Sunday, September 03, 2006

Observations About LBI from a Reader

This was posted in the comment section. Someone suggested it deserves its own post and they are right.



Anonymous said...
Just got back from a week on LBI--my 30th or so in 35 years since I was in a stroller.

Weather was a mixed bag: mostly bad, some good, some strange--we left this morning in a sandstorm; the sand drifted up into the streets, totally obliterating the fences, and covering the bench that adorns the end of each street. Trudging to the water's edge, I could hear Maurice Jarrre's theme music from Lawrence of Arabia in my head: "I must get to Aqaba!"

What follows is a mixture of conjecture, rant, and bewilderment. (With maybe a soupcon of commonsense unintentionally thrown in the mix.)

Observations:

*Hundreds and hundreds (maybe thousands) of houses with for sale signs--lots with "Reduced!" plackards affixed.
*Hundreds (or, again, thousands) more houses with For Rent signs--and rentals were slow this season, by at least one agent's reckoning. I was able to negotiate a significant reduction in rent for my second-from-beach Cape Cod in Brighton when I started looking in July.
*Retailers said that a crappy end to August and Labor Day weekend caps one of the worst seasons in memory. One guy at a long-standing business said that vacationers over the last few years have "short arms and deep pockets"; they are increasingly forced to choose between rents and "amenities."
*Stores were in weeks two and three of their end-of-season sales.
*Fantasy Island STILL doesn't get it: Open the damn rides at 2:pm, instead of 5. My kids were driving me nerts--but the pizza place at Bay Village is still top-drawer.
*The vibe down there has changed--simply the consequence of people paying more and expecting more. I don't claim to speak for the masses, and I still love the place, but if the wife or I want to buy Lilly Pulitzer togs or JP Tod loafers, we'll go to Southampton, Bayhead or brush up on my Thurston Howell, III lockjaw and go back to Chatam, MA. Three story McMar-a-Lagos festooned with vinyl Victoriana and built on the former sites of capes and two-bedroom bungaloes does not a Malibu make--LBI is, despite the massive influx of funny money, just not a fashionable summer resort, at least not south of the causeway. (And only in isolated sections north of it at that. Though I gotta say that Barnegat Light looks better now than it did ten years ago.)
*The former Brighton Manor motel, a cheesy little dump where I used to rent a Sat. night to extend my vacation another day, is now efficency condos, priced at $199k/unit (down from $240k at initial offering). The barely renovated rooms are maybe 180-200 sf, with teeny kitchenettes (microwave, sink, fridgelet, but no stove). If the owners cut the number of units in half, made each a two story floor-thru, and charged $219k, maybe it'd be worth a look. But for now, the bubble has a name, and it's Brighton Manor Condos on LB Blvd (Near the ACME!). In fact, if I had to create a picture of the bubble, it'd be the lovely sea-foam green accented former motor lodge perched behind signs in the parking lot screaming, "OPEN HOUSE! REDUCED!! LIMITED TIME OFFER!!!" signs in the parking lot. My guess is, the last unit will be sold for under 100k--maybe $79k. It'll be a date that will live in infamy...
*Mustache Bill's diner in Barenegat Light has incredible fries and really good white chowder.
* Surf was crappy. Glad I didn't finally break down and buy a board.
*It's still a swell place. I admire/envy the folks who bought before the Bubble. And I'll show no Schadenfreude for those who end up losing their shirts. LBI is a place that can make Mr Spock irrational. It's a shame prices got so out of wack, and that a lot of people are gonna get hurt when they return to Earth.


By way of digression: The tatty cape I rented for $2500/week was listed for $1.2 mil. It was nicely redecorated with Ikea/Target stuff, but the systems were a disaster--e.g., 15 amp fuse box. The realtor calls it a tear-down--I'd rather buy a lot and not have to deal with demolition. I took one look at the place and decided that it was a "flipper." A quick check with the neighbor confirmed my suspicion: A couple once owned the place for a long time as a summer cottage; they put little work into it. The present owner bought in early '05; he paid in "the high eights."

The new owners prolly decided to rent it while it's on the market. Big mistake. The remnants of T.S. Ernesto exposed the place's weaknesses: The owners put in cheap-o window a/c units, but didn't caulk--result: horizontal rains caused extensive water damage to floors and newly-painted/restored sheetrock ceilings. The winds blew roof shingles off. Inside, the furniture was in unsafe/shabby condition, etc. Owners probably don't know sweet f-a about renting--there was no cleaning equipment, just an electric broom, and no mop--which meant that wife and I were using bedspreads to stanch the bleeding.

