#jersey shore real estate
For Jersey Shore property – what now?
Smashing furiously through the Jersey Shore, superstorm Sandy broke up boardwalks and shoved houses off their foundations.
Storm damage in Ortley Beach. The Jersey Shore will be rebuilt. The questions are when and to what extent.
As Shore towns and homeowners clean up, the question now is how the storm’s impact will be felt in the coastal housing market site of so many New Jerseyans’ favorite vacation memories in the months and years ahead.
Real estate experts say that the storm will have a number of effects, including:
- The construction industry will get an immediate boost as homeowners repair and rebuild.
Most observers expect that after a period of rebuilding, homeowners and renters will return to the Shore.
“Generally after a natural disaster, whether in Florida or North Carolina, people return to the coastal region and start rebuilding, and I anticipate that will be the case in New Jersey as well,” said Lawrence Yun, chief economist with the National Association of Realtors.
“The Shore is pretty resilient. It’s always bounced back,” said Peter Reinhart, director of the Kislak Real Estate Institute at Monmouth University, just a mile from the ocean. “People will still want to have places there. There may be some short-term shortages of available places over the next year or so as places get rebuilt.”
The demand for coastal property is likely to endure because so many people have deep feelings about the beauty of the ocean, combined with memories of family vacations.
North Jerseyans with second homes at the Shore, for example, said last week that although their houses were badly damaged, they are not walking away.
Madeline Caminiti of Paramus said the front steps were knocked off her place in Manahawkin, and the first floor was filled with several feet of water.
“Carpeting, washer, beds, furniture and tile floors are all shot,” Caminiti said.
But, she added, “we will clean it up and continue to enjoy our lovely house in that lovely location.”
Similarly, Katie Piller’s second home in Ocean City three blocks from the ocean was filled with three to four feet of water. Her Ocean City neighborhood is filled with trash bins, as homeowners toss everything that was soaked.
“It is kind of upsetting,” said Piller, a teacher who lives in Elmwood Park.
But she said the Shore retains its appeal.
“We’re going to rebuild,” she said. “We don’t want to sell. It’s the Jersey Shore it’s such a special place.”
And Reinhart recalled a family reunion last summer on Long Beach Island. Most of his relatives have moved out of New Jersey, he said, but at the Shore, “they were just reliving their youth.”
The value of scarcity
That continued demand for the Shore experience, combined with a smaller supply of housing because of the storm, could lead to higher home prices and steeper rents over the next year or two.
“It’s just math. Scarcity always equals value, as long as the desire to be at the Shore doesn’t go away, and I don’t see that happening,” said one real estate agent, Brian Church, of Ward Wight Sotheby’s International Realty in Belmar.
Jed Kolko, chief economist at the real estate website Trulia, agreed.
“Prices tend to rise after major disasters because some housing gets damaged or destroyed,” Kolko said. It’s not yet known how many homes were destroyed or damaged so badly that they can’t be lived in, but it’s certainly a large number along the 127-mile coastline.
On the other hand, if climate change leads to more severe storms in the years ahead, many beach lovers may become more wary of buying a Shore house.
“If people believe that disasters like Sandy are becoming more common, people will price that into the value of the home, and that could push prices down,” said Kolko.
Ken Pringle, a lawyer and former mayor of Belmar, said that prices may go down for people who have to sell immediately because the damage to infrastructure, including boardwalks, makes Shore towns less appealing, even though everyone expects them to be rebuilt.
“I wouldn’t want to sell my home in this market,” said Pringle.
But that also means “there are probably some great buying opportunities at the Shore,” he said. “If we look back and this is kind of a 100- or 200-year storm, as I certainly hope it is, I think people forget, and you get back to people wanting to be at the Shore and understanding there are always risks living near the water.”
Jump in taxes, insurance
Lee Childers, of Childers Sotheby’s International Realty in Normandy Beach, said that he expects prices may go down in the short run. His theory is that potential buyers will be hesitant, while the supply of houses will be bumped up as some homeowners, especially older people, will take their insurance settlements and “put the place on the market and not go through the hassle of rebuilding.” But he expects that the market will rebound by mid-2013.
The cost of living at the Shore is likely to increase as a result of Sandy. Flood insurance premiums were already scheduled to rise, according to Robert Hunter, an insurance expert with the Consumer Federation of America. And older homes that were badly damaged will have to be rebuilt according to more rigorous and more costly standards.
Property taxes are likely to jump, too. Governor Christie said last week that towns facing expensive Sandy cleanups will be able to raise property taxes by more than the statewide 2-percent annual cap.
“It’s got to be paid for,” Christie said.
These higher costs “could easily change the character of neighborhoods” by pricing out many working- and middle-class families who could once afford a small beach cottage, Yun said.
The question of Sandy’s effect on home values unfolds against a backdrop of a Shore real estate market that may have bottomed out, after the national slump in housing. The number of home sales in Monmouth and Ocean counties rose 13.2 percent in the first 10 months this year, compared with the same period last year. Prices, however, were flat, at a median $318,300.
Farther south in Atlantic City, home prices dropped about 3 percent from the third quarter of 2011 versus the 2012 quarter, according to the National Association of Realtors, to a median $214,000.
Time to change pattern?
In the short term, repairing storm damage is expected to bolster the construction industry, which cut jobs deeply the past five years as the housing market fell into its worst slump since the Depression.
“Many of them suffered during the recession, but they’re probably going to have a pretty good year,” said Reinhart.
But Kolko said construction activity will be focused on repairing or replacing damaged homes, rather than new development.
“We typically see a delay in new-home starts and home sales, because construction on new homes tends to be delayed or interrupted by a hurricane, and some of those construction resources might shift to rebuilding rather than building new homes,” Kolko said.
Questions have been raised about whether some flood-prone areas should be rebuilt, given the risk of storms.
“The area is ripe for some good rethinking of redevelopment of those areas,” Reinhart said. “Do it in a smart way.”
Lawrence Hajna, a spokesman for the state Department of Environmental Protection, said the DEP has been too focused on the immediate emergency at the Shore to ask those land-use questions, for now.
Ultimately, the future of Shore real estate will be linked to people’s feelings about being near the water.
“Longer term, is the beach seen as desirable as in the past?” asked Jim Diffily, an economist with IHS Global Insight. He answered his own question: “People always want to live on the beach.”