Editor’s note: This is a two part series on the current state of the real estate market in Myrtle Beach. To learn more about who is moving to Myrtle Beach, click here.
Out-of-state home buyers have lit up Myrtle Beach’s real estate market for the past year, driving up home prices and creating a shortage of homes for sale never seen before by some local real estate agents.
Many of the buyers are desperate city-dwellers fleeing packed, expensive hometowns in the northeast or moving up longtime plans to retire at the beach thanks to remote working. The deluge of home buyers has inflated home prices and shrunk the local housing supply to barely one-third of what it was a year ago, Myrtle Beach real estate agents told The Sun News.
These factors created one of the hottest real estate markets local agents said they have ever seen. The market brings with it the potential for low- and middle-income buyers being crowded out, exacerbating existing problems of affordability for people who live and work in the Grand Strand.
Some of these trends are not easily undone, while the rate of home prices increases could decline, the prices themselves might not, according to Federal Reserve real estate data. One of the few times in recent decades that home prices actually declined on average was during the 2008 housing crisis and global recession.
Problems with affordability are not new. Experts say that there is a “substantial disconnect” between what people can afford in terms of housing and the actual cost in the region. The mean wage for Horry County renters is $11 an hour but they need to make $19.17 per hour to afford a two-bedroom apartment without being “cost-burdened.”
To help combat this, the City of Myrtle Beach approved a program last year to help hospitality and government employees provide housing to those living in the city limits.
“We want people to be able to live downtown, but a part of that is being able to afford to live downtown,” Amber Campbell, a research and development analyst for the city, previously told The Sun News. “It’s not just the city’s employees that we want to live downtown but the general workforce.”
The buyers coming in are selling expensive real estate up north and using that money to outbid competitors. The math is simple for some. David Matthew Vital, in Boston, said he can buy a house two to three times the size of what he rents currently.
“It just seems like a better place to raise kids than sit in your house for six months because it’s 20 degrees outside in Boston,” said Vital, who plans to move later this year or early 2021. “If I were to stay in Boston, it’s either I would live where I don’t want and have the house that I do want, or I’ll live in a town that I do want to live in, but I won’t get the house that I want.”
Many houses, even those in need of renovations, end up with a dozen requests for tours within the first 48 hours, with offers coming in close to or above asking price almost immediately, Luxury real estate agent Troi Kaz said.
In this market, many homes will sell for more than the appraised value as buyers make “emotion-driven” purchasing decisions out of fear that they will be outbid, said Greg Harrelson, a real estate agent for Century 21.
“I don’t like to use words that stimulate emotions,” Harrelson said. “But I will say we are experiencing an inventory crisis in Myrtle Beach. There is such a backlog of buyers.”
From January 2020 to the beginning of this year, median home prices rose 8.71% in Myrtle Beach, according to the Federal Reserve Bank of Richmond. That’s the sharpest jump since 2014 when home price increases flattened to 5% each year for the next six years.
On average, this means a home sold before the pandemic for $250,000 would sell for $272,000 today. For sellers, this market is great, real estate agents say.
“They’re going to be flooded with showings like bam, bam, bam, bam, bam,” said Renny Diedrich, South Carolina Association of Realtors’ vice president over Myrtle Beach. “You’re going to get multiple offers. Sometimes sellers don’t anticipate that. Sometimes it is stressful.”
But it’s also raised thorny issues surrounding affordability in an era when the number of homeowners has been on the decline.
These high home prices couple with the fact that many buyers are making offers at or above the initial asking price, some of which end up in bidding wars. That $250,000 house from a year ago could easily end up selling between $280,000-$300,000 by the time the purchase is finalized, real estate agents say.
“If you’re a seller, you’re living out your fantasy right now,” Harrelson said. “If you’re a buyer, it’s your worst nightmare.”
Even if there wasn’t a deluge of rushed buyers driving up home sales, prices likely would have gone up this year anyway, the Federal Reserve said. The pandemic snarled supply chains all across the country, making essential home building materials like lumber, windows and large appliances harder to find and more expensive to buy.
Home building itself also practically ground to a halt last March before slowly restarting, Myrtle Beach real estate agents said. And thanks to the supply-chain woes, it still hasn’t fully recovered, the Federal Reserve economist Matthew Martin said.
“That pipeline for lots is falling behind,” Martin said. “Who is going to move into a home without a dishwasher or windows or anything like that? That’s extending the time it takes to build a home.”
The few houses that have been put on the market are much more expensive thanks to those construction problems.
“If it needs some work, it (stays on the market) like 60 days or so,” Diedrich said. “But if it’s good, it’s on the market, I swear, like within five minutes of an agent putting out a listing, and their phone is blowing up for showings.”
All of this means that there are more, free-spending buyers competing for fewer, more expensive homes.
“It appears that the only way that you’re going to be able to find a home for your buyer is to do it in a stealthy way and get the home before it actually hits the market,”Kaz said.
It’s a spiral of chaos in the private real estate world right now, Kaz and Harrelson say.
Nevertheless, Harrelson said many buyers, ready to escape their previous homes after a year of pandemic lock downs, are willing to pay these huge sums.
“Remember the winner in an auction? It’s always the highest bidder,” he said. “The winner always pays the most. It’s almost like people are in that, ‘I’ve got to win,’ mentality right now.”
One major factor helping buyers is the historically low mortgage interest rates currently available to prospective homeowners. These rates, some as low as 1-2%, happened in part as a result of steps taken by the federal government in the last year to protect the economy from the worst effect of the pandemic recession.
The quick, and expensive, home sales in recent months have raised concerns that the current real estate market might be crowding out less wealthy buyers.
Some people coming in to buy houses in the region, real estate agents say, are coming in with 10-20% down payments, Harrelson said. Many of them are also bringing their high incomes, inflated because of the northeast’s cost of living, to much cheaper South Carolina in the form of remote work, real estate agents said.
The most eager buyers simply have cash to burn.
Right now, at least, some locals looking to buy might have to wait until the market cools off and the bidding wars end, real estate agents said.
However, there could be more far reaching consequences, like home prices permanently increasing to levels out of reach of those who both live and work here. This could remain especially true if most of the people moving here continue to be high-income remote workers rather than those working in lower wage, in-person hospitality jobs, said Martin, the Federal Reserve economist.
“Somebody is going to get priced out of the market and they have to either live further away and have a longer commute or figure out something else and put some other other strains on those households,” he added.
The price of rent also grew 8.7% since the beginning of the pandemic, according to a report from the market research firm Apartment List. In Horry County, 24.9% of renters spend more than half of their income on housing, according to U.S. Census Bureau data.
“Trying to make a family budget work when you’re spending more than half your income on rent and utilities, that’s not feasible,” Bryan Grady, the chief research officer for C Housing Finance and Development Authority, told The Sun News. “That’s not going to happen.”
There are also new buyers in the market looking for second homes, increasing competition and taking away housing from people who want to live here full time. Some of them are making cash offers, Kaz said, which are particularly hard to compete with because of the shorter closing window.
The city’s workforce housing program could help mitigate some of these issues, but it could be 18 months or more before residents can even apply to participate, the city said.
There is some hope the market will cool off, Martin said. While many people switched to remote work permanently this year, many companies still expect people to return to the office, full or part time. There will not be an endless supply of remote workers and retirees flooding into Myrtle Beach.
Home loan interest rates are also rising. While that will make home buying more expensive down the line, it also means that some people will eventually be cut off from buying or choose not to, Martin said. Once that happens, the bidding wars driving up prices could also go away, real estate agents say.
“That (will) take a little bit of the buzz out of the market,” Martin said.