(Yeah, I should have checked it out in person, but I didn't think it was necessary--I mean, screw me for taking the word of the agency from which I had rented for the past ten years [the rental agent whom I worked with this summer is a middle-aged "sales associate" who in a year's time likely will be back to doing whatever it was he did before he put on his realtor's jacket]. Before this year, I used to deal with the broker, an upstanding [for real estate] woman named Sharon, who now owns the place.)

Other tid-bits: This place (our rental) had a spotty rental history this summer--there were lots of open weeks as late as mid-July. Now the owner has to either do repairs from T.S. Ernesto and hope the place lasts out the fall (rainy) season and winter. To pay for it, he can put in an insurance claim and hope to sell before he has to renew his policy, which will, naturally skyrocket in price.

Either way, this guy probably sank $25 grand into "renovating" the house, and might be carrying a big mortgage, or at least losing principle on a cash purchase when he could be getting a minimum of 5% gain elsewhere. He may have gotten $20-24k in rental income this summer, less the agent's 10%--and, with the peeling paint and stained, possibly water damaged sheetrock, there is NO way people can inhabit the place this week. Great investment--what he loses per unit, he'll make up in volume...

There must be dozens or even hundreds more like this owner on LBI. My gut says that after all is said and done, he'll be lucky to get in the high sixes, low sevens. And the neighbor who filled me in on the owner's story was a discernably, yet discretely, amused by this owner's folly--it's gotten to the point where even long-timers (ESPECIALLY long-timers) want the madness to end. Greed is so unsexy.

So, how was your summer?

-Jamey

5:08 PM

31 Comments:

Anonymous OceanGrover said...

Great informative post, on so many levels.

Up here in the Grove, I've been keeping an eye on two properties. One, my next-door neighbor, has a house that's been for sale for 2-1/2 months now, for roughly 25% more than he's ever going to get, imho. Other is a tiny cottage which has been price-chopped 25% over the past year and a half and is still over-priced.

Can't understand practice of realtors who put labels with new prices over the original listing price. They should do all prices on labels so that the reduced properties don't stick out like sore unsold thumbs.

Monday, September 04, 2006 9:32:00 AM  
Anonymous rbyzell said...

hi and thanks for all the info. the shore i think, will return. asbury park is a disaster (no suprise) and all along the shore, there is an over abundance of homes for sale. it's just a matter of time before reality (higher rates, over building) hits the greedy bastards where it counts. we must always remember that, real estate busts and booms come and go but one thing is for certain; people will always come to the jersey shore for its beaches, clubs and sun and fun. not to buy mcmansions and horribly overpriced beach shacks. and i love beach shacks.

Monday, September 04, 2006 12:55:00 PM  
Anonymous rbyzell said...

oh yeah. spent labor day weekend in belmar. no matter how much that crazy mayor there tries (the one who walks around in a tuxedo) no matter how much he tries to make belmar spring lake/newport, ri, it was still the old belmar in a lot of ways. the clubs, the streets, 16th avenue, was mobbed with partiers. mobbed! no, it's not as honky tonk as it was but man, it was a rockin'! oh, and so many homes for sale, so, so many.

Monday, September 04, 2006 12:59:00 PM  
Anonymous Anonymous said...

Some interesting posts here! Interesting how marketing the Jersey Shore as a lifestyle has presented people with an overinflated sense of how valuable the property truly is.

Monday, September 04, 2006 6:35:00 PM  
Anonymous Anonymous said...

Addendum: About the best part of the vacation was using the "free souvenir box of saltwater taffy with purchase of a 1lb box of fudge" coupons at Country Kettle. Sifting through the Sandpaper, Islander, and other LBI free publications is yet another longstanding Jamey family tradition...


Thanks for shining the spotlight on my well-intentioned, if not frighteningly long rant, Sil. Glad someone could put my adult ADD to use...

I miss summer.

-Jamey

Monday, September 04, 2006 8:43:00 PM  
Anonymous Anonymous said...

unfortunatly the pain is just beginning.
i purchased a condo on nj shore, a year ago and similar units are 25% less now.

Tuesday, September 05, 2006 5:02:00 AM  
Anonymous Anonymous said...

what town?

Tuesday, September 05, 2006 9:45:00 AM  
Anonymous Anonymous said...

have the mexicans taken over yet
on LBI?

Tuesday, September 05, 2006 2:13:00 PM  
Anonymous Burner said...

Wow man...what a posting! I too was just there for a couple of days, and couldn't believe the amount of "For Sale" signs I saw.

Tuesday, September 05, 2006 5:40:00 PM  
Anonymous Anonymous said...

