South Carolina Real Estate Future Dependent on Insurance, Mortgage Rates
It doesn’t take long for casual conversations around the Grand Strand housing market to turn to how much insurance rates are going up and how much high-end development is changing Myrtle Beach’s “blue collar” persona.
And you’ll often hear the local work force expressing dismay that they can’t find an affordable South Carolina home - especially with the price that $120,000 condo might cost to insure.
The forecasts call for coastal insurance rates to continue rising - the Insurance Information Institute expects an increase of 20 percent to 100 percent in 2007.
What happens in the legislature this year concerning insurance reform will play a key role in predicting the coast’s real estate future - answering the question of whether the Myrtle Beach housing market is still affordable for buyers.
As for the real estate market, there’s more correction to come in the marketplace before sales and appreciation pick up, economists say.
“It will take 2007 to work through inventories,” said Mark Vitner, economist at Wachovia in Charlotte, N.C. “But by the end of the year, the process should be complete.”
Vitner expects continued declines in sales, but he expects that to bottom out by the middle of the year and for demand for mortgage loans in the state to return by then.
The Strand’s sales numbers showed a 4 percent decline in home sales from 2005 to 2006 and a 30 percent decline in condo sales in the same period.
Vitner expects little to no appreciation overall in 2007. Nationwide, the forecast calls for a 1 percent drop in median price, but Vitner says markets like Myrtle Beach that saw the boom may have more outright price declines.
While quarterly stats haven’t shown price declines - actually double-digit increases have been the norm - Vitner says price appreciation has largely stopped, but it takes a while to show up on a year-to-year basis.
“Myrtle Beach still remains a relative bargain compared [the Florida housing market]. I really think we’re going to still find plenty of demand, it’s just not quite as strong,” he said.
Because so many baby boomers itching to move to the sunny Grand Strand are having trouble selling their homes in the Northeast or Midwest, Vitner said “the national housing market must bottom out and improve before we’ll see Myrtle Beach pick back up again.”
Some experts say insurance issues could threaten the local real estate market’s lifeline: savings-rich baby boomers who choose the S.C. coast as they retire in droves and take our home mortgages in the region.
Most of the new development on the Strand is holding this vision - the lavish North Beach Plantation, the Riviera, expected high-end development at the site of the former Pavilion Amusement Park and Myrtle Square Mall, as well as The Market Common and Withers Preserve.
The belief that the Strand could compete with wealthy destinations like Hilton Head and Florida cities was ushered in about five years ago with the advent of Grande Dunes - which took off in sales and popularity as real estate boomed. But an investor exodus and hesitant second-home buyers have left many lavish homes without any takers, like the 59 homes in Grande Dunes on the resale market.
Analysts say the luxury second-home market may be the first to pick back up because wealthy buyers are the least affected by insurance increases and mortgage interest rates.
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