Everything You Ever Wanted to Know About 2014 Oceanfront...

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Gene Carter, CDPE Myrtle Beach Real Estate Sales 1-800-872-4488 [email protected] www.MyrtleBeachAdvantage.com This document expresses the opinion of Gene Carter, CDPE. Specific property information is deemed reliable but is not guaranteed.

Everything You Ever Wanted to Know About 2014 Oceanfront Condo Sales

I mentioned in my Dec/Jan 2015 newsletter that the number of closed sales for oceanfront condos in 2014 was down slightly from 2013. There were 1118 sales in 2014 versus 1271 sales in 2013 – a 12% decrease. I stated that, from a historical perspective (the last 12 years or so at least), the decrease was a relatively incremental change. I also stated that the oceanfront condo market has been far less volatile in recent years. I did some research and came up with the charts below that appear to back up these comments. Interruption - Spoiler alert – This is a long detailed article packed with lots of charts, numbers and facts. It’s fascinating to me but I realize this type of analysis is not everyone’s cup of tea. If you aren’t into this kind of thing or simply don’t have the time, you can skim over it and just pay attention to the passages in bold print. If you really just want to cut to the chase, you can skip to the Summary and my “What to Do” sections at the end. All of the data used to prepare this report was collected from the Coastal Carolina Association of Realtors MLS. The referenced oceanfront condo sales and listings were entered in the system (by the individual listing agents) as being in oceanfront buildings. Not all were direct oceanfront condos. For more details, please read the disclaimer at the end of this article. Now here we go, on to the charts… The following exhibits track the numbers of condo sales, average closed sale prices, and median closed sale prices from 2003 until 2014.

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I found these results so interesting that I will follow up with a detailed analysis of these in a future newsletter. For now please note that, since 2011, the numbers of sales as well as the closed sale prices have both been bouncing around in the same general ranges. The median price, a better measure of values than the average, has increased in each of the last three years - since 2011. The increase from 2011 to 2012 was 9.8%, from 2012 to 2013 it was 2%, and from 2013 to 2014 it was 1.2%. The total median price increase during this three-year time period was 13.3%. When you look at all these numbers in historical perspective, it’s obvious that we have indeed entered the “normal”, “stable” market with “prices trending up” that I’ve mentioned in numerous previous newsletters. Now let’s take a detailed look at how the local real estate market fared for oceanfront condominiums in 2014. I will be borrowing some phrases and explanations from my 2013 report since many of the results and patterns in 2014 were similar. First, note that the number of oceanfront condo listings available as of February 18, 2015 was 1285. In last year’s report I noted that as of March 20, 2014, there were also 1285 active oceanfront condo listings. I have checked this metric frequently and there have consistently been, at any given time, between 1175 and 1325 active oceanfront condo listings for at least several years now. I’m not sure if it’s coincidence or not but the number of active listings has been in the same range as the number of closed sales per year. What is not a coincidence is that the time periods during which the numbers of listings have remained relatively stable have coincided with times of relatively stable prices. When there have been big changes in listing inventory, these time periods have coincided with big changes in prices. In 2005, at the peak of the market frenzy when prices were skyrocketing, there were less than 300 oceanfront listings available. As the bubble subsequently collapsed and prices went into freefall, the number of oceanfront condo listings swelled to over 2700. Once again, as with prices and sales numbers, the listing counts have stabilized. It is noteworthy that there have been no new oceanfront condo towers built since 2009 so the overall inventory of potentially sellable condos has remained the same. It’s a pure re-sale market. The same cannot be said of the market for condos off the beach or for single family homes. Lots and lots of new construction! In fact, 45% of the single family home sales in our area in 2014 were new homes.


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Let’s take a detailed look at last year’s sales. The following chart shows the number of oceanfront closed sales by price range for 2013 and 2014. See my comments below.

