Jersey Shore Real Estate

February 13, 2008

It’s a buyers market

Professionals say it’s a good time to make your move

By CAROLE MATTESSICH
Correspondent

A day doesn’t pass without new accounts of economic challenges facing New Jersey and the country at large, yet county real estate professionals say that there are sound financial reasons to buy a home – now – at the Jersey Shore.

Prices Down, Motivation Up

On the barrier islands, first and foremost, buyers are finding good values in current inventory, according to Jeff Quintin, of Prudential Fox & Roach’s 55th Street office in Ocean City. In some instances, he said, prices are down as much as 30 percent from the peak market of late 2005 to early 2006.
“We watched the market ramp up rapidly from late 2001 to 2005,” Quintin said. “But our market started to adjust at the end of 2005.”
In addition, Quintin said, the aims of today’s second-home buyers are somewhat different from those of the “flip investors” who, during extremely heated periods in the boom years, looked to buy low and sell high after a brief holding period.
Most second-home purchasers today, he explained, are buying with plans to hold onto the real estate for at least six to 10 years.
Rather than quick profits, today’s second-home buyer views a purchase “more about family enjoyment, the way they experienced the shore when they were growing up with their own parents,” according to Quintin.
Michael Monihan, of Monihan Realty’s Central Avenue office in Ocean City, agreed that it’s all about family when it comes to why buyers are purchasing on the barrier islands.

Noting his frustration over opinion pieces published by national media last year, which suggested that the Ocean City market was overvalued, Monihan criticized the underlying premise of those articles. (Ocean City was singled out, together with communities in other parts of the country such as Naples, Florida.)
“A good part of their statistics were based on the assumption that the income levels of residents was not keeping up with house values,” said Monihan. “But in fact, most of our sales are not to local people.”
Monihan said that current prices are “down from their peak” in certain market segments, particularly new duplex construction in areas where inventory is high. Some areas, such as the Gardens, have not experienced as much of an adjustment as others, he noted, attributing the differences to factors such as the Gardens’ composition of single-family, uniquely-designed homes.
In every area, however, Monihan sees it as a buyers’ market.
“Buyers feel they can get a good deal, and they can,” he said.
Over on the mainland, even though different motivational factors are at work, real estate professionals there, too, report a softening in prices that they say is good news for buyers.
Mainland buyers are “a very different audience” from those looking to buy on barrier islands, agent Joe Barksdale of Clermont Nine Real Estate in Clermont said in a recent interview.
One big difference: rather than reaching for trust fund withdrawals, many of his customers “feel caught” by the economy.
“They’re not making any more money at their jobs,” he said, “yet they’re watching their energy costs and healthcare costs go up. But the flip side is that there is more opportunity right now to buy at discounted prices.”
Jim Rixey, of Rixey Real Estate in Cape May Court House, agreed.
“The mainland market has been quiet,” he said, “but if a property is priced right, it will sell.”
In Cape May, somewhat of a hybrid community with both ocean-front homes and older, long-established neighborhoods, Chris Clemans, of Chris Clemans & Co. Realty, said Cape May prices are “stabilizing at a lower range. They needed to. Prices had risen so dramatically over the past four or five years, they needed to stabilize.
“Buyers have more inventory to choose from than ever before,” Clemans noted. “And inventory always has been tough for us down here.” In Cape May, she explained, typically homes do not turn over at as high a level as other beach-side communities.

Favorable Financing

Along with lower prices and some changes in personal preference factors, the availability of favorable financing also is incentivizing buyers.
“Banks are offering products like a 30-year fixed mortgage for just above 5.5 percent,” Quintin noted.
Monihan, too, said that “rates have dropped significantly,” particularly for those with a good credit history and the ability to make a down payment.
As for the mainland, Rixey said he expects that falling interest rates may go so far as to reverse the past year’s decline in two groups of buyers: “move-up customers” (buyers who trade up to a higher priced home) and “people who are just tired of renting.”
Rixey noted, too, that mainland purchasers are motivated by government-assisted financing programs such as the FHA program, which requires only a 3 percent down payment.

Sellers Motivated

Area realtors say that another factor working in buyers’ favor right now is the effect that the high level of current inventory has on seller behavior.
According to Quintin, currently there are about 1,200 homes for sale in the Ocean City market, with some 36 to 40 properties selling during each winter month, a number expected to climb to 50 or 60 properties per month as warmer weather approaches.
When such a substantial inventory is at play, he said, sellers are motivated to find ways to distinguish themselves by creating a deal that is even more attractive than before.
A motivated seller not only prices for the market, said Quintin, but also makes sure that the home is in impeccable condition so that it will be chosen over others with similar location and price.

Market Psychology

Finally, according to those interviewed, there’s a bit of market psychology causing some savvy buyers to conclude that they may find the best deal right now precisely because others are being pessimistic.
As Monihan explained it, some potential purchasers “think that things may get worse and prices will continue to decline.” This causes some buyers to hold off on purchasing.
The problem with that way of thinking, according to both Monihan and Quintin, is that it never actually allows a purchase and does not necessarily result in any substantial savings.
“You’ll never know when the market has hit bottom,” noted Quintin, “until it’s on its way back up. You just don’t have control over it.”
So what if prices were still to decline by another few percent, Quintin asked.
“A home purchased for $495,000 may decline to $475,000,” he said, “but in 10 years, regardless which price you paid, it still could be worth a million.”
“Fear about the market declining further is only a short-term view,” Quintin emphasized. “But real estate is a long-term gain.”
In a similar way, Steve Booth of Prudential Fox & Roach in Ocean City debunked yet another mode of thought.
Acknowledging the current buzz among pundits that American consumers typically put off large purchases until after a major election, Booth suggested that savvy consumers recognize that if everyone truly were engaging in that trend, it would mean that a large number of people will be buying a year from now.
“But where will interest rates, inventory and prices be in a year?” he said. “I doubt they will be better than today.”
And there’s an even better reason to go against the pundits’ advice, Booth suggested.
“If you buy into the theory at all,” Booth said, “then you also have to recognize that the guy who comes in today steps in front of the crowd.”

Carole Mattessich can be e-mailed at gazette@catamaranmedia.com or you can comment on this story by calling 624-8900, ext. 250.