Grand Strand Real Estate News - September 2023

September 2023

Volume 2023 Issue 9

Dear Gene Carter Team,

Summary

We continue to have numerous showings and inquiries but the offers have been coming in slower and the negotiations have been more difficult. Anyway, it’s been a beautiful fall. I’ve included a few pictures I’ve taken in recent weeks.

This month I want to touch on real estate tax bills and then examine some of the challenges facing financing for condos and for second homes in general (including houses).

Oceanfront and Resort Condo Update

The number of oceanfront condo listings keeps increasing (See graph below). The total is now 700, up from 652 in August. There were just over 300 in the early spring. The number of active listings off the beach also increased again with 1103 in September versus 1008 in August.

The next chart below shows month to month metrics for oceanfront condos. Activity of all kinds was slower. New listings decreased 10.2%. Pending sales decreased 7.5%. Closed sales decreased 5.1%.

Sellers: Buyers are buying but we still have two different markets. Upscale buildings, particularly those with large condos and/or strong rental incomes, are still selling at good prices. Resorts with smaller condos are seeing increased active listings and relatively few pending sales. 

If you plan to sell in the next year or two, now would be an excellent time to cash out regardless of the building or the size of your property. Most of the financing challenges described below (which don’t involve interest rates which should eventually improve) could get worse before they get better. Please contact me if you would like a free market analysis.

Buyers: If you can pay cash, there are good deals available. Despite challenges, financing of some type is still available for almost all properties. Many buyers are using alternate methods to leverage their purchases. If you want to buy, we will help you find a way. Please contact Teressa or Kevin.

New Home Sales

Resales once again won the battle with 528 closed sales versus 433 new construction closed sales (See chart below). There were 657 new resale listings and 452 new construction listings. Please contact Teressa or Kevin and to help you find the best deals.

Real Estate Tax Bills

Tax bills were sent October 1. Your tax amount is based on the county assessor’s estimate of “Fair Market Value” as of December 31 of the previous year. 

If you want to see if you think it’s really “fair”, our Closed Sales Histories might come in handy. We have all of the closed sales (complete with details) from 2009 to 2022 laid out on spreadsheets for over 190 condo developments. Here is an example. Link to Anderson Ocean Club 2022 Closed Sales List To request a spreadsheet like this for any development of interest, click on the link below.

BeachProTeam.com/nl-ClosedSales

Your tax bill is based on the market value as of December of last year, not the value as of today. 

If you want to find out your property’s approximate market value now, please contact me.

Condo Financing

Interest rates are the highest in 23 years. In addition, conventional financing (Fannie Mae and Freddie Mac) for condos is facing lots of hurdles in addition to the high interest rates. The issues described below have nothing to do with the borrower’s qualifications.

But first, a reminder…

Hire a condo expert (like The Beach Pro Team!) whether you are buying or selling. We can make sure a buyer is paired with an appropriate lender or make sure the buyer for the property you are selling is paired with an appropriate lender. That way, you won’t need to try to keep up with all the never-ending changes like the ones below.

Condo questionnaires, required by lenders, have now added structural questions. Many property management companies have refused to answer them because of potential liability problems. If these questions are not answered, many lenders will not approve a project. 

HOA Reserves are being scrutinized.

Insurance Deductibles must be within acceptable ranges for conventional financing.

HOA Master Insurance policies are also being closely examined. In particular, the policy must now state that it is for “100% replacement costs” and not for “Actual cash value”. For example, with 100% replacement costs, if a roof is heavily damaged by a storm, the roof is completely replaced by the insurance company. With actual cash value, only a depreciated amount will be paid for a claim. “Actual cash value” is not generally acceptable for conventional financing, especially if the roof(s) are over 10 or 12 years old. 

This has caused problems for many properties far from the beach - not just the oceanfront buildings. This is, in turn, affecting property values. Dozens (maybe hundreds) of condo developments in our area are facing the loss of conventional financing.

Second Home Financing

There are additional challenges for second homes, including houses as well as condos.

Second home financing costs and interest rates were increased by Fannie Mae and Freddie Mac in the spring of 2022. These increases were specifically directed at second homes - not primary residences. 

Underwriting guidelines are typically tougher for second homes.

Investment properties face even more stringent requirements and less favorable terms. 

So what to do if conventional financing is not available?

Cash, HELOCS and loans collateralized by investment accounts are some of the methods we have seen used recently for purchases. 

Condotel financing, which is a form of “portfolio” financing, can often be used to finance properties which don’t qualify for conventional financing. These are called portfolio loans because they are often held in the lender’s portfolio of investments. Interest rates and other financing costs are usually somewhat higher although, at the moment, the differences in terms are not that great.

