Grand Strand Real Estate News - May 2024

May 2024

Volume 2024 Issue 5

Dear Gene Carter Team,

Summary

There are anecdotal indications that vacation rentals may be somewhat improved this year - which could help keep prices high. As for real estate sales, activity has been steady, especially for high-end properties, but not enough to keep up with the surging inventory of available oceanfront and resort condos. In local news, the annual Carolina Country Music Festival was another sold-out success. 

By the way, the Beach Pro Team was nominated for Best Real Estate Team at the Beach. Please click here to vote. Once on that site, click on Real Estate and then Real Estate Team to vote for us. Thanks for voting!

Oceanfront and Resort Condo Market Conditions

Overview: Listings are still coming in faster than they are selling, leading to inventory increases in most buildings. The difference between condos mainly bought by investors and those bought as second homes or primary residences has become more pronounced.

Sellers: If you want to cash out on the big price increases in 2022, now is the time to do it. There’s a good chance the increasing inventory and downward pressure on investment condo prices will eventually start affecting prices for large condos as well. Please contact me if you want to discuss a property you own.

Buyers: You have far more choices than have been available in the past several years and there are some motivated sellers out there. Also, for investors, this is an ideal time to purchase to take advantage of the upcoming peak rental season. Contact Teressa or Kevin to help you find the perfect property for you.

Active Oceanfront Condo Listings (See Graph in Newsletter) The number of active oceanfront condo listings increased for the 14th month in a row. As of June 12, there were 990 active listings compared to 962 on May 15. The number of active condo listings off the beach also increased again for the 14th month in a row, from 1696 on May 15 to 1772 on June 12.

Month-to-month metrics for oceanfront condos (See chart in Newsletter). Once again, I think the two numbers that 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 May (roughly the same time period). There were 222 new listings and 149 pending sales. This ratio of new listings / closed sales has been consistent in recent months. 

One surprise was the 12.7% month-over-month average selling price increase, from $328,555 to $370,363. I looked through the actual list of sales and there were lots of sales at high prices which pulled the average up.

 New Homes and Resales

The chart below shows single-family home stats for May. As was the case in April, there were more closed resales than new construction closed sales, 523 vs. 475. Also, as in April, there were far more new resale listings than new construction listings, 786 vs. 518. 

A Strong Rental Season Could Sustain Price Increases

There is a strong correlation between rental rates and selling prices. The biggest factor affecting the price a buyer is willing to pay for a vacation rental property is the return and the biggest factor affecting return is the rental income. In our market, since the occupancy rates during peak season are consistently high from year to year, the nightly rates are the biggest contributors to rental income variances from year to year. 

There is anecdotal evidence that vacation rental incomes may be a little stronger this year, based on the fact that some of the spring incomes were higher and that almost all of the potential summer rental weeks are already booked for many units. 

However, spring and fall income is just gravy. The real meat of the season is in the summer months. The actual rental income during those months will determine whether it’s a good year or a bad year. 

So if our resorts are all booked up this summer, that means it will be a great rental income year, right? Most of the resorts in our area are virtually one hundred percent booked during the summer months every year yet the income can vary significantly from one year to the next. In the good years, how is the income higher? The answer is simple. In good years, they are able to rent each night for more. This is why I said that it’s a good sign that there are strong reservations going forward but we won’t know the full story until we see the incomes from those months

Rental Rates Contributed to Recent Appreciation

Prices increased sharply in early 2022 immediately after the unexpectedly strong 2021 yearly rental income totals became known. So why were incomes so high in 2021? The answer is that demand was at an all-time high. Myrtle Beach was one of the first resort areas to fully open back up after the pandemic and among the first to do away with most mask requirements. Vacationers booked their reservations at whatever rates the resorts were charging. The result was a 30% to 40% increase in income over any previous year.

I hoped the 2021 incomes were here to stay and not just a one-year anomaly. Unfortunately, most resorts have seen their incomes return to levels near their historical norms. Prices have been adjusting downward as well but are still high in relation to the net incomes. The high insurance costs have made the imbalance even worse.

Let’s hope we will see an increase in incomes this year, both through strong occupancy and high nightly rental rates.

What Determines Rental Rates?

For any given vacation rental property, there is a range of rates (varying by as much as 30% or more) at which it can be booked for any given time period. Vacation rental pricing is now similar to booking an airline flight. The airlines try to charge the highest rates they can but they receive zero income for any empty seat on a flight so they discount if necessary until they fill every seat.

Vacation rentals work the same way. Management companies initially try to charge the highest rates they can. As time goes by, they will discount to try to fill up any vacant nights. Rental companies are always trying to maximize their incomes at the same time the guests are trying to minimize their outlays by delaying their bookings. If demand for a particular destination is strong, there may be little or no need for discounting, resulting in higher rates. This is what happened in the Myrtle Beach area in 2021.