We stayed in a roomy old house (borderline pit) on 13th St. in Avalon for $2,000 for a week in July. These friends of friends bought the house in '99 for $450,000. Would love to buy something that big in Avalon today for that price. When casually talking to a realtor, I was told Avalon prices will NEVER come down. It's too late to buy a SFH for under $1,000,000. I guess we'll see.

Tuesday, September 05, 2006 7:06:00 PM  
Anonymous Anonymous said...

Of course realtors are going to tell you that prices "will never come down", they're in business to make money so they have to paint a very rosy picture of the market. It is up to buyers to not be hoodwinked by sales pitches and smoke and mirrors. Unfortunately, there are a lot of gullible buyers out there as the market of late has proven.

Tuesday, September 05, 2006 9:25:00 PM  
Anonymous Anonymous said...

Thanks Jamey, I live on the North End of LBI and Just don't see what you have seen. A real eye opener.

I am beginning to believe relators are a strange bunch. In my home town of Westfield, a family was moving to California and had to sell their home in a nice neighborhood. Realtor said, 2 million no problem! They were dubious and figured that they ought to ofer it where they were happy to sell it, 1.675. No takers, since they were committed to moving they went down to 1.475 and it sold immediately.

Who was correct, the owners or the realtor? Would the buyer who came along at 1.475 been around even if the house was offered still at 1.675? Was it the fact the buyers had a top of 1.5 in their search, so this house didn't even show up until then. The fact that it sold full offer 1.475 immediately is interesting.

Mr. Rant.

Tuesday, September 05, 2006 10:00:00 PM  
Anonymous Anonymous said...

Mr Rant.

Look at the Blvd between 75th and 100th streets. If you don't see what I saw, then you should visit an ophthala... opthmi ... mologist... an eye doctor.

As you're heading south, take a left on any street in that area. "Reduced" signs are uncommonly common.

-Jamey

ps: The realtor in Westfield was wrong. And the homeowner was correct in pricing their pile $200k closer to reality. End result: A relatively painless and timely sale, with a likely strong profit for the owner--albeit at a cost of more than $30k seller's commission (had they followed his advice and somehow sold the place for $2 million).

Glad I could clear that up for you.

Wednesday, September 06, 2006 9:16:00 AM  
Anonymous Anonymous said...

Harvey Cedars is 75th through 86th street. So I am guessing you mean some other town. I did take a ride last week south to the waterpark and saw the ubiquitous reduced sign.

If I had some each money I would browse the MLS waiting for the bottom to fall out of some of these shacks, where I would jump in would depend on far more than I have time for.

I think that the person moving out of Westfield, did the right thing and I know the neighborhood and I think the buyer got a very fair value (IMHO) but not a steal. Kinda shows some resiliency.

Mr. Rant

Wednesday, September 06, 2006 1:16:00 PM  
Anonymous Anonymous said...

Mr Rant:

Yeh, 75th through 100th in Brighton and Peahala--south of the Causeway. (We stayed on 90th.) For Sale/For Rent signs aplenty--homes with signs practically outnumber those without.

Not sure whether the sale price of the Westfield home shows resiliency or that price declines, like price increases, take time to build up momentum.

Oh, who am I kidding? I AM sure: It's the latter. What confuses me, however, is why the Realtor recommended that the house be offered at $2 million. If it was, and then sold just south of $1.5 million, surely, the 25% drop in a short span, to quote Cosmo Kramer, "wouldn't be good for business."

-Jamey

Wednesday, September 06, 2006 2:47:00 PM  
Anonymous Anonymous said...

Last pullback in Westfield, 10 -> 20% in 1991. Lasted a year. Just the way it is. My question, which I can't answer yet, is what were the comps over the last year. If comps were 2 million (I really doubt it), then it was a steal, if comps were 1.75 why did the mellon head suggest 2 million?

"Hovnanian reported Q3 earnings of $1.15 per share, $0.05 better than the Reuters Estimates consensus of $1.10. Revenues rose 18.1% year/year to $1.55 bln vs the $1.47 bln consensus. Co issued downside guidance for Q4, with EPS of $1.05-1.80 vs. $1.26 consensus. Co issued in-line guidance for FY06. It sees EPS of reaffirms $5.00-5.75 vs. $5.16 consensus."


Mr. Rant

Wednesday, September 06, 2006 7:36:00 PM  
Blogger MissTheBeach said...

Love this blog...been reading for months.

I grew up on LBI and we sold our family home in the early 90's...I know I know..Wish we hadn't, but who would have ever thought. Still in touch with highschool friends who aren't happy with the development on LBI, in Tuckerton or Stafford Township. They just chuckle at all of the foolishness... Even some of the builders that have been there a long time see the over development as a bad thing.

