| Thursday, August 17, 2006 |
| Myrtle Beach Real Estate |
Myrtle Beach Condos and Investment Real Estate
I guess everyone is aware that the big real estate investing boom of last summer has subsided somewhat.
Last year reminded me of a twice a year happening we have in Myrtle Beach, when an unbelievably large school of fish makes a migration through here. In March and October, a small and "tasty" fish called "spots" come through the entire area in HUGE schools, close to the shore, and right under and around the piers. Pier fishermen (and women) bring huge garbage cans, coolers, barrels, and anything they can find to put ice in, and literally throw out a line and bring in 3 and 4 fish at a time, often without even baiting the hook. I did it myself one year, and while it's cool to catch 200 fish in 30 minutes, there was no sport or challenge to it, and then you're stuck cleaning all those fish!
That's the way it was with condos and any other kind of resort real estate last summer.
Myrtle Beach condos were so easy to sell that there weren't enough to go around for all the people looking for investment real estate. All you needed to do was talk about a new resort and there were buyers begging for the product.
Of course this was going on in Florida and many other areas, too. Developers went crazy everywhere, and the market became saturated. As the months passed, interest rates climbed with mortgage companies, all the investment gurus kept predicting doom and gloom in the press, and eventually it became somewhat of a self-fulfilled prophecy. Sales slowed, and investors got scared and backed off. The ones that got in on the condo boom in the beginning made gigantic profits, and the ones that waited either lost out, or may now be facing a choice of closing on the preconstruction or losing their deposits.
By no means has there been a real estate bubble or crash. I think every bit of this has been caused by the doom predicters. And the agents and people who know what they are talking about are all saying that this is only a slow-down, and another wave will hit in about a year and a half from now. My only other concern is how high condo insurance may end up going.
The good news is that now it's more of a "BUYER'S MARKET". For those who don't choose to believe all the pessimists and invest in condos and resort property now, they will get even bigger discounts and perks, and when it picks up again, they will be in the same boat with the ones who bought in the beginning of the other boom. Real Estate investing is not for the worriers or the wimps...I think you have to have the nerve to take a chance and get in early to reap the profits.
A guy who is near and dear to me never stops buying. It would terrify me to borrow and spend right and left on every kind of real estate in Myrtle Beach, but he is building so much wealth that I doubt even HE knows what he has. And in about 10 years he will be so rich that we will all be shaking our heads in disbelief. If you've got the money, the credit, the right intuition, and the nerve to commit everything you have, you'll come out on top. I see him doing this every day, and my admiration for him knows no end.
Myrtle Beach is still underpriced compared to Florida and the other hot vacation spots. The developers are offering incentives right and left. Anyone who is looking to invest in real estate and can hold their investment for a year or two will be smiling then.
Here's a recent article about the local market and some of the discounts and perks the developers are offering. If you are thinking about investing at all, you should read it and think hard about taking the plunge before it starts back hot and heavy and prices jump again...
Home builders offering incentives on S.C. coast
Special deals aim to pick up sales among wary buyers in shaky market
By JENNY BURNS
jeburns@thesunnews.com
MYRTLE BEACH — Big builders, taking cues from the auto industry to sell their oversupply of homes, are offering big incentives along the S.C. coast.
Buyers can get 4.25 percent financing, no payments until 2007 or free homeowners association fees for a year.
The deals are aimed at making cautious buyers during this real estate slowdown take the plunge and buy.
“(National builders) are seeing sales falling in general, seeing cancellation rates pick up, and they’re using the incentives to help drive sales and use it to sell inventory that they didn’t plan on having,” said Todd Vencil, analyst for BB&T Capital Markets, who covers eight publicly traded home builders.
For consumers, the payoff is in lower monthly payments and less upfront cash to get into a new home.
While incentives are normal, Vencil said this summer’s incentives go beyond the typical appliance upgrade and free closing.
“They’ve clearly picked up,” he said.
One example is Centex Homes, the Grand Strand’s largest builder. The company is offering 4.25 percent financing with an adjustable rate mortgage. On a $150,000 home, that would make monthly payments about $738 before insurance and taxes are figured in.
That rate is only on spec homes that close by Oct. 31 in most Centex neighborhoods, said Ken Balogh, Myrtle Beach division president.
For a 30-year fixed mortgage, that rate jumps to 6.5 percent.
Balogh said Centex wants to take rates down to last year’s level to help buyers fight rising rates.
The builder is seeing an uptick in cancellations compared with last year, especially in condos, he said.
Builders also are looking at ways to ease the pain of skyrocketing insurance rates along the Grand Strand.
For instance, Centex is paying homeowners association fees between $3,000 and $9,000 in most of its condo and town home projects.
Some Strand condo complexes have seen double and triple increases in their fees because of insurance hikes.
“We can’t fix the insurance challenges but we can help our customers to overcome a year or two of that increase,” Balogh said.
