One of the most desirable locations for a second home is beach/waterfront property. In another article, we explained how to evaluate beach property. But what affect is the current appreciation of the housing market having on second homes near the ocean? The answer, of course, is that, it depends. Overall, the low interest rates have made a major leap in housing costs, as more people vie for property. This is one of the main factors affecting affect price appreciation: the amount of available housing… as the supply goes down, and the demand for vacation homes goes up, values appreciate that much faster. Another factor is proximity to an already-saturated highly valued location. For example, as Palm Beach grows in price and saturation, West Palm Beach properties appreciate faster, because they have a lower base to start with.
While it is difficult to find one source for current prices and appreciation of market conditions, here’s how ten locations have stacked up over the years, gleaned from a variety of sources. (These locations are the top "ten plus 1" most frequently searched beach locations on EscapeHomes.com)
|
Housing Price Appreciation*
|
Median(M) or Average(A) Price
(Single Family Home)* |
| Gulf Shores, Alabama |
7% (2002-3) |
$142,500 (A) |
| Charleston, South Carolina |
7.9% (2001) |
$234,983 (A) |
| Maui, Hawaii |
9.9% (2003-4) |
$550,000 (M) |
| Virginia Beach, Virginia |
10% (1997-99) |
$122,400 (M) |
| Galveston Island, Texas |
10% (1999-01) |
$130,000 (A) |
| Outer Banks, North Carolina |
14% (2002-3) |
$428,007 (M) |
| Hamptons, New York |
24% (2001-3) |
$360,000 (M) |
| San Diego, California |
24.5% (2003-4) |
$479,540 (M) |
| Gulf Coast (Sarasota), FL |
37% (2000-3) |
$226,000 (M) |
| Cape May, New Jersey |
56% (2000-3) |
$131,500 (M) |
| Cape Cod, Massachusetts |
64% (2000-3) |
$330,000 (M) |
*figures gleaned from a variety of Internet sources, sometimes for the county as a whole. No claims as to the precision of the figures.
So what’s a buyer to do?
With prices rising so quickly, many vacation home buyers are seeking less-expensive alternatives. Of course, less expensive is relative. For example, if you are thinking of Kiawah, South Carolina (median price $846,617), then Sullivan Island, near Charleston, with a $712,550 median home price for 2002 might be relatively less expensive. With a population of 2000, and rental laws which prohibit rentals of less than 28 days, Sullivan Island leans towards long-term residents, rather than vacation home buyers. Perhaps Florida is a better answer, with no state income tax. So you might look further south.
In a similar way, if you are getting priced out of the Boston and Cape Cod area, then looking further north may be useful. Many Boston folks head to Rhode Island or Maine. Is it any better there?
Newport, Rhode Island: up 20%
Speaking with Paul Leys, broker/owner of Gustav J.S. White in Newport, Rhode Island, he echoed the sentiments we have heard in most of the markets—appreciation is off the charts. It is definitely higher than the appreciation rates seen in the boom years between ’86-88, he noted. And where he used to see 6-7% appreciation on a home, he is now seeing them as high as 40-50%. The same house, he noted, is even back on the market one year later just to cash in on the appreciation. The housing appreciation rate in Newport for 2002-3 was 20% for single family homes. While the median home price is listed at under $300,000, Paul sees most substantial residences starting at $700,000 and going up over $2 million. In fact, the total Newport sales were $250 million in 2003 year for 600 homes, making an average price of over $400,000.
Bar Harbor, Maine: up 8.7%
What about going even further north, like coastal Maine? We looked into Bar Harbor, Maine. David Dodge, broker/owner of Maine Sail Real Estate for the past 20 years, commented that he has never seen anything quite like the appreciation in values. The town of Bar Harbor just revalued itself (for tax purposes) and the valuation doubled from three years ago. Undeveloped lots which had previously sold for $40,000 now are going for $150,000-160,000 for two acres. David also confirmed that the range of prices in Bar Harbor varies depending on proximity to water, with a three bedroom going for $270,000 in town to $1.6million on the coast. How does this compare to last year? In May 2002-2003, 3-bedroom homes sold for an average price of $287,839. In the same period in 2003-4, the average was $313,032, an increase of 8.7%. The typical entry price for a new or spec home of about 2400 sq. feet seems to be currently at $350,000.
What next?
Keep your eye on your goal. If your goal is to own a second home or a vacation home pending a future retirement, no matter how high the prices seem now, they have no indication of dropping drastically. The time to buy is now. Check the homes listed on EscapeHomes.com to find your vacation place on the beach today.