Waterfront Homes Seen Weathering Housing Market Storm By Marilyn Alva Investor's Business Daily, April 12, 2007
When it comes to selling a home, real estate agents like nothing better than the sound of a simple word: waterfront. In a business that's all about location, the waterfront has long been considered the most desirable real estate. But have fiercer hurricanes, floods, rising insurance costs and the softening housing market battered the value of waterfront homes? While conditions vary from market to market, real estate experts agree that values still do generally hold up better on the water whether the water is an ocean, bay, river or lake. "They appreciate faster in good times and decline in value at a slower rate in bad times," said Alan Hummel, past president of the Appraisal Institute and chief appraiser of Forsythe Appraisals. Buoyant Market The reasons are simple. A growing number of people still want to live on the water for the views, recreation and sense of privacy. Yet the supply of waterfront homes continues to shrink, exacerbated by local efforts to limit development on the shoreline. That has muted the housing slowdown's effect on waterfront properties, says Kenneth Lusht, a real estate professor at Florida Gulf Coast University in Fort Myers. "In general, shore properties have been less adversely affected than nonshore properties," he said. "For example, in Southwest Florida the impact on shore properties is one-fourth that of other properties." But there is a downside. Homeowners in flood zones in Florida and other hurricane-belt coastal areas such as the Gulf Coast have seen their insurance premiums skyrocket. That puts a damper on the "marketability" of such homes, says real estate adviser Lewis Goodkin, president of Goodkin Consulting. It might take a while longer to sell, he says, but buyers will cough up the higher insurance premiums for such homes "when there's not a whole lot to choose from." "There are more people with wealth and big incomes than any time in our history, yet the opportunities (to buy on the waterfront) are less," Goodkin said. Surge Despite Storms Storms won't keep the coastal market down, experts say. Robert Hartwig, president and chief economist with the Insurance Information Institute, told a U.S. Senate committee on Wednesday that the value of insured coastal property "will double" within the next decade. Hartwig cited a growing number of people who want to live in coastal areas, including hurricane belts. For now, the supply-demand imbalance is especially pronounced in the market for single-family homes on the water. These homes and townhomes on the water have shown the greatest resistance to price depreciation, real estate sources say. Such waterfront homes generally command prices 7% to 9% more than those off the water, Hummel says. But homes with stunning water views can go for twice as much as similar homes with no water views, he says. In San Diego, the coastline is dotted with single-family homes. Little land is left to develop. Waterfront homes are selling at prices about the same as eight months ago, says Sara Schwarzentraub, an appraiser with Interstate Appraisal Service. But homes east of Interstate 5 those farther inland are down 3% to 5% from the first quarter of 2005, she says. "Sales activity has picked up this quarter vs. the same time last year," Schwarzentraub said of beachfront homes. Only high-end homes priced at $10 million or more are taking longer to sell, she says. Schwarzentraub adds that she considers single-family coastal homes in San Diego to be "housing recession-proof." She says that foreign buyers of such waterfront homes are helping to bolster the market. That's not the case in overbuilt waterfront condo markets in downtown San Diego, the Miami area and other parts of Florida, where speculators and other investors bid up prices on tens of thousands of new units to unsustainable levels. "It was artificial demand," Goodkin said, adding that condos in those overbuilt locales are "a long way from seeing a recovery." In Miami, one of the most overbuilt markets, about 30,000 condos are under construction, both on the waterfront and near it. Many of the buyers of these units signed on at peak prices. The question being asked now: How many will show up at the closing table? "Water is the single most desirable asset, but when you have high levels of speculation you're going to have significant adjustments as the buildings are completed," Goodkin said. "There's nothing magic about water when you have more supply than demand." The greatest resistance to price declines in a slowing housing market is in popular areas with limited supply and where buyers are users, not simply investors, Goodkin says. He cites such places as Palm Beach, Fla., Fisher Island in the city of Miami Beach and the Southern California coastal locales of Santa Monica, Newport Beach and Laguna Beach. Values decline steeply the farther you move away from the waterfront. "Even a block away there's a huge difference in land values," Lusht said. Since building and labor costs are typically the same whether along or away from the water, land values reflect location, he says. Real estate professionals put oceanfront properties at the top of the valuation list, followed by the Intracoastal Waterway, bays, lakes and rivers. A lot also depends on the view itself and access to the water. "Open access to the bay will garner more money. It's the same with direct access to the ocean," said Art Napolitano, a broker- manager with Coldwell Banker in Spring Lake, N.J., on the Jersey Shore. "The depth of a river makes a difference. How big a boat can you put in the water? A deep-water dock is a lot more valuable than one where you have to wait for the rain." Mainstays In tight times, primary residences typically hold their value better than properties in second-home markets. But the economy has not slowed to a point where the second-home market is seriously contracting, says Hummel. "It takes a really significant change in the economy for people with the ability to have second homes to be drastically affected," he said. The second-home market in coastal areas within driving distance of New York City has held up well, thanks in part to the city's strong financial services economy. "The Wall Street bonuses were very good this year," said Napolitano. "Whenever Wall Street has a good year, the Jersey Shore has a good year." Take the upscale Jersey Shore town of Spring Lake, where entry-level homes start at around $800,000. Some are selling within two to three months, compared with up to six months last year, Napolitano says. Amid fears that prices were getting too high, buying slowed last year and prices stabilized. Napolitano says Spring Lake homes are now selling at prices 5% above last year's level. "Because there is only so much water to go around, the waterfront properties will always be somewhat in demand," Napolitano said. Copyright 2007 Investor's Business Daily Yahoo! Groups Links <*> To visit your group on the web, go to: http://groups.yahoo.com/group/AsburyPark/ <*> Your email settings: Individual Email | Traditional <*> To change settings online go to: http://groups.yahoo.com/group/AsburyPark/join (Yahoo! ID required) <*> To change settings via email: mailto:[EMAIL PROTECTED] mailto:[EMAIL PROTECTED] <*> To unsubscribe from this group, send an email to: [EMAIL PROTECTED] <*> Your use of Yahoo! Groups is subject to: http://docs.yahoo.com/info/terms/