And If You Buy Before Midnight…
It was a great time to purchase a home at the beach three months ago. If you were looking then, it’s time to act now—before the ship sails.
Let’s face it. Nobody wants to predict what the real estate market is going to do in the coming months. It’s been a roller coaster ride for sellers and buyers alike, and it’s probably not over yet.
But when it comes to coastal properties, many indicators show we may already be knee deep in an incoming tide of opportunity.
“It’s always a good time to buy at the beach,” says Sussex County Association of Realtors executive vice president Ruth Briggs King. “And because you have limited waterfront land, properties there today may not be there a year or two from now.”
Though home sales are slowing because of lenders’ increased scrutiny, people are still buying.
“There is activity out there,” King reports. “One of our lenders in the area tells me there’s still quite a few people with the money to invest in real estate. Interest rates are still very low, and the population buying at the beach doesn’t have the predatory lending issues other buyers do. The problem is a general economic confidence issue.”
National Association of Realtors figures for the first quarter of 2008 showed that, though sales of existing homes were slipping nationally, sales were rising in the Northeast. And, surprisingly, existing home prices were 4.6 percent higher in the Northeast than they were at the same time last year.
Locally, figures from city-data.com showed first quarter sales in Rehoboth Beach sharply down from last year. But median home prices jumped from an average of $400,000 to nearly $600,000 in the first three months of 2008. So though buying has slowed, home values have increased.
King says in areas such Lewes, Rehoboth Beach and Bethany Beach, existing homes still settle for 90 percent to 95 percent of their asking prices. The issue is lack of buyers, not loss of value. “One thing we are seeing is that houses are staying on the market longer, 240 days on average,” King says. “Part of that is the number of listings. If you have 10 or 20 listings to look at, it’s going to take longer.”
According to King, however, if you’re waiting for the bottom to hit for existing home sales, you may have missed the boat.
“We feel we hit bottom last year, and it was a soft landing,” King says. “We are different from Kent and New Castle County because of the location. We’re very fortunate, considering the market. We’re not back to the ’05-’06 prices, but we didn’t have that 10-year loss experienced in other areas.”
SCAOR reports from spring show that prices for existing homes in Sussex County averaged $261,000 as of March, compared to $270,00 at the height of the market in 2006. “If that was the peak of the market and we’ve been in a slip, the value there has not really fallen,” King says. “So if you’re buying now, you’re only going to see the prices go up. And there are no fire sales here.”
When it comes to buying new construction, prices are significantly lower than two years ago. Without naming names, prices for everything from bayside condos with marina slips to luxury homes a few miles from the beach have dropped 15 percent to 25 percent. Though builders were throwing free cars and boats at buyers last year, there are far fewer incentives offered now.
One factor affecting both new and existing home sales this fall was the health of the rental market over summer. Higher fuel costs made Mid-Atlantic vacationers look for close getaway options like Delaware beaches. With more vacation renters came more buyers checking out their prospects of buying second homes.
“I think the gas prices have actually helped us,” says Andrew Ratner, who handles vacation rentals for Prudential Gallo Realtors. “People are staying close to home. We’re close to so much population, and it’s cheaper coming here than it is driving to somewhere like the North Carolina market.”
At the beginning of the vacation season, Ratner had already seen a continuing upswing in rentals. “Our summer rental market is up about 15 percent over last year, as far as the number of bookings,” Ratner says. “And we had a 15 percent increase last year over the year before. A lot of times, guests will come and look at properties to buy while they’re here.”
Because rentals are up and prices are low, investors have healthy opportunities to make money. “It’s a good time to buy at the beach because inventory is exceptional, interest rates are still low and the rental market is strong for the investment group,” says Camilla Conlon of Jack Lingo Realtor, a past president of the Delaware Association of Realtors.
In the first half of 2008, Conlon saw the perfect combination of conditions for profitable real estate opportunities.
“We saw a lot of activity this spring,” she says. “We’re in the low, no doubt about it. So it’s a great time to buy. And mortgage rates are very good. Anything under 7 percent is a very fair and competitive rate.”
Ratner agrees that a wait-and-see attitude among buyers can work against them. “It seems that people are waiting to see prices bottom and rates go down,” he says. “But the prices are about as low as they’re going to get, and the mortgage rates are still very good. In fact, they’re inching up.”
If mortgage rates increase, it won’t benefit buyers to wait for prices to fall. “It’s the value of money,” Conlon says. “If you wait for lower prices and the interest rates go up, you’re not saving.”
King cautions buyers to check reputable, up-to-date sales information before they get thrown off by national stats. The state and county Realtor associations can provide good data to help you decide when to buy.
“When you’re looking at local real estate, you need to look more closely,” King says. And when it comes to buying in Delaware’s coastal resorts, fables of buying for pennies on the dollar give way to market reality.
“I don’t think you’re going to see those bargain basement prices,” King says. “But an informed buyer and seller are always the ideal customers.”