When it comes to real estate, you already know The Big Story. It went like this:
Since the early 2000s, home prices—fueled by shifty lenders, irresponsible borrowers, plummeting interest rates, etc.—rose. That swell became a bubble, and that bubble, as all bubbles are born to do, burst.
Yet within The Big Story are smaller ones. Consider, for instance, the story of the beaches.
During the mid-2000s, prices in Lewes, Rehoboth Beach and other coastal towns were just as inflated as those across the fruited plain—until the bottom fell out. In that sense, the beach was like every other real estate market in the United States. But there are other factors to indicate that a beach buy is a good investment—and that the time to buy is now.
“The decline is what it is: a decline,” says Laurie Bronstein, a real estate agent with Prudential Gallo since 2003. In the tavern of misfortune and struggle, Bronstein has been served the same bitter cocktail as almost every other Realtor she knows. Consider that a typical waterfront home in Broadkill Beach would have sold for an average of $480,000 in 2004-05. The same home would now fetch in the neighborhood of $370,000. That’s a decline of almost 25 percent.
“Some sellers are, of course, disappointed by this, but in a way it’s no different than the rest of the country,” says Bronstein.
“It’s completely different now compared to when I started,” says Sherri Martin of Jack Lingo Realtor. Martin has specialized in the Rehoboth area since 2002. “Back then, you couldn’t even keep up with the phone calls and the showings and the offers and the contracts. Not that it was easy, but you really didn’t have to work too hard for the sale.”
Now, says Martin, it’s a bona fide hustle. “Ninety five percent of my business right now comes from referrals or repeat business. And I’m lucky. A lot of agents just can’t seem to make it,” says Martin. “It’s a lot longer from the point of meeting to the point of sale, and it’s not unreasonable to expect that selling a home could take up to five years.”
Shaun Tull, also an agent with Jack Lingo Realty, echoes Bronstein’s assessment. “On average, I would say there’s been a decline in home values between 20 percent and 30 percent,” says Tull. “But I can tell you, I’m very glad to be selling real estate in Rehoboth Beach rather than a lot of other places. Relative to the rest of the country, we’ve been able to continue doing pretty well.”
Though no one would ever be so bold as to claim these waterfront regions of Sussex have been recession-proof, there is much to be said for the minor buffer the area has enjoyed during the market’s collapse in late 2008. First among those buffers is location.
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“The best thing going for this region is that [Washington] D.C. is currently one of only five markets in the country that is seeing an increase in home values and pricing,” says Tull. “And here in Rehoboth we have a lot of buyers that come from the D.C. area, which I think is the number one thing that has helped get us through the recession.”
Secondly, there’s the cost of living. Delaware’s real estate tax rates are nearly 75 percent lower than those in Pennsylvania, Maryland and New Jersey, says Bronstein. That factor not only helps bolster the market with young, wealthy families who are looking for a vacation home or investment property, but it also attracts individuals looking to retire along the water’s edge.
“We’re still probably the most economical state in the Mid-Atlantic region for retirement in terms of low cost of living,” says Bronstein. “This has provided a floor for the real estate market in Delaware, especially at the beaches.”
Finally, there’s the less quantifiable—but nonetheless powerful—pull of the beach lifestyle. Mark Hughes is a regional director of business development for Max Spann Real Estate & Auction Co. Over the past decade, Hughes has focused his time and attention on the realty arm of Sotheby’s Auction House in multi-family, luxury and auction marketing. Hughes says places such as Rehoboth have done a good job setting themselves apart from the over-crowded “Myrtle Beach vibe” of other resort towns.
“Rehoboth is a brand, no doubt. There’s a lot of good will in the name Rehoboth, a lot of history, and I think that has played a roll in its success,” says Hughes. “Nonetheless, I think you’ve probably got a three- to five-year window of inventory reduction left in terms of stabilizing the market and getting rid of excess new construction and inflated prices.”
But, Hughes points out, that is a window that prospective, previously anxious buyers should be getting ready to pass through.
Bronstein, Tull and Martin all say their numbers rose in spring when compared to the same period last year. And though some of that rise was fueled by still record-low interest rates, the story that emerges is that of—dare one say it?—a recovery.
“There was a lot of pent-up demand,” says Bronstein. “People still wanted to buy beach houses, but they were afraid over the last few years because prices were still falling and people were backing off. But a lot of those people who think prices have sort of hit bottom came out this spring and picked up some very good deals.”
This is not to suggest that we are headed back in the same pre-crash direction. Lending is still tight, so financing is more difficult to find than it was five years ago, which means buyers need to lay a bigger down payment on the table. If they can, there are, indeed, deals to be had. “Prices are still down, but I think we’re beginning to see it stabilize somewhat from its peak,” Tull says. “As along as we continue to have a good summer, hopefully we’ll be bouncing along the bottom. But it’s still tough.”
Martin says her company’s sales in and around Rehoboth have nearly doubled from the same six-month period last year. Yet she is not ready to uncork the champagne and start a recovery parade down Coastal Highway.
“Hopefully this is going to continue to change for the better,” says Martin. “And to buyers who want something in town in Rehoboth or close to the beach, I would say now is the time. It would be a very good time to seriously consider buying at the beach.