Help on the Way for Myrtle Beach Real Estate Market

Forbes.com recently reported that there was good news coming for the real estate market, and particularly in areas such as California's San Diego and others whose home prices are bordering on the outrageous.

Coldwell Banker's annual Home Price Comparison Index listed areas in all 50 states with average home prices. California was pretty conspicuous in that it was in with only a handful of places where the same home that costs $200,000 - $300,000 all over the country is over a million dollars.

Point being, that a new provision in the Economic Stimulus Act of 2008, Bush's attempt to do something to help the economy, calls for the Government Sponsored Enterprise, or GSE lenders Fannie Mae and Freddie Mac to increase their loan limits to 125% of a city's mediun home price.

If the Coldwell Banker figures are accurate, that would amount to a whopping $312,750 increase to the mortgage cap for Beverly Hills, whose average home was listed at $1,656,500. That is a lot of money for the government's already empty coffers to take responsibility for. It would help San Francisco, whose average is 1.3 million, and Boston at 1.2 million as well.

Previously the government loans had a maximum cap of $417,000, and still won't cover more than $729,750. But that would allow 32% of homes in Los Angeles to be included, and 18% of San Diego. With credit less risky for banks, they will be able to offer more mortgages in this capacity, which right now is badly needed. Since the blow-up of the sub-prime lending, mortgages have toughened to the point of being a hardship on everyone except those with stellar credit and six digit incomes.

And it is good news for the rest of the country as well. The average price of a home in Myrtle Beach, SC is $191,584, according to Coldwell Banker, so now a government guaranteed loan of $239,480 would be possible on that same property, if used as a primary home.

Forbes goes on to say that the provision will help to lower interest rates. Conforming loans will carry lower rates, and will make home buying more affordable, as well as opening the door to re-finances, and hopefully pulling some of the ARM loan victims out of their dilemma.

Perhaps that will limit some of the Myrtle Beach foreclosures, spur the sales of Myrtle Beach condos, and boost the overall beach real estate market.

Lowered Prices in Florida and Myrtle Beach

Baywatch Resort

Fortune Magazine's reporter Jon Birger recently announced that beachhouses and condos for sale in Florida have been pushed to drop their prices by 25 to 30 percent, with plenty of oceanfront condos in the $400,000 range.

He goes on to say that prices in Cape Cod and Hamptons up north have seen little change. The wealthy in these northern beach areas are SO wealthy that their real estate prices are insignificant. It seems to be that true luxury property everywhere is unaffected by the whims and pricing of regular homes.

Myrtle Beach real estate has certainly seen prices drop somewhat, but taking into consideration how much they increased several years ago, the overall picture is not as bad as one might think.

Traditionally, condos for sale in Myrtle Beach have been several hundred thousand dollars cheaper than a comparable Florida beachfront condominium. Where their averages were usually a half million or more, ours are about $350,000.00. Now there are quite a few available for right around $300,000... Baywatch Resort in North Myrtle Beach comes to mind. They have come down a bit, but are still holding their value, due to their overall popularity as vacation rentals.

Likewise our new resorts such as Bayview Resort, Prince Resort, and the recent condo-conversions such as Coral Beach Resort are holding their prices fairly well.

Our insurance is lower than florida. Our property taxes are definately lower than Florida.
Our cost of living is low, and our winters mild. If you are dead-set on permanent warm weather and miserable summers, then perhaps Florida is worth the extra several hundred thousand.

I do think that more and more of the northern retirees are looking at homes in the Carolina's instead.

We've got more to offer at a better price than almost anywhere on the eastern seaboard. Browse through our listings of Myrtle Beach condos at www.myrtlebeachcondos.net

You may be eligible for a tax exclusion, but do your homework first

Interesting Q & A from an article in the Bellville News Democrat

Q. In response to a reader who owned three rental properties in addition to his primary residence in Irvine, Calif., you said he could not do a 1031 exchange on his personal property. We've got title companies and aggressive CPAs here in San Jose, Calif., who are suggesting this scenario for highly appreciated properties.

It's pretty commonplace that someone bought a property for $400,000 and now it's appreciated to a $2 million house. Say you've bought a house for $400,000 years ago here in Northern California. You bought in a good community and now the same property is worth $2 million. So you've definitely lived there for five-plus years, although I guess two years should be enough for our example. You move out of the property and rent it for two years, or a year if you're aggressive. You then sell the property as an investment property.

Because you've lived in it for two of the last five years, it should be eligible for a 121 exchange. Since it's also been an income property for two years, after taking your 121 exclusion, you should be eligible to take the balance in a 1031 exchange since it does qualify under a like kind exchange. So you've now pulled $250,000/$500,000 out under a 121 exchange and you're pulling the balance out and deferring gain into another property in a 1031 exchange. I know this is aggressive, but will it hold water?

A. Yes, the strategy that you have outlined will work, but you must be careful to establish investment intent. Because you have lived in the property for two out of the last five years, you will qualify for the 121 exclusion providing tax-free profits on the sale of a personal residence of up to $250,000 for a single person or $500,000 for a married couple.

The 1031 tax-deferred rules are based on the premise that the property that you own is eligible if held for investment or used in a business. It is important to understand that the IRS will consider the intent of how the property is used at the time of the exchange. This allows the owner the opportunity to change the use of the property from a primary residence or vacation property to an investment property.

As part of demonstrating intent, you should rent or attempt to rent the property for fair market value, report rental income on your tax returns, and depreciate the property. The tax code does not address any required amount of time that this must be met to qualify for 1031 tax status. My 1031 exchange intermediary friends feel that logic dictates a two-year holding period or two-year tax cycle as a reasonable amount of time.

Dr. Thomas Musil is the director of the Shenehon Center for Real Estate in the Opus College of Business at the University of St. Thomas in Minneapolis. He has more than 25 years of experience in real estate as a broker, analyst, consultant and expert witness in real estate litigation and arbitration disputes.