My sister spent some time visiting in May and at a local LBI bar chatted with a group of 10 longtime locals who said that many full time residents sold because the money seemed so good, the taxes were outrageous, and don't forget the homeowners insurance prices. They spent a good 30 minutes mocking the design of the restaurant DaddyO's (Old Engleside)as a disaster that should have been
put up in Wildwood.

I still want to buy a 2nd home there and hope that the prices drop tremendously. I love the beach but refuse to rent a place for $2500 - $5000 a week. Come on, the lifestyle isn't that great.

The problem with the recent real estate boom on lBI is that most of the people that bought these 2nd homes really can't afford them. Back in the 70s, 80s and 90's you needed more money down, you didn't get to pay interest only mortgages, and banks didn't let people stretch like they do now. And let's not forget people didn't have 15 credit cards to rack up for every day expenses while they struggled to pay their 2nd home mortgage.

And trust me, the shore realtors couldn't be trusted 20 years ago, let alone today while they are sitting fat and pretty. Trust me their sweating. Guess where a lot of realtors probably invested their earnings? I bet they purchased rental properties.

Sister who is ready to buy a second home at the jersey shore works for large mortgage company. The brokers there told her two months ago "don't buy now...wait two years you'll have so many to choose at much lower prices and anticipating a high foreclosure rate at the jersey shore."

Realtors will tell you anything to get your listing. And when it doesn't sell for what you wanted they are the first to tell you to lower the price. Some sellers are smart enough to price it right the first time. Realtors and Realtor Associations I work with tell me that realtors are finally getting the picture, now they need to educate the sellers that the market just insn't what it used to be.

Friday, September 08, 2006 2:27:00 PM  
Anonymous Mr. Rant said...

“My sister spent some time visiting in May and at a local LBI bar chatted with a group of 10 longtime locals who said that many full time residents sold because the money seemed so good, the taxes were outrageous, and don't forget the homeowners insurance prices.”

This is a good move by the locals; unfortunately, it is a one-time thing for them.

"The problem with the recent real estate boom on LBI is that most of the people that bought these 2nd homes really can't afford them."

Really? How do you know?

"And trust me, the shore realtors couldn't be trusted 20 years ago, let alone today while they are sitting fat and pretty. Trust me their sweating."

Trust you, why? You have just lumped all realtors into an untrustworthy group, sounds prejudicial to me. Do you also lump different religious beliefs into groups? How about skin color, got a nice niche for that also? Now I am a little more confused, they’re sitting fat and pretty (BBW), but what about the sweating? Have you been checking the armpits for moisture levels?

"The brokers there told her two months ago "don't buy now...wait two years you'll have so many to choose at much lower prices and anticipating a high foreclosure rate at the jersey shore.""

These the same buffoons who said sell in 1991?

Friday, September 08, 2006 5:40:00 PM  
Anonymous Anonymous said...

In 1955, Shapiro built three basic styles of cottages on LBI. They were priced between fifteen and twenty grand. Today those cottages are $700,000 to $1,200,000. Based on their location (at the beach), their quality (good, but inexpensive), lot size (small), age, and potential storm damage (high insurance rates, disruption, destruction, etc.), They aren't worth more than $250 - $500,000, depending on location and condition. When does reality enter the picture here, folks? I'm a fifty year summer resident of the island. The same idiots who drove the internet bubble are driving real estate prices. I can't wait to get back to reality.

Friday, September 08, 2006 10:03:00 PM  
Blogger MissTheBeach said...

Mr. Rant - You are right I did unfairly lump realtors into one group. Thanks for pointing that out. I don't think all are untrustworthy AT ALL.

We'll have to wait and see what the future brings for the Jersey Shore real estate prices.

Saturday, September 09, 2006 9:13:00 AM  
Anonymous Anonymous said...

Dear Missthebeach;
Where does it all land is a good question, asked by many here on this blog. My suggestion, only because I have done this myself, is find the neighborhood(s) you like. Fix the price you are willing to pay, period, your price no one elses. Inform a broker to show you things that become available in a price range, don't tell them your price, no need to, and watch. Every once in a while a plum will come along by someone desperate and if you haven't been watching, you won't recognize the plum.

Just recently a home sold that was in an estate here in Loveladies on the beach for 1.6 million. It was listed for 3.4 million. I know two people who were willing to pay 2 million or more, but never bid since it was offered at 3.4. These things happen, be ready for them. It is your money, your summers and something that family and friends love, the Jersey shore. Make your decision and be happy with it.

Mr. Rant

Sunday, September 10, 2006 1:11:00 PM  
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