March 22, 2008

IS BEACHFRONT PROPERTY WORTH HAVING? Yes. But is it worth buying? Maybe not. When we were in Hilton Head we looked at the market and there seemed to be a lot of places for sale — on one street, we saw eight for-sale signs in a single block; when we rented a house on that street a few years ago there were none that I remember — certainly nothing like the forest that we saw this time. Although the realtors in the area are talking happy, as they tend to do, I wonder if things are really moving. Reportedly, however, the low dollar is bringing in foreign buyers.

UPDATE: Fritz Schranck emails:

Your point about beach property is well-taken, although even in these areas, there are lots of variables, with absolute proximity to the sand providing the most protection against deflationary effects.

Where I live in Rehoboth Beach, for example, the properties within a few blocks of the Atlantic are essentially stable in pricing, and moving at a reasonable clip. Further back, say within a mile or two of the ocean, properties are definitely cheaper, and slow to sell. Local agents say there’s a one year inventory, which is a huge change from the go-go times of 2-3 years ago.

Charleston reader John Marcoux writes:

While Hilton Head is about 60 miles south of here, I’m guessing the kind of seller you have there is like the sellers around here, on Kiawah Island, Sullivan’s Island and Isle of Palms. They tend to be financially secure and not in any hurry to sell. Places tend to remain on the market for a long time, without much lowering of price, and so for sale signs will accumulate in a slow market.

The place next to us, on the marsh, was for sale for 18 months after the owners moved back to Connecticut, leaving the house vacant. It finally sold this past January for $1.1 million, about 12% below the asking price. That’ a somewhat atypical bargain. I was in a $4.3 million place in the historic district in downtown Charleston that has been on the market for over a year, and still is, because the seller refused to close the difference of $100,000 with a motivated buyer.

And reader Ron Stack emails:

I am a big believer in waterfront property. It is the most desirable and scarcest property in any given community (Manhattan and LA possibly excepted) and will always command a premium relative to the market. When the market as a whole is overpriced, as in South Florida, waterfront takes a hit, too. But it should drop less and recover faster than the equivalent inland property. For a vulture investor like me, the best set of facts is an overpriced waterfront property owned by a speculator who is under water (so to speak) as soon as the market drops. In other words, a good property held by a very highly motivated seller (or the bank). The trick is finding a community where the owners aren’t in it for the long term. If they are, and if they have bought intelligently, they just ride out the recession like any sensible person
should.

So look for a place where people are shortsighted and gullible!

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