There is also always competition from other resorts, other rental companies, the new hotels in our area, VRBO, Airbnb, and many other sources of accommodations. 

___________________________________________________________________

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!

Summer is here and the beaches are packed!  There are anecdotal indications that vacation rentals may be somewhat improved this year - which could help keep prices high. As for real estate sales, activity has been steady, especially for high-end properties, but not enough to keep up with the surging inventory of available oceanfront and resort condos. In local news, the annual Carolina Country Music Festival was another sold-out success. Google the video of Carrie Underwood closing out the festival by singing “Before He Cheats” in driving rain on a stage 200 feet from the ocean in front of 15,000 cheering fans. It’s amazing. 

By the way, the Beach Pro Team was nominated for Best Real Estate Team at the Beach. Please click here to vote. Once on that site, click on Real Estate and then Real Estate Team to vote for us. Thanks for voting!

"A good pour and a great view"

Oceanfront and Resort Condo Market Conditions

Overview: As has been the case for a number of months, listings are still coming in faster than they are selling, leading to inventory increases in most buildings. The difference between condos mainly bought by investors and those bought as second homes or primary residences has become more pronounced. There are relatively few oceanfront condos large enough to be suitable for these uses and prices for these buildings are generally maintaining their same elevated ranges, although with some slow downward drift. A few well-managed resorts with consistently high rental incomes are also holding up well. 

Meanwhile, all the other “cash flow” type condos are becoming difficult to sell, with only the lowest priced or most upgraded units attracting attention. In most cases, with the decreases in incomes and the increases in HOA fees because of increased insurance costs, the prices resulting from the big price jump in 2022 are not in line with where they need to be to generate returns acceptable to investors. In other words, either net incomes need to increase or prices need to come down for the numbers to work for investors (See article below).

Sellers: If you want to cash out on the big price increases in 2022, now is the time to do it. I think the increasing inventory and downward pressure on investment condo prices will eventually start affecting prices for large condos as well. Please contact me if you want to discuss a property you own.

Buyers: You have far more choices than have been available in the past several years and there are some motivated sellers out there. Also, for investors, this is an ideal time to purchase to take advantage of the upcoming peak rental season. Contact Teressa or Kevin to help you find the perfect property for you.

As can be seen in the chart below, the number of active oceanfront condo listings increased for the 14th month in a row. As of June 12, there were 990 active listings compared to 962 on May 15. The number of active condo listings off the beach also increased again for the 14th month in a row, from 1696 on May 15 to 1772 on June 12.

The next chart shows month-to-month metrics for oceanfront condos. Once again, I think the two numbers that 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 May (roughly the same time period). There were 222 new listings and 149 pending sales. This ratio of new listings / closed sales has been pretty consistent in recent months. 

One surprise was the 12.7% month-over-month average selling price increase, from $328,555 to $370,363. I looked through the actual list of sales and there were lots of sales at high prices which pulled the average up - several above $1M, one sale above $2M, and many more above $500K. This is an illustration of my earlier comments about large expensive condos still holding their values. The overall number of sales remained relatively low (127) and the median price was only $287,500.

New Homes and Resales

The chart below shows single-family home stats for May. As was the case in April, there were more closed resales than new construction closed sales, 523 vs. 475. Also, as in April, there were far more new resale listings than new construction listings, 786 vs. 518. One thing to keep in mind is that a number of builders sell homes “to-be-built” and don’t enter them in MLS before they go under contract. This may explain why the gap between closed resales and new construction resales is not larger than it is considering the big differences in the numbers of new listings. Average and median closed sale prices were similar for resales vs new construction with a median price for resales at $370,000 vs. $366,364 for new construction.

A Strong Rental Season Could Sustain Price Increases

There is a strong correlation between rental rates and selling prices. The biggest factor affecting the price a buyer is willing to pay for a vacation rental property is the return and the biggest factor affecting return is the rental income. In our market, since the occupancy rates during peak season are consistently high from year to year, the nightly rates are the biggest contributors to rental income variances from year to year. 

I mentioned earlier that there is anecdotal evidence that vacation rental incomes may be a little stronger this year. This is based on the fact that some of the spring incomes were higher and that almost all of the potential summer rental weeks are already booked for many units. This is all good news. 

However, spring and fall income is just gravy. The real meat of the season is in the summer months. The actual rental income during those months will determine whether it’s a good year or a bad year. We will have to wait and see.