Builders aren’t saying how long they’ll be touting incentives, but analysts expect the enticements to stick around a while.
myrtle beach real estate
Jenny Burns is a reporter for The (Myrtle Beach) Sun News, a McClatchy newspaper.Labels: myrtle beach condos, myrtle beach real estate, real estate investment |
posted by Myrtle Beach Web Design @ 2:19 PM  
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| Friday, May 20, 2005 |
| Banks offer letter of credit to finance 2nd homes |
Banks offer letter of credit to finance 2nd homes
Thursday, May 19, 2005By Kemba J. Dunham, The Wall Street Journal
Buy beachfront property! Almost no money down!
More investors prowling some of the hottest real-estate in the country have discovered an old-fashioned financing tool -- the letter of credit -- and are using it in a way that may be adding fuel to an already overheated housing market.
Regional banks active along the Gulf of Mexico, where thousands of luxury condominiums are planned, are offering letters of credit to high-end home buyers, who use them instead of a cash down payment to reserve condos before they are built.
A person who obtains a letter of credit is promising to make a future payment, or else the bank that wrote the letter of credit is on the hook. Some letters of credit are secured by the person's assets; some aren't. They have long been used by companies, often when there is a lag between striking and closing a transaction, such as in securities transactions or the import/export business.
Using a letter of credit to buy a home has been rare -- until now -- in beach communities in Florida, Alabama and Texas, where baby boomers are buying second homes. Estimates call for 20,000 condo units to be built in Florida and Alabama alone in the next two years, many at prices of $500,000 to $1 million. Some commercial lenders won't advance construction financing for condo developments until the builder "presells" at least 60 percent of the units, even though they may not be built for a couple of years.
For customers who don't want to tie up cash that long, the letter of credit is attractive. "You're not using any of your cash, and protecting your cash is one of the most important things to an investor," says Kathy Martinez, who has been investing in real estate for 25 years and currently owns eight condos and seven preconstruction units along the Gulf Coast.
In Alabama, buyers are allowed to use a letter of credit for as much as 20 percent of the down payment. In Florida, a buyer can get a letter of credit for half of a 20 percent down payment; the rest must be in cash.
How letters of credit get used to buy condos is fairly simple. Typically, a developer "presells" by letting a buyer reserve one or more units with a small cash payment. The buyer then has 30 to 60 days to get a letter of credit covering up to 20 percent of the purchase price. Once the developer gets the letter, the deal is binding, and the reservation becomes a sale. The buyer may then get back that initial cash payment.
Ms. Martinez recently received a letter of credit from Vision Bank in Gulf Shores, Ala., for 20 percent of the value of a $460,000 condo there. Like other investors, she hopes the property will appreciate by the time construction is complete, allowing her to sell for a profit -- without spending anything but the letter-of-credit fee charged by the bank. Such fees are in the 1 percent-to-3 percent range of the letter-of-credit value per year.
Helga James, a Gulf Shores mortgage broker, says "everyone makes out" with letters of credit: Banks get fees and customers, buyers get to invest their money elsewhere while waiting for construction, and developers are assured their money.
Some say letters of credit make it too easy for speculators. Economists estimate about 20 percent of residential property sales involve investors, not families or individuals who plan to live in the home. Such purchasing could be artificially lifting prices and demand and could destabilize a market should speculators start dumping homes, these economists fear.
"If these letters of credits are being given in markets that have a high share of investor purchasing, then it seems speculative, and it's something I'd pay attention to," says Doug Duncan, chief economist at the Mortgage Bankers Association in Washington.
The banks believe waterfront property is unlikely to lose value, and they see letters of credit as a way to attract high-end clients amid competition from the nation's biggest residential mortgage lenders, including Countrywide Financial Corp. and Wells Fargo & Co.
Offering the letter of credit "has been very profitable for us and has allowed us to build relationships" with wealthy clients, says Danny Sizemore, chairman and chief executive of Vision Bank. Mr. Sizemore says the bank manages its risk, requiring that customers have equity in an existing property, cash in a certificate of deposit or other assets.
SunSouth Community Bank in Destin, Fla., a division of the Bank of Bonifay, Bonifay, Fla., is issuing an increasing number of letters of credit. The most popular type, an unsecured letter, requires no collateral, but the customer has to have a good credit score, a stable job and income and between one half and two times the letter-of-credit amount in stocks, a CD or in a checking or savings account. Most applicants qualify, but because of strong demand, "we have reached our cap for unsecured credit," says Jayce Holley, a vice president at the bank.
J. Collier Merrill, a developer in Pensacola, Fla., says banks do a good job with letters of credit, and the market does the rest. "We do have a lot of investors on our rolls right now, but there are enough baby boomers out there who are going to want condos here for at least another 10 to 15 years, and they're going to buy from these investors," he says.Labels: condo sales, mortgages, oceanfront condos, real estate investment |
posted by Myrtle Beach Web Design @ 5:59 AM
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