There is a potential problem brewing here. If numerous condos in our area suddenly have to go with portfolio loans instead of conventional loans, this could result in a shortage of portfolio financing. Fortunately, there are other potential purchasers for portfolio loans (other than Fannie Mae and Feddie Mac) and that could alleviate the situation.

With all this going on, it’s not surprising that sales have slowed in some segments of the market. The majority of our condo sales over the past two years have been cash. The reason for the high percentage of cash sales as well as the overall lower number of condo and second home purchases is because a large percentage of the financed sales we would normally see are simply missing. 

Despite all this, buyers are still buying and sellers are still selling. If you want to do either, contact my team and we will find a way to get it done! 

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

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!

Greetings from The Grand Strand!

We’ve had lots of buyer activity with numerous showings and inquiries but the offers have been coming in slower and the negotiations have been more difficult. Still, I received two offers for my listings yesterday so I shouldn’t complain. Maybe we were just spoiled by the past couple of years. Anyway, it sure has been a beautiful fall. I’ve included a few pictures I’ve taken in recent weeks.

After this month’s market report, I want to touch on real estate tax bills and then examine some of the challenges facing condo financing (not just condotels and not just high interest rates) and second home financing in general.

Oceanfront and Resort Condo Market Update

As you can see in the updated chart below, the number of oceanfront condo listings keeps increasing. The total is now 700, up from 652 in August. There were just over 300 in the early spring. The number of active listings off the beach also increased again with 1103 in September versus 1008 in August.

The next chart shows month to month metrics for oceanfront condos. Although the overall result was another increase in active listings, there were no sharp increases or decreases in any measurements but activity of all kinds was slower. New listings decreased 10.2%. Pending sales decreased 7.5%. Closed sales decreased 5.1%.

Sellers: Even with high interest rates and financing challenges (see article below), buyers are still buying. As previously mentioned, I received offers on two of my listings yesterday. We still have two different markets. A number of upscale buildings, particularly those with large condos and/or strong rental incomes, are still selling at good prices (although even these seem to have peaked). Meanwhile, resorts with smaller condos are seeing increased active listings and relatively few pending sales. Pricing is critical with only the most attractive listings selling. 

I will restate that, if you plan to sell in the next year or two, now would be an excellent time to cash out regardless of the building or the size of your property. Most of the financing issues described below (which don’t involve interest rates which should eventually improve) could get worse before they get better. Please contact me if you would like a free market analysis.

Buyers: If you can pay cash, there are good deals available. Although there are financing challenges (see article below), financing of some type is still available for almost all properties. Many buyers are using alternate methods to leverage their purchases. For instance, you can borrow against an investment account or utilize a home equity line of credit (HELOC). Even if the terms may not be ideal at this time, no one expects rates to stay as high as they are now indefinitely and you can always refinance later. If you want to buy, we will help you find a way. Please contact Teressa or Kevin.

New Home Sales

The chart below shows single family home stats for September. Resales once again won the battle with 528 closed sales versus 433 new construction closed sales. There were 657 new resale listings and 452 new construction listings. Please contact Teressa or Kevin and to help you find the best deals.

Real Estate Tax Bills

I mentioned in last month’s newsletter that real estate tax bills would be coming out soon. They were scheduled to be sent October 1. Your tax amount is based on the county assessor’s estimate of “Fair Market Value” as of December 31 of the previous year. 

If you want to see if you think it’s really “fair”, our Closed Sales Histories might come in handy. We have all of the closed sales (complete with details) from 2009 to 2022 laid out on spreadsheets for over 190 condo developments. Here is an example. Link to Anderson Ocean Club 2022 Closed Sales List To request a spreadsheet like this for any development of interest, just visit BeachProTeam.com and sign up or click on the link below.

BeachProTeam.com/nl-ClosedSales

Keep in mind that your tax bill is based on the market value as of December of last year, not the value as of today. For properties which were not sold during any given year, value is only reassessed every five years. The most recent reassessment was in 2019 and the next one will be next year (2024).

If you want to find out your property’s approximate market value now, please contact me.

Condo Financing

Of course everyone is aware that interest rates are at much higher levels than we’ve seen in a long time. As of a few days ago, The average fixed 30 year rate was 7.57%, the highest it’s been in 23 years. What most people are not aware of is that conventional financing (Fannie Mae and Freddie Mac) for condos is facing lots of hurdles in addition to the high interest rates. Note that the issues described below have nothing to do with the borrower’s qualifications.

But first, a reminder…

Hire a condo expert (like The Beach Pro Team!) whether you are buying or selling. We can make sure a buyer is paired with an appropriate lender or make sure the buyer for the property you are selling is paired with an appropriate lender. That way, you won’t need to try to keep up with all the never-ending changes like the ones below.

