There has been good news on existing home sales in recent weeks.  Nationally, sales of previously owned homes have improved and locally pending home sales have increased as first time buyers take advantage of the federal tax credit. However, a Wall Street Journal article, after previously reporting other improvements in the U.S. housing market, published a caveat: home sales are improving nationally at the “low and moderately priced” range but on the “upper end” ($750k+), “Sales remain mired in a deep slump and price declines are expected to accelerate.”
Many of the home sales (especially single family homes) in island communities within the Charleston area fall into the upper range. For some—notably Isle of Palms, Kiawah, and Sullivan’s Island—even the median listing price is well above the $750k price point. And, as I have reported elsewhere (see www.searspartners.com), about a third of Seabrook Island listings are in this high-end range (another 41% also require “jumbo” loans being at or above $471k).
Just as home sales vary across the country, so do they across various Lowcountry communities and neighborhoods. Table 1 compares all houses (single family and attached homes) listed and sold on the Charleston-Trident Multiple Listing Service (MLS) for the first half of 2009 compared to the same period a year ago. This allows comparison across island communities and across time. For purposes of this comparison, it should be noted that only a minority of Kiawah homes are listed/sold through the MLS.
Although some generalized and common sense patterns were found (generally new listings were down, median sales prices lower, days on the market higher), differences were found on every dimension among these communities.
Table 1: Comparison of All Home Sold through MLS
Jan-Jun 2008 vs. Jan-Jun 2009 for Selected Island Communities
As shown in Table 1, there were more listings on the MLS during the first six months of 2009 than in 2008 for Isle of Palms, Sullivan’s Island and Kiawah. Further, the latter two recorded an increase in the median price of new listings. Sullivan’s Island—unlike the others—also recorded more residential properties sold between this year and last. The greatest percentage of decrease in the number of homes sold was found on the Isle of Palms, which as one would expect also evidenced the greatest percentage increase of days on the market (DOM) before a property was sold (from 76 to 258). In contrast, Sullivan’s Island saw DOM slashed by one-third (from 257 to 168).
There were also island differences in the median price for which a home sold from 2008 to the same period this year. The sales price was up on Daniel Island, level on Folly Beach and Sullivan’s Island, and down on Seabrook, Isle of Palms, and Kiawah.  Further evidence of the relative strength of the housing market on Daniel Island is apparent when comparing the difference between final list price and sales price.  The average home sold on the MLS was 93% of the listed price. The LP/SP ratio also remained constant (but lower, 91%) on Folly Beach. The greatest absolute drop between 2008 and 2009 was on Seabrook (from 94% to 87%) and the greatest percentage decline was the Isle of Palms.
The relative changes in each community from the first half of 2008 to the same period this year for each of these dimensions is shown in Table 2.
Table 2: Percentage Change of All Homes Sold Thru MLS Jan-Jun 08 vs. Jan-Jun 09

So, what do the data show regarding the upper-end of the real estate market? Comparing the first half of 2008 to 2009 across these island communities, a small increase in share in Sullivan’s Island and Daniel Island was found for residential sales at $750k or above. The former increased 5 percentage points (from 86% to 91%) and the latter by 3 (16% to 19%). All of the other communities found market sales at the higher-end shrinking in comparison to those in the lower ranges. The most dramatic changes were on Folly Beach with 2009 sales at 43% of the 2008 level and Seabrook at just at half of the percentage sold in 2008.

From these data, the Wall Street Journal’s conclusion that the market for high-end homes is “mired in a deep slump” is only partially true.  Even within the limited Charleston metro area, there are pockets of improving high-end sales. Further, one can reasonably anticipate improvements in our regional real estate market to be differentiated among the island communities even as national economic conditions improve.

James T. Sears, PhD, is a Realtor and Real Estate Analyst. As an Accredited Buyer Representative, he specializes in residential real estate on the islands and investment properties in Charleston. More data are available at www.searspartners.com and he can be reached at property@searspartners.com

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By Lindsey Conklin

How is Folly Beach's vacation rental industry doing in a struggling economy?

