A volatile market for Shore property

Sales have ebbed, and median prices are up, but the last 20 months show the tide can turn quickly.

Posted: September 24, 2007

The word that best describes the real estate market at the Jersey Shore over the last 20 months is volatile.

Sales dropped by more than a third in 2006 from 2005 in Atlantic, Cape May and Ocean Counties, and that decline continues overall. But median prices have yet to follow suit. (The median is the middle value: Half the houses sold for more, half for less.)

In some municipalities sales volume and median prices rose, as towns farther from the water grow because of the opening of active-adult (over 55) housing developments.

The million-dollar-plus market in high-end communities is still thriving after a couple of quarters of indecision. Yet lower-price markets into which flippers tried to introduce high-end homes appear troubled.

According to an Inquirer analysis of 19,390 home sales in 2005 and 2006 in the three counties, median prices in most towns marched higher, though at a slower pace than in past years.

But some places - notably Stone Harbor - took it on the chin in 2006, only to bounce back in the first quarter of 2007.

Stone Harbor's median price fell to $951,000 in 2006, down 32 percent from $1.4 million in 2005 - a year in which its median price rose 65 percent over the previous year, the analysis showed. By spring, the data showed, Stone Harbor's median was up 90 percent, to $1,412,500, albeit on only 10 sales.

It's not uncommon for prices to rise as a real estate market cycles downward, said Kevin Gillen, a Wharton School research fellow and vice president of Econsult, a Philadelphia economic-consulting firm.

"Volume and days on the market are leading indicators" of how a market is performing, he said, "whereas prices are a lagging indicator."

According to The Inquirer analysis, median prices rose in 75 percent of the 72 municipalities that had enough transactions to offer an accurate sense of individual markets. There was a substantial decline in sales volume, which fell by more than 8,000 units in 2006 to 19,390, from 27,709 in 2005.

"Because a vacation home can be more of an elective purchase than a primary home, the slowdown was deeper at the Shore" than in metropolitan Philadelphia, said Steve Storti, a senior vice president at Prudential Fox & Roach Realtors.

Vacation markets are typically the first to suffer in any real estate downturn. But a review of Multiple Listing Service numbers for the first eight months of 2007 shows the tide may be turning. Some selective MLS data supplied by Re/Max shows a slight upturn in sales at the Shore this year.

Storti concurred. While acknowledging that his company's HomExpert Market Report data for the Shore were not comprehensive because of difficulty gathering information from numerous MLS entities in the three counties, he said, "Our agents . . . have reported that sales are higher in most areas so far this year than they were last year."

Shore market observers emphasize that it is not a single geographic entity. Different towns attract different incomes, affected in different ways by economic forces.

So when Avalon Real Estate broker Paul Leiser says his office sold 32 properties for more than $3 million in the first two quarters of 2007, his experience doesn't necessarily apply in Ocean City, where many properties sit unsold.

Jay Lamont, host of WPEN-AM's All About Real Estate and an Ocean City property owner, said that while rentals there surged in July and August after soft demand earlier in the summer, single-family sales continue to fall.

The Inquirer analysis showed that sales in Ocean City fell by more than half in 2006 compared to 2005, to 642 from 1,314, while the median price dropped by $61,000, to $538,250. Still, the median price is twice what it was at the start of the real estate boom in 1998.

These days, "incentives and price concessions are both creative and abundant," Lamont said.

Merrie Bender's family put her mother's rancher on Asbury Avenue in Ocean City up for sale right after Labor Day 2005. They ended up with two builders competing for the right to tear it down and put up a duplex. "My brother . . . went on the Internet and saw what similar properties were getting, and it was sold for $1.5 million," Bender said. "We'd hoped to go to settlement by January 2006, but it was delayed to St. Patrick's Day, even though the builder tore it down beforehand."

The replacement building was constructed, but it still hasn't sold, she said.

John and Lyn Duffy, Main Line real estate brokers, tore down the house on Ocean City's beachfront Lyn's family had owned since 1946 and replaced it with a duplex - one-half of which they spend summers and weekends in. "We didn't want to do it, but we couldn't see the beach from the first floor because the dunes were so high and the bigger homes that replaced houses like our Cape Cod also blocked our view," John Duffy said.

Over the last 20 months, Duffy said, he's noticed that if they're close to the beach or bay, and if they're reasonably priced, houses are selling.

"It's the flippers who built duplexes in the middle of nowhere and are asking for $2 million who are watching their properties sit and sit and sit," he said.

Still, Shore houses appear to be holding the value they've accumulated since 1998, The Inquirer's analysis showed:

In Longport, the median price in 1998, adjusted for inflation, was $258,000; in 2006, it was $850,000.

In Wildwood Crest, the inflation-adjusted median was $144,384 in 1998; in 2006, it was $360,000.

In Ship Bottom, the adjusted median was $206,173 in 1998; it was $675,000 in 2006.

And in Avalon, where the 1998 adjusted median was $346,775, the 2006 price was $1,400,000.

In land-locked towns development of active-adult communities for aging baby boomers and bedroom communities for Atlantic City casino workers has, in many cases, doubled annual sales and tripled median prices.

Of the 157 new-home projects either actively being sold or just closed out in the three Shore counties, "32, or 20 percent, are active-adult," said Wayne Norris, regional sales director of Hanley-Wood Market Intelligence, which tracks new-home sales.

Lifestyle near the beach is very attractive to baby boomers, "so monthly sales are more than three times what is being sold in regular communities," Norris said, with buyers coming from Philadelphia and New York.

Construction in resort towns, including Wildwood and North Wildwood, has been slowing as investors have grown nervous about the future of the market. But The Inquirer's analysis showed that median prices in the two towns were higher in 2006 than in 2005, while sales fell by more than half in Wildwood (median price $335,000) and slightly more than 25 percent in North Wildwood (median price, $385,000).

For those people who bought at the high end of the market two years ago and now are trying to sell, there is no guarantee they'll get their money back, said Leiser, the Avalon Realtor.

What seems to be missing from the current Shore market is the not-so-well-heeled buyer, he said, possibly as a result of the turmoil in the national mortgage market.

Duffy said many younger buyers who spent summers at the Shore as kids stretched their resources to the limit to buy pricey places in traditional vacation destinations.

Now the mortgage rates that allowed them to do so are getting ready to adjust.

"They bought a place for $1 million two years ago, that's now worth $900,000," he said, "and they soon won't be able to manage the mortgage."


Analysis Methods

   The Inquirer's home-price analysis was based on more than 275,000 residential sales in 2005 and 2006. Home-sale information was obtained from the five Pennsylvania counties and the New Jersey Division of Taxation.

   Only sales at fair-market prices of $10,000 or greater were included in the analysis of single-family houses, condominiums, townhouses and twins, or duplexes.

   The median home price is the amount at which half the sale prices are more and half are less. The percentage change reflects the difference in the median price from 2005 to 2006.

   A town with fewer than 10 sales is marked "N.C." because the median and percentage change were not calculated. Towns with no sales are marked "N.S."

   All numbers are rounded to the closest whole number.

   Supplementary data for 2007 were provided by Hanley-Wood Market Intelligence (new-home sales) and Re/Max and Prudential Fox & Roach's HomExpert Market Report (existing-home sales, based on Trend Multiple Listing Service figures).


 

To see interactive maps of home-price and sales data for the region, go to

http://go.philly.com/homeprice


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