Home values drop for 2nd straight year


June 16, 1991|By Audrey Haar

While Ocean City is attracting record numbers of tourists, real estate buyers are disappearing.

Condominium sales in Ocean City dropped 30 percent from 1989 to 1990. The number of new construction permits plummeted nearly 60 percent. And home values decreased for the second straight year, according to a new report on the resort's real estate market says.

The study, by Lipman Frizzell & Mitchell, a real estate appraisal company in Baltimore and Silver Spring, found an increasing number of four-day mini-vacationers and more vacationers during the off-season and periods surrounding the peak summer months.

Although the real estate market is still in recession, "people will go on an inexpensive vacation regardless," said David Brooks, partner with Lipman Frizzell & Mitchell. "Even with the recession, the typical tourist is going on his one-week vacation even if he can't go anywhere else."

Mr. Brooks said it was not surprising that the number of construction permits fell so dramatically from 1989 to 1990, after a decrease of only 6.8 percent in the previous year. "Realistically, there is not a whole lot of land left," he said. He also said that even if someone wants to develop a property, they have a difficult time finding financing.

The study also tracks the numbers of people visiting Ocean City by counting Bay Bridge crossings. That number increased 5 percent in 1990, compared to a 2.7 percent increase in 1989. Mr. Brooks said the 8.4 percent increase in lodging rentals in 1990 correlates with the increasing bridge-crossing numbers.

Compared to the building heyday in 1984, when a two-bedroom oceanfront condominium appreciated 18.2 percent, such a property decreased 2.7 percent in value in 1989 and 2.8 percent in 1990.

Paul Faulstich, who owns Leland Realty in Ocean City, says the real estate market is about the same as it was this time last year.

He acknowledges that area agents are boasting increased sales, but he attributes that to the 20 percent decrease in the number of agents working in Ocean City this year. He said there are 100 fewer agents this year, with the remaining ones dividing up the same business.

Mr. Faulstich said there is a strong market for houses costing more than $150,000 and those below $80,000.

"One-hundred thousand to $150,000 is no man's land," he said. The customers for those houses are unsure of their employment security and are afraid to buy, said Mr. Faulstich, who supplied some of the data used in the Lipman Frizzell study through his Worcester Information Network. The network compiles real estate-related information from Worcester County records.

Ocean City real estate agents who survived the sluggish market during the gulf war said they are seeing signs of recovery this spring. "The bottom fell out when the war started, but the numbers for next year will look good," said Robert Warfield, partner in the Ocean City real estate company Moore Warfield & Glick.

Mr. Warfield said he thinks the survey results are positive when compared to the rest of the recessionary market. "[The numbers] show that this town is pretty recession-proof," he said.

"The condominium market picked up immediately after the gulf war ended," added James Waggoner, director of resort rentals and sales manager of the Ocean City office of Long & Foster Realtors.

He noted that the average Ocean City condominium buyer is 40 to 45 years old. And buyers are looking for second homes not as investments, but for their own use.

While the resale market has remained steady the past two years, the major entry in the Ocean City new construction market is the luxurious Princess Royale. It opened in February on 91st Street, on the last empty parcel of oceanfront in Ocean City.

The Princess Royale condominiums are priced between $138,000 and $385,000 and have all the features of a full-service hotel.

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