Changes To Condo Lending Going to Hurt SC Coastal Economy

It likely comes as no surprise that much of the South Carolina economy and especially that on the coast is due in large part, if not almost exclusively to tourism. Charleston SC has been voted number one tourist destination in the United States by the readers of Travel & Leisure Magazine for 9 yrs in a row, and once #1 in the world

( Myrtle Beach was the 2nd biggest golf town in America behind Orlando for years, and we haven't even touched on what Hilton Head means to the SC economy.

Many of those visitors that come, buy and sell real estate which generates hundreds of millions of dollars in tax revenue for the state of SC. Every time someone who does not live in South Carolina sells a property here South Carolina Code Section 12-8-580 mandates that anyone purchasing real property in South Carolina from a nonresident Seller must withhold seven percent (7%) of the gain recognized on the sale by the nonresident Seller. Not to mention traditional annual real estate tax revenue.

For every transaction there are many service providers, real estate agents, that assist in facilitate the transactions from attorneys, inspectors, tradesmen, contractors just to name a few. All reliant upon these sales.

On December 7th, 2020 Fannie Mae & Freddie Mac (GSEs) changed its rules to make it clearer that it won’t back certain loans in high-rent vacation areas. This will almost asuredly cripple the vacation home industry in not only South Carolina but also the entire United States. James Schiller a South Carolina real estate broker who spent 13 yrs in the mortgage industry as President/CEO of Mortgage Professionals says, "there were already significant hurdles to over come before this new change to get financing for 2nd home condos, I'd guess this will almost certainly cut sales in half from normal levels".

The new rule will not allow resort condos (those with a vacation renter booking office) - When a project as a whole, functions more like a vacation rental resort, the building is ineligible for Fannie financing, and mortgages secured by units in that project are also ineligible. So that means Fannie Mae (the largest buyer of mortgages) & Freddie Mac will not lend on these developments. Here in Charleston (specifically Isle of Palms & Kiawah Island) this is very common especially in Wild Dunes and in no place more than Myrtle Beach where this could be catostrophic for their economy. The list of oceanfront condos in Myrtle Beach (, is HUGE compared to what we have here in the Charleston area. According to James Schiller whose team sells in both markets, "unlike Wild Dunes & Isle of Palms where a vast majority of the transactions are cash purchases, the Myrtle Beach market relies heavily on condo financing". If you're not familiar with what the different types of single family attached properties are and what makes up their designation, you can read more here

Mr. Schiller tells us there will still be lenders to absorb this business and presumably more to eventually enter the market to fill the void however the terms will not be as favorable as they once were. At the moment bankers and NAR are working to overturn this ruling, but for now buyers are stuck with limited financing options from private lenders. Right now Mr Schiller tells us the lending options mortgage brokers have available will require 20% down, and a rate higher than prevailing conventional interest rates. Whereas the previous lending options with Fannie Mae & Freddie Mac would allow as little as 5% down and lower rate with 30 year terms.

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