I’m going to insert last year’s analysis almost verbatim here because it still applies. “There were relatively few sales under $50K, probably because there were relatively few oceanfront condos available in that price range (very small condos). The $50K to $150K ranges saw the most activity, probably because of their affordability. The sales were predominantly 1BRs bought by investors. The next tier is the range of $150K to $250K. These sales were mainly 2BR condos with a few big 1BRs and inexpensive 3BRs… With each higher price range the number of sales decreased – dropping off dramatically for condos over $400,000.” Although there were fewer sales in each of the price ranges in 2014 than in 2013, the biggest decreases were in the higher-priced ranges. There were 45 fewer sales above $400,000, a decrease of 38% compared with 2014. This explains why the average sale price decreased (Chart 2) while the median price increased (Chart 3). 45 sales may seem like an insignificant portion of the 1118 total sales but the dollar volume for these was approximately equivalent to the total dollar volume of all 354 sales under $100K. The sales in the $250K to $300K range were down 21%. I don’t think these decreases resulted from diminished buyer interest. In fact, most of the closed sales within the upscale developments were at higher and higher prices (again – incremental increases). In my opinion, these low numbers of sales were mainly the results of limited supplies. As you’ll see in a


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subsequent figure, the numbers of sales in several high-end resorts were down substantially, mainly because the developer-owned inventory - which was fueling the sales in recent years - has been dwindling. In several other high-end, high demand developments, there were few listings priced in market range and potential buyers were unwilling to make the purchase price leaps the sellers were attempting to accomplish. The next chart shows oceanfront condo sales per number of bedrooms for 2013 and 2014. See my comments below.

As with the numbers of sales in the various price ranges, the numbers of sales in each bedroom category were generally down slightly in 2014 compared with 2013 but the pattern of sales was similar. Again I’m going to borrow verbiage from last year’s report to summarize this chart. This follows the pattern I described when discussing the price ranges. Lots of 1BR sales – mostly bought by investors (same for the efficiencies). There were quite a few 2BR and 3BR sales as well. The number of sales of 4BRs drops off dramatically. Note that there are many 4BR condos in North Myrtle Beach but very few 4BR condos in Myrtle Beach. There are very few oceanfront condos in the area with five bedrooms or more anywhere on the Grand Strand.


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The following chart shows cash purchases versus financed purchases for oceanfront condos in 2013 and 2014.

As you can see, almost 30% of the oceanfront condo purchases over the last two years have been financed. Incidentally, the “other” category includes owner financing (very rare) and other creative purchasing arrangements. One of the most baffling aspects of oceanfront condo sales in recent years has been the persistent and erroneous belief that oceanfront condo purchases cannot be financed. Many buyers believe this and, inexplicably, the majority of the agents in our area believe this. Even worse than the agents who think oceanfront condos can’t be financed are the agents who think these purchases can be financed using the same lenders and the same programs as single-family residences. The poor advice given by these agents costs buyers and sellers a great deal of time and money. The fact of the matter is that financing is readily available to purchasers of almost any condos on the entire Grand Strand. I would not, however, advise a buyer or seller to spend time investigating this on his own. There are too many subtleties and the lenders and their parameters change often. Furthermore, the lender programs are building-specific and even floorplan-specific within buildings.


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This sounds complicated and it is - but the right agent should be able to make it easy for his or her buyer or seller client. Note that throughout this discussion, I’ve said buyer or seller. It’s just as important for a seller to choose a listing agent with expertise in this area because one of the agent’s primary responsibilities is to assess the viability of an offer – which includes determining whether or not the potential buyer has a good chance of completing the sale. The last thing a seller wants to do is take a listing off the market for 2 months while the buyer wastes time chasing a loan which has no chance of closing. My team has been involved with 40 financed oceanfront condo purchases over the last two years (either representing the buyer or the seller) and not one has fallen through. I will include a separate article examining this in more detail in my next newsletter. Please read it if you plan to buy or sell a condominium. Now back to the 2014 oceanfront condo sales The following tables show the number of closed sales in 2013 and 2014 for 88 different developments in Myrtle Beach and North Myrtle Beach. Table 1 includes only oceanfront developments and Table 2 includes only developments that are not oceanfront (although several are located on the second row). See my comments below.


