Grand Strand Real Estate News - March 2024

March 2024

Volume 2024 Issue 3

Dear Gene Carter Team,

Summary

I’ll be covering several topics this month - reader comments on last month’s newsletter regarding declining investor condo returns, the return of the Bulk Upfits, and the proposed NAR settlement. But first…

Oceanfront and Resort Condo Market Conditions

Overview: April has historically been the busiest month of the year for oceanfront and resort condo sales. 

Sellers: Lots of showings on my listings but buyers are being selective about making offers and they currently have lots of choices.

Buyers: There are far more listings now than over the past couple of years. Also, in certain segments of the market, there are some motivated sellers.

The number of active oceanfront condo listings increased for the 12th month in a row (See graph in newsletter). There were 926 active listings in March compared to 871 in February and 815 in January. By comparison, there were 325 in March 2023, just a year ago. The number of active condo listings off the beach also increased again for the 12th month in a row, from 1405 in January to 1592 in March. 

Month-to-month metrics for oceanfront condos (See chart in newsletter). The two numbers that I believe most accurately reflect current activity are the number of pending sales (which represent new contracts within the past 30 to 45 days) and the number of new listings in the month of March (roughly the same time period). There were 244 new listings and 173 pending sales.  

New Homes and Resales (Single Family)

There were a few more closed resales than new construction closed sales, 480 vs 465 (See chart in newsletter). However, there were far more new resale listings than new construction listings, 818 vs. 590. Average and median closed sale prices were similar for resales vs. new construction with a median price for resales at $360,000 vs. $364,328 for new construction.

Net Incomes and ROIs for Investor Condos

A few readers emailed to say that my methodology that I described in last month’s newsletter for calculating ROIs was very simplistic. I totally agree. Calculating ROI (return on investment) for any particular investment is actually far more complex. The formula I use is a “quick and dirty” way to compare one property’s relative investment value with another and, most importantly, to get an idea of the expected price an investor would be willing to pay today based on my knowledge of the history of sales of this type in our market. Regardless of how ROI is calculated, a 40% drop in net income, if all other factors remain the same, will reduce the ROI. 

The Return of Bulk Upfits

Last spring, 3 condotel developments (Caribbean Resort, Ocean Reef, and Compass Cove) announced bulk upfits. However, too many people opted out so all of these efforts were cancelled. Over the past couple of months, all 3 developments that were planning these last year have notified the owners that they are moving forward with bulk upfits again. The owners have a limited time to opt out. (“Bulk upfit” is the name coined for a total renovation of all condos in a building, financed by the HOA, then paid off by the individual owners. See the complete Bulk Upfit explanation in the newsletter). 

Last year’s proposals have been updated and improved upon. The total prices for these new and improved upfits (before the credits) are still pretty steep - approximately $40K to $50K for an efficiency or shotgun 1BR, $70K for a 2BR, and $80K to $90K for a 3BR. 

As I have repeatedly stated, something has to be done—either individually or in bulk—to make these condos competitive against all the Hiltons and Marriotts entering our vacation rental market. 

If you own in one of these resorts, should you opt in or out? Please contact me if you want to discuss your choice. Keep in mind that this decision is important if you think you might sell any time in the next 7 years because the lien for the balance conveys with the condo and must be assumed by a buyer or paid off at closing.

Some buyers view this as an ideal time to purchase because the condo will be totally renovated for them in the near future. FYI, as mentioned, a condo can be sold with the buyer assuming the remaining debt for the upfit. There are even lenders that will finance a purchase with this situation. We’ve sold quite a few in Grande Cayman and The Breakers Resort with this scenario. Please contact me if you want to go over the options.

Proposed NAR Settlement

There are big changes (sort of) coming for the real estate industry as a result of recent lawsuits. Here are the basic facts.

A proposed settlement has been agreed to in which NAR will pay several hundred million dollars. There are really only two rule changes that will occur, and they are scheduled to go into effect around late July of this year.

1. Offers of compensation (commission) will not be allowed to be published in MLS. 

1. MLS participants are required to enter into written agreements with their buyers specifying compensation and level of service. 

That’s it. Here’s why it doesn’t really change anything.

Commission: When a property is listed, the commission is negotiable, as it always has been. There has never been a set or standard commission. Commission can still be paid as it has always been, and sellers can communicate the commissions offered to agents through websites, emails, etc. The only difference is that the MLS listing cannot state the commission. 

