The beach bounces back Resort real estate is riding a rising tide of demand

May 24, 1998|By Gary Hornbacher | Gary Hornbacher,SPECIAL TO THE SUN

The boom that became a bust is now apparently popping again.

Have any doubts, just listen to Mark Fritschle, who has been selling resort real estate for 24 years.

"I've never seen it like this," said Fritschle, of Keller Williams Resort Realty in Ocean City, who is president of the Coastal Association of Realtors.

"There seems to be security in the beach market," he said. "The city has proven it is a year-round town, the convention center, a forward-looking city council, people taking money out of the stock market." All of that, Fritschle said, is making for the best beach market in years.

Memorial Day weekend marks the start of another seasonal rite of passage with thousands of families throughout the region heading toward a thin ribbon of beach, bays and rivers stretching northward from Assateague Island into Delaware.

Ocean City. Bethany. Rehoboth. Lewes. They all seem to have their own faithful following of vacationers.

For many, it's a quick day-trip or weekend getaway, for others, a long-awaited vacation measured in weeks or even months.

And every year, it seems, there are some for whom the lure of the beach grows a little stronger. Individuals who find themselves dreaming how great it would be to own a second home close to the beach and wondering if it is financially feasible.

Most leave their dreams on the beach or fairway or fishing boat, but a surprising number realize their goal. And this vacation season, it seems that more people are taking a look at buying.

Market observers said 1997 produced double-digit sales increases in many brokerage offices, but the 1998 market is off to a sizzling start.

"It certainly rivals '81, '82, '83 -- those years when we had all that stuff propping up the market the savings and loan money was out there and really good tax benefits," said Peter Copenhaver, Delaware regional manager for O'Conor, Piper & Flynn-ERA and president of the 700-member Sussex County (Del.) Association of Realtors.

'It sure feels good'

"I would say it is a very good market. Is it as good as that one? I don't know. But it sure feels good."

For example, O'Conor, Piper & Flynn-ERA reported that for the first quarter of 1997 it recorded $82 million in sales volume in the Ocean City and Ocean Pines resort areas. For the same period this year, the volume jumped to $111 million, up 35 percent.

Further, as inventory continues to drop in the face of strong demand, properties seem poised for some of the most positive appreciation experienced in more than a decade -- more reassuring news to buyer and seller alike.

"It has been a long time since we have been in a seller's market, but I sense we are headed in that direction if we are not there already," Copenhaver said.

He said the average price of a two-bedroom, two-bath in the Golden Sands high-rise on 109th Street in Ocean City was $135,500 in 1996. In 1997 it rose to $142,900 and this year has jumped to $155,000.

"I can't say to you that we have strong inventory in any category. We need listings," said Copenhaver, who has been selling resort real estate for 17 years. "And if a buyer is coming down and they find a property that they like, they should buy it, because it will be sold in the market that we are currently enjoying."

It wasn't always this good. A decade ago a combination of factors -- including the tax reform act of 1986 and the fallout from the savings and loan crises -- produced economic uncertainty, depressed coastal real estate values and a burgeoning inventory of unsold properties.

But the market, say knowledgeable observers, bottomed out in 1990 and the next year found buyers returning to the market in greater numbers, inventory levels beginning a downward trend and prices stabilizing.

"Our market has steadily gained since 1991," said Fritschle. "That doesn't mean prices are going up like they were in the 1980s, but demand certainly has caught up with supply from both a sales and rental standpoint."

Are boom times back?

Hal Glick, a broker and principal in the Ocean City-based firm of Moore Warfield Glick, quietly ticks off a number of reasons why his firm posted a 37 percent sales increase last year and expects to do even better in 1998.

They include very favorable interest rates for buyers, continuing consumer confidence, stock market gains that are being cashed in and spent on resort real estate, the beneficial effect (for both buyers and sellers) of recent tax changes, and mild weather that has produced a steady stream of prospective buyers. Other Realtors are quick to elaborate.

The recently lowered capital gains tax has freed up dollars of first-time buyers, particularly the baby boomers who increasingly have paid for first homes, educated their children and are ready for the benefits of a vacation home.

Owners of existing beach properties are trading up with confidence from bayside apartments and smaller oceanside condos to larger units or ones closer to the oceanfront.

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