Sunday, February 27, 2005


DISCLOSER: My wife and I own resort rental properties in Myrtle Beach. We are in the process of retiring; our rental properties are for sale. We plan to keep 10 to 20% ownership in one or more ocean front condos for our family's enjoyment. Having purchased our first Myrtle Beach property in 1973, we have a long history of ownership. We have forgotten more about owning resort rental property than most folks have learned. It is a difficult business but has its just rewards. Our opinions are biased by our personal ownership experiences and we are happy to share information. Our rental web site is


The average home price in Myrtle Beach went up 14.7% in 2004; a very strong number. Not as strong as Las Vegas, up a whopping 47.3%, but still a very strong number. Across the country, in 62 of 129 areas, the National Association of Realtors reports values were up 10% or better.

Another sign of strength for Myrtle Beach is air traffic growth. The 2004 air traffic growth was 15%, almost the same as home appreciation. One notable success is the Hooters Airline. It seemed to be a joke when the airline was started a couple of years ago, but it is growing quickly and bringing golfers and vacationers from all over. Recently added flights are to and from Pittsburgh, PA and Rockford, IL.

USAir is still carries more traffic than anyone else to Myrtle. An important note is that USAir offers international flights through Charlotte. USAir is under chapter 11 bankruptcy protection for the second time in 3 years. The firm has negotiated over 1 Billion Dollars annual labor concessions! Last week USAir received a loan from a Wisconsin Airline for 125 Million Dollars. Air Tran, a regional carrier out of Chicago, is trying to push into Charlotte. Air Tran clearly wants to take over USAir routes if the firm were to liquidate.

Yesterday, in a show of strength, several carriers announced $20 per flight price increases. I happen to believe the airline business is already making the turn. Year over year revenue seat miles are up at several carriers. Large non-cash depreciation expenditures are masking increasing cash flow.

Another very important event for Myrtle is the construction of interstate highways. Evne without good roads, Myrtle has been the second fastest growing city in the country for thirty years. Now major segments of several interstate roads have been completed. There is a rush to get the others done. Our properties are within a couple of miles of the intersection of interstate 73 and interstate 74. These interstates will connect Michigan with Myrtle Beach and Myrtle Beach to I-95 and I-20. I am old enough to remember rural areas where interstates were built. I live in Clemmons NC and regularly visit Cracker Barrel, K-Mart, grocery stores, several banks, office buildings and other locations that sit where there was nothing but a couple of dairy farms before the interstate came.

A lot of TV talking heads keep ranting about the strength of the real estate market. Of course, they recognize that low interest rates have made homes more affordable and they sometimes mention new laws and lending programs designed to help single parents. Sometimes they even acknowledge that millions of immigrants have purchased many of the re-sale homes. The two things they most often miss are the support real estate is receiving from the baby boom generation and from the falling dollar.

Baby boomers are between the ages of 44 and 60. These are peak earnings years and relatively slow spending years. College tuition may have been a bear but it is over or almost over. Baby boomers are typically too young to down-size. In this mobile society, should their jobs take them to a new town, they are likely to pay-up to buy the big house in the nicer neighborhood. Buying a second home is also a consideration. The empty nest syndrome is a powerful motivator to go do something. Harry S. Dent, Jr. has written several books that show the importance of the demographics. I will write again about his latest book, "The Next Great Bubble Boom--How to Profit from the Greatest Boom in History 2005-2009".

Having written about the falling dollar helping real estate before, I will not go into great detail. The bottom line is that the lower dollar increases travel and real estate purchases in our country and prices are set buy the highest bidder. Adding just 1 or 2% to the number of renters who want to visit America and another 1 or 2% of Americans who travel in the states after deciding they do not want $15 Belgian chocolates, tightens supply versus demand. Higher demand pushes up rental and purchase prices.

No one knows how much lower the dollar must go to correct our massive trade deficits. I do not believe the decline in the dollar is the crises it is made out to be. I actually think it is the perfect solution to allowing those who have much to buy from those who have little. Indeed, records show that England ran a trade deficit during the entire industrial revolution during which time the English became more and more wealthy as a nation. The beauty is that their trading partners also increased their standard of living. It is a simple fact that free trade is of benefit to both sides of the trade--otherwise neither party would trade! Yes, the industrial revolution caused the cottage industry to fail. However, higher paying jobs were created and the country prospered for the entire 19th century.

In any event, it is true that if our dollar declines ten percent versus a currency, then the holder of that currency can buy US real estate at the "old" price and give the real estate owner 10% more dollars! The data are clear; the US dollar has declined three consecutive years and the net worth of Americans which includes their real estate holdings is now at a record all time high!

ADVERTISEMENT: Owning a 10 or 20% interest in a second home is the best way to own a resort property. Neither Marilyn nor I recommend owning time shares but we enjoy partial ownership. We are seeking partners to own 20% shares in a beautiful ocean front corner condo. It is easy to maintain a beautiful home if it is used only by owners, their friends and family. Owning with others cuts the over-head costs while others pay 80% of the ownership costs. Give me a call at 336-778-0543 if you would like to learn more. You can email me at