single family residence market, in particular, is red-hot, both for new homes and resales. Oceanfront condos, especially the ones eligible for conventional financing in North Myrtle Beach, have also been flying off the shelves. Condos off the beach have been selling extremely well, mainly as primary residences, but also as second homes. Condotel sales have also picked up, although the large amount of inventory has kept prices from increasing much so far.
In addition to this huge upswing, there’s another contributing factor to possibly changing your life for the better this year - interest rates.
I’ve mentioned the current historically low interest rates in just about every recent newsletter and I’ll say it again - Do not take the current crazy low interest rates for granted! Take a look at this chart showing the differences in buying power for the same $1000/month payment with different interest rates.
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I repeat, do not take the current rates for granted. Use them - to buy or to sell (see below)! The current interest rates are barely above the inflation rate. It’s the closest thing to free money we are likely to see. They will not stay this way for long. When I first got into real estate back in the mid-80s, interest rates were 15%. As recently as January of 2019, just two years ago, 30 year interest rates were at 4.5%, almost double what they are today. Now take another look at the chart above. For the same monthly payment, today’s interest rates allow you to buy a property worth $55,000 (30%) more than you could two years ago with the same payment. To put this in perspective, buyers in our market, no matter how hard they negotiate, rarely are able to purchase a property for more than 5% to 7% below asking price, just a fraction of the savings which can be achieved from the low current interest rates.
OK, what specifically can you do?
Condo Sellers - If you have a reason to sell, this is a great time to do it. If you’re selling a property eligible for conventional financing, the buyer pool is much larger than it would be with higher interest rates, which increases the likelihood of your being able to sell at a good price in a reasonable amount of time.
What if you are selling so that you can buy another property? If you’re going to finance to purchase the other property, the low interest rates give you the same advantages as any buyer. By the way, I always advise sellers who are thinking of buying elsewhere to factor in the market conditions for the property they want to buy. If the value of the property they want to buy is rapidly increasing, now is the time to sell here to take advantage of today’s price with the replacement property, even if you may not achieve the optimum price you would like for your property here.
The lowest inventory levels in years have caused prices to increase. This means there’s a good chance you could sell your property relatively quickly at a good price. Please be aware that prices for condos rarely go up in a straight line for very long. Typically, once there are a few sales at higher prices, more owners list their properties for sale and the prices flatten out again because of the increased competition. Prices sometimes even decrease. In other words, it may not be a good idea to wait in hopes of prices getting even higher in the near term.
Condotel Sellers - The activity level is picking up. Investors were holding back for most of last year mainly because of the low rental returns for 2020 (because of Covid). I expected them to come back this year and early indications are encouraging. As I have reported in several newsletters, sales have been impacted by the large discrepancy between condotel financing rates and exceptionally low conventional condo financing rates. I don’t expect this to change soon but we’re seeing lots of cash buyers and 1031 exchanges in which financing doesn’t make a difference. Also, for a buyer, there is a strategy which can bypass the high condotel interest rates. I’ll address this below under the section about “Condotel Buyers”.
Condo Sellers Who are “Upside Down”. What if you would like to sell your property here and you owe more than it’s worth? Many current owners who bought at the peak of the market back in 2005 and 2006 have mortgage balances significantly higher than the current market values. Most are racking up substantial losses each year, even with rental income. They’re also stuck paying high interest rates but feel they can’t sell because they don’t want to have to come out of pocket for the difference between their loan balance and the market value selling price. Here’s an idea. With interest rates as low as they are, if you have equity in your home or some other real estate, you could do a cash out HELOC for the difference between your mortgage balance and the market value of the property you want to sell. It could allow you to stop the bleeding now and possibly save you a lot of money in the coming years. The window of opportunity to optimize this strategy will only remain open as long as interest rates remain low.
If you are “upside down”, please take a look at the detailed example at the bottom of this newsletter. Two of my clients have successfully used this strategy in recent months.
