Monday, February 28, 2011

Experts provide mixed forecast for real estate market in Myrtle Beach area

Here is a great article about how cash is really King now, more than ever! Important for prospective buyers!

Realtors across the Grand Strand, ready to put a somewhat slow winter selling season behind them, are counting on cash buyers to continue to sprout up and spur the real estate market this spring.

"We continue to see this sputtering where we get really busy, and then it kind of falls off a bit," said Rod Smith, the broker-in-charge of Coldwell Banker Chicora Real Estate. "The cash buyers are the catalyst to get things moving again."

In January, sales were slow, and the median prices for condominiums and single-family homes fell 18 percent and 14 percent from the same month last year, according to the Multiple Listing Service. Some Realtors, including Smith, said that the type of business that leads to sales - phone calls, online inquiries and showings - has picked up since then and is setting the stage for a good spring selling season. Others say the season will be about the same as spring 2010 because homebuyer tax credits have expired, and record-low mortgage rates have crept up.

There continues to be some challenges in getting financing, especially on condo-hotel properties, which may be preventing some purchases, but the cash buyers don't need to wait for the bank and can act on a great deal, Smith said. The cash purchases help take inventory off the market, which can help eventually stabilize prices in neighborhoods, he said.

The combination of early signs of an economic recovery, such as the stock market reaching over 12,000, and the cash sales may make some of the buyers that had been holding back more comfortable making a purchase, Smith said.

"Hopefully, that translates into stronger consumer confidence, which is really what is going to bring us out of this," he said.
Joanie Michael, who was looking for a home in Murrells Inlet this week, said after a particularly tough Maryland winter, she and her husband want to find a home in the area to retire to this spring so they can be settled in by summer.

Like some other retirees, the couple have already sold their Maryland home and plan to use that cash to buy the new house.
"Well you certainly can get a lot more home for your money in this area than you could up north," she said. "We're at a retirement age and will be living on a fixed income, so it just seemed at our age to pay cash right now was the best way to go."

The lure of low prices

About 47 percent of all properties bought in 2010 were paid for in cash, with 43 percent paid for using conventional financing and the remainder financed through agencies such as the Federal Housing Administration or Veterans Affairs. In a typical market, fewer than 20 percent are paid for in cash.

A number of factors are leading to the high level of cash buyers - most importantly, challenges in getting financing, especially on certain types of properties, and the low prices, said Tom Maeser, a real estate analyst with the Coastal Carolinas Association of Realtors.

Some buyers have the cash, while others refinance another property, get a line of credit or transfer investments to be able to buy, he said.

Paige Bird, a Realtor with Re/Max Ocean Forest, said the cash buyers she is working with are mainly attracted to the low prices in the area.

"I just think the pricing is bringing them here. It's amazing the value, and there is a tremendous amount of inventory that you can buy at almost 50 cents on the dollar," she said, adding that she has stepped up her social media activity to reach out to buyers.

Still, it's not all good news in the market, Bird said, because those low prices may drop further as short sales and foreclosures continue to be a significant part of the market.

"I think we're going to see the same transactional amount as we did last spring, but I think the values are going to be lower due to the high volume of short sales," she said.

Those low prices mean that sellers who don't absolutely have to sell should wait, said Penny Boling, the broker-in-charge of Century 21 Boling and Associates.

If a homeowner can't wait, they should list a property for sale now before the busy spring season, which will give it a better chance of getting seen and sold, she said. Properties have to be listed for a reasonable price to be competitive, which can be hard to swallow for homeowners, Boling said.

Cash buyers are going to be the only purchasers on condotels and some investment properties, but there is financing on other properties for qualified buyers, she said.

"If we don't have cash buyers, we'll be sitting here for a while, because there is no financing," Boling said. "The more the better to move this market forward."

Hard sell for condotels

Mark Branstrom, a regional vice president at Bank of America Home Loans, said the bank wants to make loans but didn't dispute that loans on condotels were nearly impossible to get.

The bank isn't lending money for condotels because there isn't a secondary market for those loans, and if an investor won't buy them, he can't make them, he said.

"We're selling all of our loans in the secondary market; we're not interested in shelving loans at the present time. We will be in the future ... but we need to see some stabilization in prices," Branstrom said.

For other properties, the standards haven't changed much since they tightened about two years ago, he said. The income verification process, which is required now, can take time, but he said banks shouldn't be blamed for what they are made to do by regulators.
The processing time for a mortgage has sped up; with many refinances done already, there are fewer loans to process, Branstrom said.

He said more potential buyers are coming in to get prequalified before looking at property, in part because the proof of ability to pay is required up front for many deals, especially with distressed properties.

Branstrom said there is a little bit of loosening of regulations, mainly detailed, common-sense changes such as allowing newly retired homebuyers to use their 401(k) as income, without two years of documentation.

When the area market becomes stable, then some of the lending standards will change, with smaller down payments required and possibly credit score requirements reduced, he said. Now, buyers of houses they'll live in are putting down about 10 percent of the purchase price, second-home buyers are putting down about 15 percent, and investor buyers are putting down about 20 percent, Branstrom said.

"We're ready for a normal lending environment, and we're going to get things in place to where once it does become normal, it's going to become a viable thing," Branstrom said.

In 2010, about 26 percent of single-family homes and 37 percent of condos sold were distressed properties, and those problem properties need to be cleared out of the market before prices can recover, said Laura Crowther, the CEO of the Coastal Carolinas Association of Realtors.

The number of foreclosures and short sales has begun and will continue to decline, she said.

"As that continues to happen, it will have less and less impact on the market," Crowther said. "We're never going to have zero foreclosures or short sales, they are a reality of life, but the numbers that we've seen over the past few years will diminish."
Will sales spring back?

Realtors and experts had mixed opinions on whether sales will pick up this spring and help clear out those distressed properties.
Maeser said he doesn't expect sales to be better than last spring, but that they might hold steady.

"People are attitudinally feeling a little better about the economy," he said. "They're not as nervous. They're willing to make some commitments they weren't willing to make a year ago."

Maeser said that the single-family home market will likely improve at a faster pace than the condo market.

While the past couple weeks have started to show signs that business will pick up in spring, Alex Holbert, the broker-in-charge of Re/Max Town & Country, said he doesn't expect that spring sales will be able to match last year.

Last year, the federal homebuyer tax credit spurred buyers into action at a time when there were also record low mortgage rates.
"Without incentives and even with interest rates creeping up, that's going to pour a little bit of cold water on it. I think it's going to have a dampening effect," Holbert said.

Smith disagreed. He said that he expects sales will be up and prices will stabilize.

"Each sale is one more nail in the coffin of this bad market that we've had," he said. "As we seal that coffin up, the consumer confidence is going to increase, which is going to generate more sales ... and we start that cycle of moving up out of this."

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