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Jersey Buys: Time to Find That Seasonal Home
Take a seaside summer vacation with your family and your mind begins to wander. Imagine owning a place out here, you might muse; a summer cabin or cottage you could return to, year after year, a repository for all your favorite family memories.
You wouldn’t be alone in the fantasy. According to the National Association of Realtors’ 2012 survey of investment and vacation home buyers, vacation home sales rose 7 percent between 2010 and 2011, accounting for 11 percent of all transactions in 2011. The median vacation home price was $121,300 in 2011, and typical buyers were 50 years old with a household income of $88,600. Eight-two percent of those surveyed planned to use the property themselves for vacations or as a family retreat.
If a vacation home has been on your mind lately, it’s an excellent time to buy on the New Jersey shore, says Dan Stecher, office manager at Marketplace Realty in Margate, N.J. “I think we’re at the bottom of our market right now, seeing prices we haven’t seen in 13 years,” he says.
In Atlantic County, there’s been a 10 percent increase in sales volume compared to this time last year, he says, and prices are down between 35 and 50 percent from the height of the market in 2006 and 2007. By way of example, a renovated Margate studio apartment with direct ocean views recently sold furnished for $95,000, he says. “We haven’t seen prices like this in many, many years. If you can afford to buy, why pay someone else’s mortgage?” Stecher questions. “For the money you’ll put out for a summer rental, rather use it as a down payment and have your own place. If you have the money to invest, this is the perfect time to invest it because there’s a lot on the market.”
Carol Shaw, a realtor with Prudential Fox & Realtors in Southern New Jersey, echoes his sentiments. “With interest rates the way they are, I would say it’s better to buy than rent,” she says. “Prices have stabilized and we have ample inventory for sale, with wonderful locations near the beach.”
Shaw deals with Atlantic City, Ventnor, Margate and Longport, and says summer rentals remain strong for 2013. A full summer rental could range from $15,000 for a place three blocks from the beach, up to $75,000 for a home on the beach block. The cost of those two homes would be $450,000-$550,000 for the $15,000 rental and between $3 million and $4 million for the $75,000 rental.
Drew Fishman, a broker with REMAX Atlantic in Northfield and Absecon, N.J., describes the real estate mood in Atlantic County as one of cautious optimism. “Atlantic City had approximately 5,000 claims through FEMA,” the federal government emergency funds outlet which was in high profile during the Superstorm Sandy devastation, “and prospective buyers are not sure what they’re going to have to do,” he explains.
“If FEMA dictates a property has to be elevated, for example, there’ll be a large expense associated with that. So uncertainty is the biggest factor we’re experiencing, which is never a good thing.”
Still, the rental market remains strong and the Jersey shore is open for business. “Tourism for the summer looks very, very promising,” Fishman says.
In Cape May the market is fairly active, according to Allan Deschert, broker and co-owner of Ferguson Deckert Real Estate, in Avalon, N.J. “We didn’t have widespread damage from Hurricane Sandy, so real estate prices have not dropped much,” he says. “Right now is a great time to buy, as interest rates are at an all-time low, so you can get a good bang for your buck.” The rental season runs from June through the end of September and Deschert’s firm handles many rentals with a commission that’s “negotiable but usually 12 percent of the rental price,” he says.
There can be considerable costs involved in renting a property out, costs that don’t become obvious until you are already immersed in the process. Who will handle the maintenance? Who will prepare the property for the season, clean and launder after each rental and close it up after the season ends? And will a rental cover money for a new roof or air conditioning? If you can’t count on rentals, will you still be able to afford those costs if the property sits vacant during high season?
That’s unlikely to happen if you price the summer rental at a marketable rate, says Jeff Gamble, general manager of the Van Dyk Group in Long Beach Island. If there was any upside to Sandy, it’s in the knowledge on how to keep homes safer than they’ve been in the past, Gamble says. “We think it’s a good time to buy in Long Beach Island right now. Interest rates are low, prices are still relatively affordable, there’s a nice selection of homes and people are in a much better position to judge the storm resistance of a particular property, after Sandy,” he reflects.
In November and December, there was a slowdown in real estate sales and rentals, he says. “People wanted to see what would happen. But soon it became clear that most of our rental properties were back online and 90 percent of those properties are ready for the summer. “It’s beginning to become much clearer to us what the National Flood Insurance Program is going to want to see in order to keep flood insurance rates affordable to people,” Gamble says. “People who want to buy a home will now know exactly what to look for.”
In Delaware’s Rehoboth Beach, it’s impossible to say if it’s a buyer’s or a seller’s’market right now, says Bob McVey, a realtor and president of the Sussex County Association of Realtors. “We had minimal damage from Sandy — a little, but not nearly as much as the Jersey shore and New York, not even close,” he says. “We’re seeing prices increase as well as sales. If the market trend continues in the same direction, people may buy properties now, planning on their value increasing over 2013.”
South African native Lauren Kramer is an award-winning writer based in Western Canada. This article originally appeared in the Real Estate Special Section.