Condo questionnaires, which are required by lenders to approve all condo projects, have now added structural questions. This is almost certainly the result of the tragic building collapse in Florida a few years ago. The questions are very broad and open-ended and many property management companies have understandably refused to answer them because of potential liability problems if any structural issues of any type ever show up, even if they don't cause serious problems. If these questions are not answered, many lenders will not approve a project. To get around this, some lenders will approve a project if they can obtain several years of satisfactory reserve studies or a number of months or years of recent HOA minutes.

HOA Reserves are being scrutinized. Generally, an HOA is being required to place at least 10% of the annual budget in reserve accounts.

HOA Master Insurance policies are also being closely examined. In particular, the policy must state that it is for “100% replacement costs” and not for “Actual cash value”. For example, with 100% replacement costs, if a roof is heavily damaged by a storm, the roof is completely replaced by the insurance company. With actual cash value, the age of the roof is taken into consideration and only a depreciated amount will be paid for a claim, typically not enough to replace the roof. “Actual cash value” is not generally acceptable for conventional financing, especially if the roof(s) are over 10 or 12 years old. 

This has caused problems for many properties far from the beach - not just the oceanfront buildings. For example, Magnolia Pointe, a large condo development (over 800 units) a little over a mile from the beach, which was built about 15 years ago, now is not eligible for conventional financing because of the situation - even if it is to be the buyer’s primary residence. This recently caused several sales for agents in our office to fall through. Any buyers for Magnolia Pointe now have to use portfolio financing which means bigger down payments and higher interest rates. This is, in turn, affecting property values. Dozens (maybe hundreds) of other condo developments in our area will be facing the same problem.

Insurance Deductibles are also being closely looked at. Many condo developments have gone to higher deductibles to decrease insurance premiums but this can also disqualify a property from being eligible for conventional financing.

Second Home Financing

There are additional challenges for second homes, including houses as well as condos.

Second home financing costs were increased by Fannie Mae and

Freddie Mac In the spring of 2022. Note that these increases were specifically directed at second homes, not primary residences. Upfront fees for second home loans were increased (anywhere from .25% to .75%). Interest rates were also increased for second homes. 

Underwriting guidelines are typically tougher for second homes - higher credit scores, higher required debt-to-income ratios, and larger down payments. 

Investment properties face even more stringent requirements and less favorable terms. If the property is rented or a fixer upper you want to flip, it will be considered an investment property and require a higher down payment and interest rate than a second home.

So what to do if conventional financing is not available?

Cash, HELOCS and loans collateralized by investment accounts are some of the methods we have seen used recently for purchases. 

Condotel financing, which is a form of “portfolio” financing, can often be used to finance properties which don’t qualify for conventional financing. These are called portfolio loans because they are often held in the lender’s portfolio of investments. This gives them more flexibility since they don’t have to follow the rigid conventional financing guidelines. Of course, since these banks and other institutions are lending their own money, they have to be sure they’re going to make a profit. This means that interest rates and other financing costs are usually somewhat higher. Incidentally, at the moment, the differences in terms are not that great between portfolio loans and second home conventional financing.

By the way, there is a potential problem brewing here. With conventional financing, Fannie Mae and Freddie Mac have virtually unlimited capacity to purchase more loans. Since portfolio loans come from the lenders’ assets, there are limits to just how much each financial institution can lend. In the past, we have seen situations where portfolio lenders have used up all the resources they were comfortable with and either stopped condotel lending or became extremely selective. If numerous condos in our area suddenly have to go with portfolio loans instead of conventional loans, this could result in a shortage of portfolio financing. Fortunately, there are other potential purchasers for portfolio loans and that could alleviate the situation.

Whew! With all this going on, it’s not surprising that sales have slowed in some segments of the market. The majority of our sales over the past two years have been cash (many from 1031 exchanges). In fact, over half the sales in every price range were cash in 2022. Unfortunately, the reason for the high percentage of cash sales as well as the overall lower number of condo and second home purchases is because a large percentage of the financed sales we would normally see are simply missing. 

Despite all this, buyers are still buying and sellers are still selling. If you want to do either, contact my team and we will find a way to get it done!

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!

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 are some new reviews published on Google. 

• Kevin is very professional, personable and helped make our move from New York State seamless. I would recommend him to anyone looking for a realtor. He is an all around great guy!!!! Lauren. Conway.

• Working with Gene Carter was a pleasure from beginning to end. Gene is very knowledgeable in the business, excellent in correspondence, and kept me updated on each process during the term of our contract. I would highly recommend signing your property with Gene and his team. Thank you Gene for a job well done!!!! Faye. Carolinian Beach. 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.