So if our resorts are all booked up this summer, that means it will be a great rental income year, right? Hopefully, but this brings up a big question. Most of the resorts in our area are virtually one hundred percent booked during the summer months every year yet the income can vary significantly from one year to the next. In the good years, how is the income higher? They can’t invent more rental nights. The answer is simple. In good years, they are able to rent each night for more. This is why I said that it’s a good sign that there are strong reservations going forward but we won’t know the full story until we see the incomes from those months

Rental Rates Contributed to Recent Appreciation

Prices increased sharply in early 2022 immediately after the unexpectedly strong 2021 yearly rental income totals became known. So why were incomes so high in 2021? The simple answer is that demand was at an all-time high. Myrtle Beach was one of the first resort areas to fully open back up after the pandemic and among the first to do away with most mask requirements. Our area was the best option for vacationers flush with Covid stimulus money in their pockets. Rather than shopping around or considering less expensive alternatives or other resort areas, vacationers booked their reservations at whatever rates the resorts were charging. 

For a more detailed discussion about how rental rates are set, see “What Determines Rental Rates” below.

The result was a 30% to 40% increase in income over any previous year - a far bigger jump than I have ever seen. I spoke with a number of rental managers and their comments were all similar. They were simply able to charge much higher rates than they had been charging in any previous years. The guests didn’t question them. 

I mentioned in a few newsletters in 2022 that I hoped the 2021 incomes were here to stay and not just a one-year anomaly. Unfortunately, most resorts have seen their incomes return to levels near their historical norms. Prices have been adjusting downward as well but are still high in relation to the net incomes. The high insurance costs have made the imbalance even worse. A few well-managed resorts, however, have been able to maintain higher income levels (and higher prices). 

Let’s hope we will see an increase in incomes this year, both through strong occupancy and high nightly rental rates. 

"Market Common"

What Determines Rental Rates?

Vacation rental rates vary from one property to another and one style or size of property to another. However, for any given vacation rental property, there is a range of rates (varying by as much as 30% or more) at which it can be booked for any given time period. In the old days, rental companies would set their weekly rates ahead of the season and hope for the best. Those days are gone. The rate can vary tremendously because of timing or if it is part of a discounted group package. There are other factors as well. 

Vacation rental pricing is now similar to booking an airline flight. The airlines try to charge the highest rates they can but they receive zero income for any empty seat on a flight. Meanwhile, fliers try to time their ticket purchases to book at the lowest rates possible but don’t want to miss out altogether. The higher the demand, the more likely the airline can stick with its highest rates. Regardless, it’s unlikely there will be any vacant seats on the plane because they will discount as little or as much as necessary to fill them up.

Vacation rentals work the same way. Management companies initially try to charge the highest rates they can. As time goes by, they will discount to try to fill up any vacant nights.  For instance, if you book the 4th of July week in the early spring, you will probably pay the full highest rate but you’ll know you have a place to stay. You can gamble and try to book at the last minute but you may not be able to stay where you want because they’ll be sold out. From the rental company’s standpoint, they can try to hold out for top rates right up until the last minute but they may end up with empty rooms and not make anything for those nights. Rental companies also will often offer discounted group packaging because it’s a sure thing even if the rate is somewhat lower. There are lots of strategies like this but rental companies are always trying to maximize their incomes at the same time the guests are trying to minimize their outlays. If demand for a particular destination is strong, there may be little or no need for discounting, resulting in higher rates. This is what happened in the Myrtle Beach area in 2021.

There is also always competition from other resorts, other rental companies, the new hotels in our area, VRBO, Airbnb, and many other sources of accommodations. Rental management companies are constantly monitoring the rates their competitors are charging at the same time travelers are checking rates daily at dozens of possible resorts. Rental managers will try to charge as much as they can but they have to balance that against the risk of losing all business for a night if the opportunity is lost. They can never regain that income.

The point of this whole discussion is that rental incomes are determined by rates as well as occupancy and rates are determined by competition within the building, competition within the market, the expertise of the rental company, and the overall demand for our market. 

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 is a new review published on Google. 

• Being from out of state, I reached out to the Beach Pro Team and let them know what I was looking for. I was put into direct contact with, Sales Associate Kevin Goodwin. Kevin listened intently to our desires in a home and got to work immediately. He would send us emails of homes to peruse that met our criteria and we began to compile a list to visit when we arrived in South Carolina. I continued to work with Kevin and he spent a couple full days with us when we visited South Carolina, showing us properties, answering questions and sharing his knowledge of the area and buying process. We ultimately went with a new build and Kevin was nothing short of incredible during the 5-6 month process. During our building process, Kevin stayed in constant contact with me ensuring any questions I had were answered or if there was anything he could do for us. He would occasionally go by the home and send us pictures. Kevin even attended a pre drywall inspection and FaceTimed us in during the couple hour process. He also came to the first walk through inspection and helped “blue tape” imperfections that we may have missed. Building/buying a home when you are 650 miles away is quite stressful. Kevin Goodwin was instrumental in minimizing our stress. He is professional, attentive, patient and effectively communicates with all parties involved in the process. I cannot recommend this team and specifically, Kevin Goodwin enough for your real estate needs. Thank you again! Greg. Waterbridge. 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 - April 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: