Coast Region Plagues South Carolina Housing Market
A crisis in the coastal insurance market continues to drag down home sales numbers throughout South Carolina — despite significant gains in parts of the Upstate and an ever-steady Midlands market.
- Home sales statewide for the first three months of the year were down 6.7 percent when compared to the first quarter of 2006.
- The Myrtle Beach area had the biggest drop, nearly 32 percent. The rest of the coast also suffered double-digit declines.
- Industry leaders, though, still are optimistic about home sales this year, citing a stable number of building permits and a growing number of new real estate licenses in the South Carolina housing market.
Sales in some areas of the state still will be at historically high levels, said Nick Kremydas, CEO of the S.C. Association of Realtors, who said an increasing number of real estate agents usually is a sign of a strong market. His organization also is welcoming a record number of members.
But he said keeping the state’s home sales healthy involves looking at the whole state.
“If a car represents our economy, the coast is the engine in that car,” Kremydas said. “It’s hard to ignore.”
But the outlook continues to be gloomy for the coastal insurance market, said Robert Hartwig, president and chief economist of the Insurance Information Institute in New York, in a recent conference call.
A natural severe weather cycle that started with Hurricane Hugo in 1989 is expected to continue at least through the next decade, Hartwig said.
The last time the coast saw weather this severe was in the 1950s, when there was much less residential development there.
“There is potential for a loss several times that of Hurricane Hugo, and it looms very large,” he said, adding that the probability that a major hurricane will hit the S.C. coast this year is 40 percent.
“One reason for the recent spikes in insurance,” Kremydas said, “the insurance companies in their models… basically are saying that South Carolina is overdue for another storm.”
In fact, devastating tropical weather in the past few years led to higher insurance costs in all coastal states. Insurers started pulling policies from coastal regions and boosting premiums.
It will take a mix of federal, state and local efforts to reduce risks and insurance costs, Hartwig said. But so far, no comprehensive plan has been put into place in South Carolina that will affect those costs, and only a few insurers have returned to the coast.
That could mean a continuing decline in home sales for those regions, no matter how low South Carolina mortgage rates remain.
Kremydas said the Realtors are backing a plan proposed by insurance director Scott Richardson that involves encouraging insurance companies to come into the state to do business.
“The discussions are going to be long and hard-fought at the State House, I’m sure,” Kremydas said. “There’s not going to be any easy answers… The only solution to this is to create an economic climate in South Carolina where insurance companies come and want to do business.”
Others factors in the declining home sales include a crash in the subprime (bad credit home loan) lending market and slow sales in other states, which ultimately prevent newcomers from buying homes here.
In Columbia, home sales in the January-March period were up 4 percent, to 2,317, over the first quarter of last year. Upstate, the Rock Hill area achieved a 66 percent gain in home sales to 957. The Anderson area exhibited a 14 percent decrease. Other areas were stable.
The median price — the point in the market at which half of the homes sold for more and half for less — also was down more than 3 percent to $152,000, at the same time the Charleston housing market was up 4 percent to $141,000.
Home sales are shifting from high-cost coastal markets to more moderately priced inland markets, Kremydas said, causing a dip in median sales price, even as local mortgage rates remain low.
SOURCE: The State