Condo Buyers - For those of you thinking of buying a condo eligible for conventional financing, the answer to why it’s a good time to buy is obvious. The cost of ownership has never been lower. Also, you have a lot more buying power at 2.5% than you would at 4% or 5%. You can qualify for a bigger loan and go all out for that bigger, nicer, property.
Condotel Buyers - First of all, condotel interest rates are the lowest they’ve been in years. They just appear high because of the ridiculously low conventional rates. Second, condotel prices are extremely reasonable right now with lots of bargains on the market. Third, rental incomes should be far better this year than last. All of that makes for a pretty good combination. If you are paying cash or doing a 1031 exchange, it’s a perfect time to pick up a deal. If these strategies aren’t an option, and if you are willing and able to do so, there is a way in which you could get the best of all worlds – super low interest rates and bargain prices. This is similar to my recommendation for “upside down” condotel owners. If you can obtain a HELOC (home equity line of credit) or something similar, you can use the loan to purchase a condotel with essentially a cash offer (from the seller’s perspective), maximizing your negotiating power, while locking in a super low interest rate too!
Single Family Home Buyers Moving to the Grand Strand - The low interest rates increase your buying power and there are hundreds of new homes from which to choose. The Beach Pro Team has become much more active in this segment of the market. Teressa is working with a number of clients at this time who are buying new homes all along the Grand Strand. She is extremely knowledgeable regarding new construction - from Little River to Carolina Forest to Pawleys Island. We feel this goes hand-in-hand with our resort condo sales. Many of the people who now want to move here started out as frequent visitors who investigated condo purchases or actually purchased second homes in our area prior to relocating. Many are selling their condos now and buying primary residences. If you own a condo here now and want to sell and move here for good, we can help you with both!
This growth is a huge part of our overall real estate market and it is expected to continue for the foreseeable future. As you can see in the following charts, the Myrtle Beach/North Myrtle Beach/Conway metro region was second in the nation in population growth between 2010 and 2019. The population in the southeast is expected to grow 58.1% between 2020 and 2040.
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It’s going to be an exciting year! Why not make this the year you make a change to improve your life and finances. Let us help.
That’s all for now. Please check out our usual Grand Strand Market Reports, Sales and Listing Updates, new Beach Pro Team reviews, and my Best Buys.
See you at the beach!
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Example of an "Upside Down" Condo Seller using a HELOC - This has lots of numbers and details but if you are in this situation, please read carefully.
A week doesn’t go by that I don’t talk to an owner who bought at the top of the highly inflated market between 2003 and 2007 and his or her mortgage balance is still considerably higher than current market prices. They’ve been waiting and waiting, often coming out of pocket thousands or tens of thousands of dollars per year, hoping that prices will get back to those inflated levels. They will someday but it’s unlikely it will happen quickly. Maybe this is the year to take advantage of today’s insanely low interest rates to stop the bleeding. Two of my clients used the exact strategy below in the past six months. I think it could help lots more “upside down” owners. Consider the following example based on real prices, real market values and real interest rates.
An owner has a condo which has a current market value of about $250K. The problem is that he paid $550,000 for his condo back in 2005. He financed it at 6%, 30 year amortization and 90% loan to value. His original loan was for $495,000. His principal/interest payment is 2967/month. So it’s costing him $35,604 in mortgage payments per year. It’s true that some of that is going to principal but it’s still his out-of pocket expense. His net income after management fees, real estate taxes, etc. is about $10,000 per year to offset this expense. So it’s been costing him about $25,000 per year out of pocket to carry the condo once he pays his mortgage. For 15 years. That’s $375K out of pocket so far. I know there are some tax breaks and he has been able to enjoy the condo but maybe he now wants to move on. (By the way, an owner buying now would pay a far lower price and have a lower interest rate, resulting in a vastly better return). The owner wants to sell but, as noted, the market value is $250K and he still owes $351K. I’ve had owners write checks for the difference (up to $350K). Not every owner can do this, however.