Buyer Agreement: A written agreement with buyers covering services and compensation has been required in South Carolina and by my company for many years. The only change is that, instead of this agreement being required to be submitted with an offer, it will be required before an agent starts showing property. This has always been recommended but it wasn’t mandated. 

This whole matter has brought up the question of how much value real estate agents’professional services provide. I’ve been doing a little research and the average number of “touches” (calls, emails, texts, etc.) per sale for my team is over 350! That’s only from the time an offer has been made until it closes. It doesn’t include all the countless showings, phone calls and other efforts needed to obtain an offer. It’s our job to make the process as smooth as possible for our clients but most don’t realize how much is going on behind the scenes to make it appear easy.

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

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 here

Greetings from The Grand Strand,

I am going to touch on several topics today - reader comments on last month’s newsletter regarding declining investor condo returns, the return of the Bulk Upfits, and the proposed NAR settlement. But first…

Oceanfront and Resort Condo Market Conditions

Overview: April has historically been the busiest month of the year for oceanfront and resort condo sales. 

Sellers: Lots of showings on my listings but buyers are being selective about making offers and they currently have lots of choices.

Buyers: There are far more listings now than over the past couple of years. Also, in certain segments of the market, there are some motivated sellers.

As can be seen in the chart below, the number of active oceanfront condo listings increased for the 12th month in a row. There were 926 active listings in March compared to 871 in February and 815 in January. By comparison, there were 325 in March 2023, just a year ago. The number of active condo listings off the beach also increased again for the 12th month in a row, from 1405 in January to 1592 in March.

The next chart shows month-to-month metrics for oceanfront condos. Note that this compares March to January since I didn’t include this chart last month. The big increases in closed sales (41.8%) and closed volume (34%) are misleading. They were primarily caused by the extremely low number of closings in January (caused by the typically low number of new contracts in December). The two numbers that I believe most accurately reflect current activity are the number of pending sales (which represent new contracts within the past 30 to 45 days) and the number of new listings in the month of March (roughly the same time period). There were 244 new listings and 173 pending sales. 

New Homes and Resales

The chart below shows single-family home stats for March. There were a few more closed resales than new construction closed sales, 480 vs. 465.  However, there were far more new resale listings than new construction listings, 818 vs. 590. Average and median closed sale prices were similar for resales vs new construction with a median price for resales at $360,000 vs. $364,328 for new construction.

Net Incomes and ROIs for Investor Condos

A few readers emailed to say that my methodology that I described in last month’s newsletter for calculating ROIs was very simplistic. I totally agree. Calculating ROI (return on investment) for any particular investment is actually far more complex, particularly if leveraging is employed to purchase. There are also tax implications, the time value of money, and all sorts of other factors. The formula I use is a “quick and dirty” way to compare one property’s relative investment value with another and, most importantly, to get an idea of the expected price an investor would be willing to pay today based on my knowledge of the history of sales of this type in our market. Regardless of how ROI is calculated, a 40% drop in net income, if all other factors remain the same, will reduce the ROI. Let’s hope insurance costs decrease and rental incomes increase this year and in the future.

New Beach Pro Listing at Maisons Sur Mer

The Return of Bulk Upfits

Over the past several years, two condotel developments, Grande Cayman (formerly Long Bay Resort) and The Breakers Resort, completed bulk upfits. (See the Bulk Upfit explanation below if you have not been following my newsletters over the past year). Last spring, 3 condotel developments (Caribbean Resort, Ocean Reef, and Compass Cove) announced bulk upfits and two more were at least planning them. However, too many people opted out so all of these efforts were cancelled. Over the past couple of months, all three developments that were planning these last year have notified the owners that they are moving forward with bulk upfits again. The owners have a limited time to opt out.

Last year’s proposals have been updated and improved upon. There were some complaints that the color choices and some of the featured improvements were already looking dated. Also, there was sticker shock. The total prices for these new and improved upfits (before the credits) are still pretty steep - approximately $40K to $50K for an efficiency or shotgun 1BR, $70K for a 2BR, and $80K to $90K for a 3BR. 

As I have repeatedly stated, something has to be done—either individually or in bulk—to make these condos competitive against all the Hiltons and Marriotts entering our vacation rental market. We will have to wait to see if enough owners agree to the upfits for these to come to fruition. 