In most fairytales, the beautiful princess and the handsome prince ride off into the sunset, destined to travel to faraway lands. In our fairytale, Folly has become that dream destination, but an evil shadow has been cast over the royal couple’s sunset dream. The economy has been cast as the villain, but is it a powerful enough foe to threaten and destroy the magical Folly Beach?
Our ne’er-do-well is desperately working to limit a favorite American pastime: summer vacations. Outsmarting the evil forces, however, people have discovered that Folly Beach is a great place to seek a summer sunshine getaway. Folly has not seen the dramatic decline that similar local areas have witnessed in terms of summer rentals. This could be due to the fact that people accustomed to visiting Kiawah and Isle of Palms are finding a refreshing retreat in Folly Beach as you not only have a place to relax, but a way to do it at a more affordable price. Dawn Goldman, Manager of the Water’s Edge Inn, noted that they have experienced a positive increase in business this year.
While occupancy seems to be maintaining a steady pace, the Realty companies (Avocet, Fred Holland, and Dunes Properties) have noticed changes in demand patterns. For instance, renters are now looking at vacation homes two or three streets back from the once highly sought after ocean front to cut back on expenditures. People are finding smarter ways to travel and are making efforts to decrease expenses by restraining their luxury purchases instead of eliminating them.
Another trend, according to local realtors and hotel proprietors, is last minute shopping. Instead of making reservations six months in advance, travelers are waiting to book their trips to ensure that the vacation can fit in their budget, and with the hopes of snagging a last minute deal. Matt Barba of Avocet noted that, rather than booking in January or February, “People are waiting until March or April, or even May” to inquire about a summer holiday escape. 
Online travel sites, TV talk shows, news networks and magazine tips all play a role in the way people are travelling today, transforming vacationers into quintessential bargain hunters.
Headlines on internet websites and newspaper columns which read “Ten Ways to Recession Proof your Vacation” and “Recession Friendly Vacation Rentals” tempt us to indulge in a much needed vacation at a better price, with tips on how best to accomplish it. Obviously, these tips have had an influence on vacationers. According to LaJuan Kennedy of Fred Holland Realty, “People are looking for more discounts and deals” in their rentals. Incidentally, prices have dropped a little this summer as rental prices are being negotiated, but not by much. On the other hand, some hotels on the island have not noticed a difference at all in their average daily rate.
Folly Beach’s Holiday Inn is experiencing consistent business while rates have remained steady when compared to previous years. However, there have been more last minute bookings and walk-in traffic. Sarah Irving, Director of Guest Services, has noticed the fairytale anomaly working in the hotel.
“The industry itself is down, but we’re doing better and we’re staying on par,” she says.
Ken Merkel, General Manager, adds, “I think Folly Beach, based on location and the connotation of it being lower priced, has benefited. A lot of resorts are down 40-50 percent. We are a predominately social and transient hotel and have been able to experience a growth partially due to the renovation, the ‘stay-cation’ theory, and also the added 4-5 restaurants on Folly to keep it interesting.”
So is this economic villain truly a foe revealing our best kept secret: the fabulous Folly Beach?  Obviously, Folly is not completely recession proof as rental rates have dropped in some instances. However, occupancy is strong. This recession has produced an abundance of summer travelers searching to get the best bargain for their buck and Folly Beach has been a financial beneficiary. While much of the country seems to be suffering, Folly Beach, which is financially dependent on tourism dollars, is that fantasy land which seems to remain just out of the reach of our economic antagonist. Perhaps our villain is actually a hero in disguise, saving a small town from the dangers of a bad economy and making our story a classic Folly-tale.

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How are Folly Beach restaurants doing this summer after economic fears gripped the nation this past winter?

Once upon a bad economy, the world fell into a recession. Not only did paychecks, stocks, and jobs dwindle, but luxuries too. Vacations, shopping, and extravagances were cut back and money was spared for necessities. But in a land far away from the Market of Stock is a small town at the Edge of America called Folly Beach, where it seems that the luxury of eating out could have a fairytale ending for Folly’s 2009 summer season.
It seems that the economic fears which plagued America this past year are unfounded in the restaurant business on Folly Beach and that the shaky economy might actually have helped these businesses thrive in 2009. The common thread in the financial tapestry of local eateries is that business this year for Folly restaurants is equal to, or greater than, last year. The success is partly attributed to the belief that travelers are taking more regional trips and staying closer to home. Perry Darby, owner of the Surf Bar, thinks that, “People in close demographics aren’t going to Paris or Rome; they are taking nearby trips and heading to the beach.” Similarly, the manager of the Crabshack, Dana Tinkler, recognizes that good business can also be credited to “day-trippers” as “people are finally taking advantage of their backyards: the beach.” The secret behind Folly restaurants’ continued success is because it’s a value-oriented luxury: great food for great prices.
However, some changes have been necessary. The Crabshack, for instance, added a $10 and under “Value Baskets” page to their menu for people eating out on a budget. No staff members were eliminated, however, and hours were adjusted. Seana Flynn, owner of Lil’ Mama’s, mentioned that they slightly increased their already low prices, but that they have been able to add more staff members. Menu offerings, pricing, and staff remained consistent at the Surf Bar, as well as at Woody’s. It was noted, however, that there has been a staggering amount of applications at several restaurants, more so than previous years, and that the resumes submitted appear overqualified. Although the addition of new restaurants may seem to add competition, Darby from the Surf Bar views Folly as a tent, “and there’s room for everyone”.
Last winter, unsure of what the future would hold, local business owners anxiously awaited the summer tourist season to see what impact the national economic climate would have. Charleston was not immune to the downturn, which means that Lowcountry residents have been included in the “staycation” trend. People are staying close to home and enjoying the Lowcountry instead of traveling. The niche’ market that defines the economy of local barrier islands like Folly Beach may actually be getting a boost from neighbors that would otherwise have opted for overseas destinations in healthier economic times.
Ultimately, the recession has not had a negative impact for the restaurants interviewed due to the large number of visitors to Folly, great food, great value, and great people. The local residents have also been significant players in helping out the local businesses by frequenting their local establishments, not only for the good value and good food, but for the love of Folly. And the people ate happily ever after.

NOTE: This article is the first in a series focusing on the state of the Folly Beach economy. We’ll be looking at local real estate next.

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