Slowdown at the Southern NJ Shore
Thanks to a reader for sending in the link.
snip..
"Jay Lamont, the host of "All About Real Estate" on WPEN-AM (950), who has studied and owned real estate in Ocean City for about 40 years, said, "I have never seen anything even close to this debacle. Many legitimate and qualified buyers are waiting for fall, for the lender REO [real-estate-owned] listings and foreclosure sales on failed developer loans."
Weekly sales reported to the Ocean City MLS are 80 percent to 90 percent lower than they were in spring 2005, with seven or eight sales a week, he said."
posted by Little_Silvered at 6:34 AM
9 Comments:
Eastern Monmouth MLS 4410 at 7 am Tuesday.
Climbing fast.
Price reductions in the 10-15% range so far with more to come.
So much for the spring buying season.
Let's see, 7 or 8 sales per week in Ocean City, and, "As of mid-June, there were more than 1,700 listings on the Ocean City Multiple Listing Service."
Let's be generous: At a pace of 10 sales per week, that would mean the supply of homes is 170 weeks-- over a three year supply--NOT counting FSBOs. Seems to me something's got to give.
How long will it take for prices to reduce at this rate?
that's just the problem ....everybody is waiting for the prices to drop
Ocean City and the state of NJ helped bring on this slowdown. NJ now enforces a 2% GIT on out-of-state owners at closing. OC slapped a 1% tax on prop's sold over $1m and assessments on new construction were ridiculous. This is in addition to the other fees implemented at closing, cap gains taxes, plus 6% realtor fees. Even if properties continued to appreciate at 20% per annum, the first 2 years of appreciation were stolen away! No way to make money at the shore anymore.
I'm as curious as anyone to see what's going to happen at the southern NJ Shore. I would love to see houses plummet so that I can get an affordable beach place. But I think that there are many buyers sitting on the sidelines. If prices drop 15%, many may think we are at the bottom. They will jump into the market, keeping it from sliding.
It appears that June has been a good month for RE down here. Some projects are just being completed and they probably had buyers locked-in.
Does anyone have any hard data or thoughts on RE in Cape May and the Wildwoods?
WSJ article on a home as an investment: http://online.wsj.com/article/SB115085103697185844-email.html
A snippet: "Since 1975, home-price appreciation has been modest, averaging just two percentage points a year above inflation.
Admittedly, you could goose your home's return with the leverage from a mortgage. You also, however, have to factor in the mortgage's cost, plus all the other expenses of homeownership, including maintenance, property taxes and insurance. The bottom line: Once you deduct those costs, you could probably amass far more wealth by purchasing a smaller home and then sinking the extra money into your 401(k) plan."
As someone who bought in Stone Harbor last year at the height of the bubble (with eyes open to the timing, but I purchased a lifestyle, not an investment), I've got no interest in seeing things plummet, but there's clearly a bloodletting coming. Places are just not moving. Not just the condos, but the $3-4 million places too. Without cheap credit, not many people have that much money. The speculators who knocked down houses and built large new ones without a buyer are stuck with them and eating the costs. Makes me wish I was more patient, but them's the breaks.
I don't see forfeitures happening though. Unlike other markets, at the shore a speculator can ride out the worst of times by renting a place to limit his losses while the place sits on the market for a year. The drop will be more than 10%, and in Sea Isle its going to be a huge drop. Unlike Stone Harbor, SIC allowed single homes to become duplexes, and many homeowners built upstairs/downstairs places where they keep the upstairs and the ocean view, and sell the downstairs, which has no view. In 2004, people doing that made a mint, but then everyone got the idea and there are a lot of brand new townhouses for sale. Many have been on the market since spring 2005. I've seen 25% reductions in asking prices, and places still aren't selling.
But that doesn't prove this blog right --not by a long shot. A 30% correction still puts the prices in Sea Isle higher than the day this blog was founded declaring a shore bubble.
whether you pay on a 2 mill mgte. or put in your own money your looking at a 6k to 7k negative cash flow -IF your at 100% occupancy. Values at OC are way out of wack and have no where to go but down. The days of 20% annual appreciation are long gone -and even with interest deduction your taking a bath-unless you inherited the property from grandpa. Atlantic city has lost its lustre with all the states getting into the gambling biz. Look for a real blood bath in the coming year or two
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