Why not take advantage of today’s “almost free” money while you can? If the owner has equity in his home or another property and is willing and able to obtain a HELOC (Home Equity Line of Credit) or something similar, this can be used to make up the gap. It’s a little like refinancing your home at a lower interest rate. Here’s how it would work. If the condo can be sold for $250K, the net to the owner after realtor fees and other closing costs will be about $232K. With a $351K loan balance, that means he needs to come up with about $119K. At the current interest rate of 2.50% with a 30 year amortization, the monthly payment for a $119K HELOC to cover the gap would be $470/month. That’s an out of pocket cost of $5640 per year instead of $25,000 per year for the foreseeable future. That’s much more manageable for most owners. It also frees up the owner (who is not in it for the long term anyway) from future risks from pandemics, hurricanes, and who knows what. By the way, if the owner just waited to sell until his loan balance got down to $232,000,assuming no appreciation, it would take another 6 ½ years. At $25,000 per year out-of-pocket, it would cost him an additional $162,000 to get to that price.
If you are in this situation, plug in your own numbers and see if it makes sense. Then contact me and we can come up with a reasonable selling price. By the way, anyone buying in recent years is not going to face this scenario. But lots and lots of current owners bought at the peak of the market and they have been coming out of pocket to pay huge carrying costs year after year. Market prices will go up over time and rental incomes will go up over time as well but so far they have not increased enough to make it worth the wait for many owners. Maybe this is the year to change your future.
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Here are some new reviews published in Zillow.
- Thank you to Gene and his team helping me sell an Ocean Front Condo in Myrtle Beach. Gene is always available and extremely knowledgeable of the Myrtle Beach market. This is my second experience with Gene and if you are buying or selling I highly recommend him and his team. Also subscribe to his monthly newsletter as he gives insight on the market both in good and bad times to help you make the correct decision to buy or sell. Thank Gene looking forward to our next deal! Chris Caribbean. Myrtle Beach
- Teressa Carter was patient, helpful, and knowledgeable in our purchase of a condo. Her brother and partner had sold our previous condo in three days, far more quickly than we imagined to be possible! We then contacted Teressa to help us find another one that would suit our needs. The entire process moved smoothly and quickly. On a personal note, we found Teressa to be congenial and friendly. Plus, she was always available to answer our questions. We highly recommend Teressa Carter, Gene Carter, and the Beach Pro Team; the whole team is awesome! Dale and Kathy. Tilghman Beach and Golf. North Myrtle Beach.
We have chosen to utilize Zillow's review platform. This is not an endorsement of Zillow (Please ignore the ridiculous "Zestimates") but we think an online third-party review service provides more credibility than simply printing reviews ourselves. At this time, we have over 100 reviews with more coming in each month. To see all of the reviews at any time, you can visit Zillow Beach Pro Team reviews.
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Grand Strand Market Report
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Below is a link to a detailed report on the current state of our local real estate market complete with statistics for just about anything imaginable. Please keep in mind that these statistics cover a broad range of properties and that particular areas or developments may behave quite differently.
As always please contact me if I can be of service in any way.
See link below to interpret terms used in this report.
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The following current listings are exceptionally well-priced and represent great values. The spreadsheets are sorted by price. These are live links to listing details and they will change according to changes in the MLS (Pending, Sold, etc.). The listing details are in the same order as the spreadsheets. Please call me directly if you find something of interest to you.
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If you are considering buying or listing any property on the Grand Strand, or if I can be of assistance in any other way, please contact me. Also, please feel free to forward this newsletter to friends or acquaintances and of course I will be happy to add them to my email list.
Finally, please let me know if you are going to be in the area and would like to get together.
See you at the beach!
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Gene Carter
Beach Pro Team
Cell Phone: 843-455-4785
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The material provided is for informational and educational purposes only and sometimes contains current or forward-looking statements on real estate market conditions, and should not be construed as legal, investment and/or real estate advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is without errors, and is not necessarily the opinion of RE/MAX Southern Shores or its agents.
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