By Jenny Burns, The Sun News, Myrtle Beach, S.C. Knight Ridder/Tribune Business News
Dec. 12--Beaches and warm weather are not the only attractions luring new residents to the Grand Strand.
People like Steven and Doris McCarthy are settling here to take advantage of one of the best real estate markets on the East Coast -- one that is booming faster than any of its neighbor cities in Georgia and the Carolinas, even as those markets also see rapid growth.
'They have so much construction going on [here],' Steven McCarthy said.
The area's new-home market is undergoing unprecedented growth, making area real estate more valuable, while also making homes less affordable for some area residents.
Much of that growth was in the new condominium market in Horry County, which almost tripled this year through the third quarter compared with the same time last year, according to Market Opportunity Research Enterprises, a real estate analysis firm.
That more than completes a rebound from a period a few years ago when several condo complexes failed because demand slowed.
The single-family market also is rapidly expanding, with new sales jumping 80 percent in Brunswick County, N.C., and 55 percent in Horry County. The Wilmington, N.C., market saw such sales increase 39 percent.
They increased 16.7 percent in Charlotte, 27 percent in Columbia and 30 percent in Charleston, according to Market Opportunity Research Enterprises.
The local market doesn't seem to be slowing, as immediate indicators point to more growth, even while analysts say such tremendous spikes can't continue forever, particularly with mortgage rates forecast to rise next year. Condo building permits have almost tripled, and there has been more than a 40 percent increase of single-family home permits in Horry County.
The healthy and still-emerging market is expected to increase homeowner wealth through home equity, while continuing to squeeze middle- and low-income home buyers as prices push upward.
The squeeze is a problem city and county officials have spent years trying to combat because of the Grand Strand's heavy reliance on low-wage workers.
The average cost of new single-family homes in Horry County has jumped about $23,000 since last year to $204,656, a 12.6 percent increase.
Even as some potential homeowners may face challenges, the recent rapid sales growth has created a more stable market that lures investors.
Investors like the McCarthys.
The winters in Cape Cod, Mass., weren't enough to drive them away. But the Grand Strand's host of new homes and rising home values got them to pack their bags.
They've been settling into their 1,500-square-foot home at Barefoot Resort for the past three months and already have decided upon a few investments -- new homes in Carolina Forest and North Myrtle Beach. And although they're happy their kids, Lucas, 12, and Lauren, 10, will get to play more sports, they've got something else on their minds: a higher return on investments.
'We really saw the opportunity down here,' Steven McCarthy said.
What is fueling the growth?
Several factors are fueling new-home sales, and those sales are affecting prices.
The sale of existing homes, although still experiencing rapid growth, isn't growing as fast as new sales because people want to hold onto their investment. That has caused a drop in inventory and continued to drive up new-home sales, said Lawrence Langdale, president of the Horry-Georgetown Homebuilders Association.
'It's a good sign when a resort market is growing. It means people have faith that the economy is strong,' said Carl Van Horn, research analyst for Market Opportunity Research Enterprises.
The Grand Strand's real estate market has been driven by population increases, wealth creation, low interest rates and the increase of national builders, said Al Parish, Charleston Southern University economist.
Since 1997, the number of permits to number of closings ratio has steadily declined, showing that production builders -- such as Centex Homes, D.R. Horton and Beazer Homes -- are capturing a larger share of what used to be the custom-home market, Van Horn said.
Small builders also are doing well even as they try to absorb the cost of rising land prices and supply costs. The lumber buyer at Myrtle Beach Building Supply, which sells to custom builders and small developers, said there's a backlog of homes waiting to be built.
That demand, construction costs that have added roughly $8,000 to a new home's cost this year, and skyrocketing land values are making homeownership unaffordable for some in the work force.
Just three years ago, half of all homes cost $130,000 or less, barely affordable then to those with good credit and earning the median household income of about $45,000 in Horry County. But today, half of all homes cost at least $160,000 -- and the upper half of the housing market is growing faster than the less expensive half.
'Land prices are growing really fast,' said local builder Will Rabon with Rabon Construction. 'I've heard rumors that ... tracts not far from us have sold for twice what we paid for them three years ago.'
A restrengthening new condo market is providing less-expensive housing options. Half of all new condo sales in Horry County cost at least $141,000 -- $19,000 less than the median price for new single-family homes. The area's high percentage of manufactured housing and numerous first-time home-buyer mortgages also are serving as buffers against the rapidly rising cost of new single-family homes.
Horry County's condo market, which almost tripled this year, represents a return to 1999 sales levels, before the market went sour, analysts said.
Several off-beach condo complexes, including projects by defunct builder Heritage Communities, ran into trouble after 1999.
Bankruptcies and foreclosures ensued. Planned amenities went unbuilt. A long list of home buyers, subcontractors, builders, banks and others scrambled to salvage investments.
Condo building was outpacing demand, leading to the failures. But now the reverse seems to be true, even though some of those failed projects remain unfinished.
New condo sales in Horry County increased 171 percent during the first nine months of this year compared with the same period of 2003, according to the Rocky Mount real estate analysis firm.
'That ... growth is a rebound from the previous four years, when the market peaked in 1999,' Van Horn said.
The condo market lost 50 percent of its share after 1999 meaning that, even with this year's increases, it is only 9.25 percent higher than it was five years ago, Van Horn said.
'This means people are putting their money in the real estate market,' Van Horn said.
Buying at the right time Bryan Fulton and his family decided six months ago to leave Las Vegas for Myrtle Beach. One big draw was real estate.
He and his wife wanted better schools for their daughters, a friendlier environment, and a chance to invest in a new home.
'You can get a lot more house for your money here,' Fulton said after leaving Las Vegas, where home prices rose faster in the past year than any other metro area in the county. 'We really wanted to get something that was ours and we could build from the ground up.'
Fulton said he's getting in the Grand Strand market at the right time.
'If we're getting in now when we're a little lower on the peak, we'll be able to make more money when we sell in five or 10 years,' he said.
Experts caution that, while rising prices may benefit homeowners, it'll be a different story when it's time to shop for a home.
'You'll get more for your house, but you'll pay more for the house you buy,' Maeser said.
A look into the future Meanwhile, the area housing market will grow in 2005, but not at the breakneck pace of this year, said economist Al Parish.
'Horry County is a hot market, but it will cool off some,' Parish said.
'I don't think you can expect growth at this rate to continue.'
Building permits, which are a good gauge of current and pending housing activity, show the growth will continue for at least the immediate future. Permits for condos in Horry County have jumped 175 percent during the first nine months of this year compared with last year, while permits for single-family homes have increased by 43 percent, according to the real estate analysis firm's figures. A similar increase also occurred in Brunswick County, N.C., and for single-family home permits in Georgetown County.
Parish also expects interest rates to rise. Freddie Mac's weekly survey released Thursday showed that rates on 30-year, fixed-rate mortgages stood at 5.71 percent, the lowest since early November. Forecasts have it reaching about 6.5 percent sometime next year, which is still low by historical standards.
Whether the rates rise won't matter to Fulton and his family. They are scheduled to have their new home in Carolina Forest's BelleGrove completed in February.
'It'll be a better investment for the long term,' he said. 'And they are constantly building here, so we can upsize.'
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