"This points to a potential problem if we keep our rates low," said Tom Maeser, president of the Fortune Academy of Real Estate. "You can't cash flow a high-end unit based on the rental rates."
For that reason, real estate agents are emphasizing other reasons to buy investment property: price appreciation, personal use and tax advantages.

Phil Cox, Broker-in-Charge at Myrtle Beach Resort Vacation Services: “Very few of our prospective buyers question the rental return now days. They are interested in buying for the appreciation, the tax advantages, and because they’ve always wanted a place at the beach! Maeser said appreciation is still a reason to buy. While he doesn't expect the dramatic increases seen in 2005 - about 37 percent - he says Myrtle Beach oceanfront still has room to increase to Florida prices.

Oceanfront condos in Myrtle Beach sell for between $450 to $550 a square foot. In Florida, they sell for $1,000 to $1,200 a square foot. Tourism officials, meantime, worry that the condo boom is putting up more units than Myrtle Beach can fill. The boom has sent more high rises into the air, but the number of tourists hasn't grown at the same rate.

The number of tourists has increased 10 percent between 2002 and 2005 (from 12.7 million visitors to 14 million visitors), but the number of rooms has increased 24 percent (from 72,000 to 89,000), according to the Myrtle Beach Area Chamber of Commerce. Without strong growth in the number of visitors, Dean worries about the impact on real estate prices. "The price of real estate investment is closely tied to the rise and fall of average rental income. Clearly if the growth of the visitor base doesn't catch up with the growth of available rooms, we'll be hard pressed to maintain the current value of investment real estate, much less to see it rise," he said.

Investor James B. Stewart, a Connecticut probate and tax lawyer, said he plans to continue investing in Myrtle Beach oceanfront. He said he's probably owned 12 condos at different times at Kingston Plantation since 1987 and he uses them for vacation. He said his properties in Myrtle Beach have seen more appreciation than those he's owned in Florida.