Current Trends
Will Mr. Greenspan give us another rate cut and if he does, will that return us to the "Glory Days" of 1999 and 2000? Well, yes and no. Yes, we may get another small rate cut this year but no, we won't be seeing another market like "99 and "00
for quite a while. The secondary housing market is now much more closely tied to the stock market and this appears to be the catalyst for a boom or bust market in the future. Low interest rates will keep our real estate market from a significant dip only for as long as they remain in the
7-8% range and act as more of a stabilizer than a market boost.
The market is not really all that bad. It seems that we have been spoiled by past performances. Prices have leveled off but are still at an all time high. Some price reductions are being noticed, but these are properties that were
initially priced too high and are now seeking more competitive levels. The inventory of new homes does not seem to be rising significantly and this market's supply/demand factors appear to be in balance. I believe that many of the
new homes are pre-sales and not built on speculation which would effect inventory. The inventory of resale homes is continuing to rise and prices are being adjusted to more realistic levels. This can be easily misconstrued to assume
that prices are falling when in effect, these homes were simply priced too high when they were listed. Homes that are properly priced and in the better locations are still selling. Current listing price ranges: Beachfront $795,000-1,300,000
with a median of $850,000. Beachblock $450,000-760,000 with a median of $550,000. 1-2 Blocks from the beach $300,000-450,000. These listings are townhouses which are felt to be most reflective of the overall market.
Future Trends
This market has definitely leveled off and for it to stay that way, interest rates will have to remain under 8%. We are on the down side of this latest market peak and expect to remain at this plateau while mortgage rates remain low and the stock
market languishes at current levels. Many market gurus believe that the Dow and NASDAQ market p/e ratios are still too high to allow for any significant upsurge and that it may take a minimum of two years to achieve the levels required for the next big
upturn. Since many of the buyers and sellers of vacation homes have their 401k's and other retirement plans in the stock market, a recovery to near recent levels is required to get them back as players. We believe this as well as a more favorable business
economy is the key to the next big seashore market, not interest rates. In the meanwhile, we can simply cruise along with a little softer market, not too good, but not too bad either.
Rental Market Update
For the past two years we have been forecasting a softening of the rental market along the shore. This summer it came to pass. All indications are that the overall effect is a negative 15%. This is felt in both merchant sales and summer rentals.
June was a disaster for many people, particularly many of the restaurants, bars, shops, etc. Real Estate agents have also experienced a similar drop off in reservations in June, early July, late August and September. Prices have risen significantly
over the past three years and when you couple this with the large numbers of lower priced rental properties that have been torn down and replaced with new, large rental units it equates to a widening gap between supply and demand. Simply put, we have
too many high priced rentals and not enough low to medium priced units.
In the future, expect to see some lowering of prices, particularly the off-peak rental prices. With the internet, it is now much easier for customers to shop around for a rental from the convenience of their home or office so expect them to be more
selective. We can also expect to see the more "business wise" property owner scrambling to make their property more competitive by adding more amenities and upscale decorations. Owners who will not maintain their properties or who take the "send the
money and stay home" attitude with their tenants are going to find even more vacancies. Rental prices for next year are expected to remain generally unchanged with the exception of more competitive off-peak rates. If you are an owner, let an experienced
agent assist you with properly pricing your rental unit. Take a few minutes and look on my web site www.ILoveSeaIsle.com or other local sites to get a feel of how your unit stacks up against the competition. This could save you some vacant weeks and that translates to money.