If you own in one of these resorts, should you opt in or out? Please contact me if you want to discuss your choice. Keep in mind that this decision is important if you think you might sell any time in the next 7 years because any buyer for your condo will be bound by your decision regarding the upfit. This is a double-edged sword. The condo will look much better and probably rent better if you opt in for the upfit but the lien for the remaining balance travels with the condo until it’s paid off - a turn-off for most potential buyers. 

Some buyers view this as an ideal time to purchase because the condo will be totally renovated for them in the near future. FYI, a condo can be sold with the buyer assuming the remaining debt for the upfit. There are even lenders that will finance a purchase with this situation. In fact, we’ve sold quite a few in Grande Cayman and The Breakers Resort with this scenario. There are a number of ways to handle this but it’s too complicated to get into all the various possible solutions in this newsletter. Please contact me if you want to go over this.

What is a Bulk Upfit? For anyone who has not been reading my newsletters over the past year or so, “bulk upfit” is the term that has been coined to describe a building-wide renovation effort involving all participating owners. The condos are gutted and completely remodeled with new flooring, ceiling treatments, furnishings, etc. These improvements are achieved by arranging for the HOA to borrow the money for the upfit. Each owner is then responsible for paying it back, typically over 7 years, with interest. These efforts are being spearheaded by on-site rental management. To incentivize the owner’s investment, the management company offer owners who remain on their program a percentage credit each month against the upfit payment, typically 40%. 

New Beach Pro SeaWatch listing

Proposed NAR Settlement

As I’m sure everyone has heard on the news, there are big changes (sort of) coming for the real estate industry. Unfortunately, as stated by several real estate pundits, information has been coming out every day while misinformation has been coming out every second. Here are the basic facts.

A number of lawsuits were filed against various companies as well as the National Association of Realtors (NAR). A proposed settlement has been agreed to in which several hundred million dollars will be paid by NAR.  Some large brokerages have settled separately for amounts in the tens of millions. This is a proposed settlement to which both sides have agreed but it is still pending approval by the judge In the case.

There are really only two rule changes that will occur and they are scheduled to go into effect around late July of this year.

1. Offers of compensation (commission) will not be allowed to be published in MLS. 
2. MLS participants are required to enter into written agreements with their buyers specifying compensation and level of service. 

That’s it. Here’s why it doesn’t really change anything.

Commission: When a property is listed, the commission is negotiable, as it always has been. There has never been a set or standard commission. Commission can still be paid as it has always been, and sellers can communicate the commissions offered to agents through websites, emails, etc. The only difference is that the MLS listing cannot state the commission. 

Buyer Agreement: A written agreement with buyers has been required in South Carolina and by my company for many years. The only change is that, instead of this agreement being required to be submitted with an offer, it will be required before an agent starts showing property. This has always been recommended but it wasn’t mandated. This may take a little bit of getting used to - for agents and buyers - but I’m sure everyone will adjust quickly.

This whole matter has brought up the question of how much value real estate agents’professional services provide. I’ve been putting some numbers together on just how much my team members do for each sale. I’ll cover this in more detail in a future newsletter but the average number of “touches” (calls, emails, texts, etc.) per sale is over 350! That’s only from the time an offer has been made until it closes. It doesn’t include all the countless showings, phone calls and other efforts needed to obtain an offer. It’s our job to make the process as smooth as possible for our clients but most don’t realize how much is going on behind the scenes to make it appear easy.

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

See you at the beach!

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

Here are some new reviews published on Google. 

• I highly recommend Gene Carter and his team. They are knowledgable, responsive and very helpful. We were selling a property from out of state, and Gene and his team made the process incredibly easy. They also helped us understand the market, how to list and price our property, and we could not have been more happy! Highly recommend for anyone buying or selling in the Myrtle Beach or North Myrtle Beach area! Trish. Bay Watch. N. Myrtle Beach.

• Teresa was amazing realtor. She was always ready available and would help out in any way she could. Thanks again, Teresa and your Team. Grace. Crescent Shores. N. Myrtle Beach.

We just started collecting Google reviews. At this time we have over 20 Google Five Star reviews and over 150 Zillow Five Star reviews which can be seen on our website Beach Pro Team reviews. 

Grand Strand Market Report - February 2024

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