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The selected developments in these tables were chosen (by me) because they are relatively new and/or large. There are literally hundreds of other condo developments in our area but it just wasn’t practical to include them all. My team and I actively sell in many of these other complexes as well. Please let us know if you want info on sales or if we can be of service regarding any development on the Grand Strand. First, the non-oceanfront developments. The totals for several of these that sold well were bolstered by the availability of new or developer owned condos for sale. Market Common (I actually combined several condo developments together), Ocean Keyes, and Tuscany all fit into this category. Magnolia North, Magnolia Place and Magnolia Pointe all produced lots of sales but these are all very large developments (400 units or more apiece) so they were bound to have high numbers. Considering its relatively small size, Grande Dunes Marina Inn was also very active with 13 sales in 2014 compared with 6 in 2013. Now for the oceanfront developments. The two leaders were at the opposite ends of the scale. There were 38 closed sales at the Landmark Resort, only slightly down from 41 sales in 2013. All of the condos at Landmark are either efficiencies or 1BRs and are typically purchased by investors. The average closed sale price for these in 2014 was $60,611. At North Beach Towers, there were 37 closed sales, down substantially from 59 sales in 2014 but still good enough for second place. This was one of the developments I alluded to earlier when I said some of the high-end developments had fewer developer owned


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units to sell this past year. The average sales price for condos in North Beach Towers in 2014 was $744,572. Another development which was impacted by the sale of developer owned units was Dunes Village Phase II. The number of closed sales decreased from 53 in 2013 to 23 in 2014, largely because there were fewer developer owned condos for sale and many of the ones which were available were less favorably located than listings in previous years. This was one of the developments which had a significant impact on sales in the $250K to $300K range. There are still developer owned units available in North Beach Towers and in Dunes Village and they are still great deals (so act fast if interested) but the selection is becoming much more limited. Sales totals were off in three luxury condo towers at Kingston plantation as well – Margate, Royal Palms, and Brighton. I think these buildings represent the scenario I mentioned earlier in which sellers have significantly increased their asking prices, leaving few listings within market value range (defined as the price range at which buyers are willing to purchase). It’s important to note that in all of these upscale buildings in which the numbers of closed sales decreased in 2014, sales prices for the ones that did close trended higher. I will address this in more detail in a future article. By the way, it may seem that I’m leaving out the North Myrtle Beach condos since they haven’t been mentioned among the sales leaders (other than North Beach Towers). It is not a coincidence that the sales leaders in terms of total numbers of closed sales were mainly in Myrtle Beach (MB) rather than North Myrtle Beach (NMB). Keep in mind that the total number of sales is not only a function of how attractive a particular development is to buyers. It is also largely dependent on the number of condos in the development – more condos, more listings, more sales. Oceanfront condo developments in MB are dominated by condotel towers - which tend to be large and have high percentages of 1BRs – resulting in hundreds of condos in each development – hence, large sales totals. Incidentally, there are a few large condotel developments in NMB as well. Bay Watch, Beach Cove, Prince Resort and The Avista are examples. The Avista, in particular, had a strong 2014 with 25 sales. Of course, North Beach Towers, also located in NMB, although not a condotel and consisting of mostly large condos with few 1BRs, is a bit of an anomaly since it has over 300 units. Most oceanfront condo towers in NMB, by contrast, are composed of large 3BR and 4BR condos and most of these buildings contain fewer than 100 units – and many buildings contain far fewer. Therefore the overall sales totals for any given time periods are usually lower - although the percentages of sales based on the numbers of units in the buildings are often comparable to those for condotel developments. It should be noted that the typical sales prices in NMB are higher on average than for condos in the MB condotel towers. In fact, many of the NMB buildings sold well in 2014 (Crescent Shores and Crescent Keyes for example) although some were down significantly compared to 2014 (Ocean Creek, Mar Vista Grande, Atlantic Breeze, Beach Club I, II, III...). I think many of these buildings in this last group were facing the scenario I’ve mentioned several times in which potential buyers were offered very few “market-priced” listings from which to choose.


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I have one final table for you. This one shows the rankings for the top 10 real estate offices in our market for condo sales in 2014.

This chart looks a lot like the one from last year, and the year before, and the year before… The Hoffman group has finished number one in condo sales every year for at least as far back as reliable MLS computer records exist (about 2002) and actually quite a few years prior to that.

Summary

Well, that’s it for this year’s analysis of oceanfront condo sales in 2014. Here’s a brief summary. The median price increased about 4%, to $144,450. This is the third year of incremental gains in a row after prices bottomed out in 2011 at $127,500. Median prices have increased 13.3% since then. There were 1118 closed sales, down 12% from 2013.This was the fifth year in a row that sales volume bounced around in the same general range of approximately 1200 closed transactions per year - give or take a hundred. Most of the missing sales seemed to be from high-end developments – largely because of decreased availability. The number of listings was virtually unchanged since last year at 1285, again continuing a streak of several years in the same range of 1175 to 1325 listings. The price segment of the market with the highest number of sales was the $50K to $100 K range with the number of sales decreasing in each subsequent higher price range, dropping off sharply above $400K. The number of sales per number of bedrooms was highest for 1BRs, followed closely by 2BRs, then 3BRs and dropping off sharply for 4BRs.


