"With its large population of transients, speculators and retirees, Myrtle Beach is a perfect storm of corporate greed, public apathy and governmental corruption. The region's long tradition of laissez-faire, good ole boy capitalism is now driven by outside money and suffused with a get-rich-quick madness."
-- Will Moredock, "Who Crapped in the Sand Box? How greed spoiled Myrtle Beach"
On Tuesday, Standard & Poor's Case-Shiller housing price index registered a 4.5 percent drop in the third quarter of 2007 from a year earlier. That's the steepest yearly fall since the index began in 1987. On a quarterly basis, prices fell 1.7 percent, also a record.
As if to underline and highlight that data point, on Tuesday the U.S. Conference of Mayors released a glum look at the housing market prepared by the consulting firm Global Insight. For those who have been following bust-related news, there isn't a whole lot of fresh material in the report. But the numbers are big. U.S. GDP will be $166 billion lower than it would have been in 2008 because of the foreclosure crisis, and homeowners will see property values decline by $1.2 trillion, asserts Global Insight.
My eye was caught by a list of the top 10 metropolitan areas that Global Insight says will be hit hardest by the housing bust. Unsurprisingly, four California cities are on the list: Merced, Madera, Napa and Salinas. There's also a representative from Florida -- Sarasota-Bradenton-Venice. But topping the list is the resort town of Myrtle Beach, S.C., which Global Insight says will grow "1.7 percentage points less than it would have in the absence of the mortgage crisis."
Myrtle Beach? Why Myrtle Beach?
The quick answer would seem to be speculators. In Horry County, reports Myrtle Beach Online, "federal data show half of the subprime loans made [in 2006] were for homes that are not the owner's primary residence." At the height of the housing boom, in 2005, "Myrtle Beach ranked 20th in the nation for the amount of mortgages to investors" reported the Sun News. Barron's reported last summer that as of 2004, "58 percent of homes in Myrtle Beach, S.C., were owned by investors."
Other factors may have come into play. In 1954 Hurricane Hazel wiped out almost the entire city. In the post-Katrina era, higher insurance premiums have been hammering coastal regions throughout the American Southeast. According to the Richmond Fed, condominium owners tend to pay higher rates for home insurance, and Myrtle Beach was overrun by beachfront condominium development.
But climate-driven insurance costs would appear to take a back seat to "get-rich-quick" madness. Myrtle Beach, reported Will Moredock in his slightly overwrought but highly informative feature for Creative Loafing Magazine, has always been in the business of making quick bucks from real estate development.
According to Moredock, the story of Myrtle Beach is largely the story of the Burroughs family. After the Civil War, patriarch Franklin Burroughs amassed some 100,000 acres in Horry County, and his corporate descendants have been developing it ever since. For those who appreciate historical determinism, the following passage echoes nicely down the years.
In 1912, the Burroughs brothers took on a partner, Simeon Brooks Chapin, a Chicago financier who had already made several fortunes and was looking for new worlds to conquer. Together they formed Myrtle Beach Farms Co. to develop their new beach resort. They sold oceanfront lots for $25; to lure quality development, they threw in an extra lot free to anyone agreeing to build a house worth $500 or more. It was the first "Buy-One-Get-One-Free" deal in a town that would become famous for them.
Buy-One-Get-One-Free -- a good motto for speculators taking advantage of subprime adjustable rate mortgages to grab a second home and sell it for a huge markup without putting any money down. Works great until it doesn't.