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Although the overall number of sales, average price, median price and listing count for the total of all oceanfront condos combined ended up in the same general ranges as recent years for each metric, the sales totals for different resorts varied quite a bit from year to year. The sale totals for most oceanfront and resort condo developments were down somewhat compared to 2013 numbers but a few sold as well or better. The total sales for the various complexes seemed to be influenced strongly by the availability of market-priced listings. Financed purchases comprised about 30% of the sales for oceanfront condos for the second year in a row, dispelling the misconception that oceanfront condo financing is unavailable or difficult to find. I strongly advise any buyer or seller to choose his or her agent carefully! Please read my article about this in next month’s newsletter. Here are a few of my personal comments which weren’t based on the overall numbers in this report but which I will flesh out with analyses of trends within specific developments in a future article. The numbers of available listings in high-demand developments have been shrinking within the price ranges buyers have been accustomed to paying. Prices in these high-demand buildings have been increasing at a faster pace than the rest of the market (although still at a relatively moderate pace). Current buyers will generally pay “market value” or even slightly above (compared to recent sales) but will not make big price leaps. In developments which do not have the attributes found in the top tier (newer construction, extensive amenities, high rental incomes, luxury features, etc.), prices have generally been flat – not increasing or decreasing much if at all – even if the resorts are still attractive and well-maintained.

What to Do?

If you’re thinking of buying: Prices are excellent, still not too far above where they bottomed out a few years ago for most properties and the market is stable with very few distressed sales. By all accounts, current market prices are still far below re-constructions costs. In other words, even though there aren’t many steals out there, you haven’t waited too late to buy. This is an excellent time to buy high quality at a low price. If you currently own, it’s a super time to trade up. However, prices have been trending up in the newer, high demand developments and the selection is becoming more limited. If you’re going to finance, interest rates are still at historically low levels and financing is available. Also, this time of year works in your favor if you are purchasing a vacation rental property because of the seasonality of the rental income in our area.


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If you’re thinking of selling: If you enjoy owning your property, particularly if you bought in the past few years at a low price, you’re probably in good shape – enjoying moderate appreciation and a stable market. In fact, a number of my clients in this position are buying additional properties. Also, as mentioned before, if you don’t currently own the property you ultimately want to own, it’s a great time to trade up since the price gap between the one you own now and the one you want will probably just get bigger. Regardless of the reason you choose to sell (another opportunity, upside down and tired of hoping for prices to skyrocket, just want to cash out...), the data in this report appear to indicate there’s probably little or no benefit in waiting. As illustrated in Chart 2, the rate of appreciation has been nowhere near nor is it likely to reach the levels seen in 2003 through 2007. The current stability of the market has resulted in no sharp movements in prices in years and there is no reason at this time to believe this will change in the near future. Different condo developments are selling and appreciating (or not) at different rates so you need expert advice as to what’s going on with your property and your development. Don’t rely on market reports for the country or the state or even the Grand Strand, and, for gosh sakes, ignore the Zestimates! If you decide to sell, consult an agent who is an expert on oceanfront condo sales to take a look at your condo, your development, the current market conditions and your individual goals. And make sure your agent understands condo financing! That’s it for the 2014 report. As always, whether you’re buying or selling, let me know if my team or I can be of service. I’ll be glad to analyze your individual situation.

Disclaimer

All data obtained from the Coastal Carolina Association of Realtors (CCAR) Multiple Listing system (MLS). CCAR’s territory includes Horry County, Georgetown County and parts of southeastern NC. This MLS info was entered by individual realtors. Realtors occasionally make errors. Not all condo sales are entered in MLS, although the most are in our area. The material provided is for informational and educational purposes only and sometimes contains current or forward-looking statements on real estate market conditions, and should not be construed as legal, investment and/or real estate advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is without errors, and is not necessarily the opinion of The Hoffman Group or its agents.


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