Beach blanket boom

May 31, 2004

BRUCE MOORE has been in the Ocean City real estate business for 35 years, so he's seen plenty of ups and downs. But he hasn't experienced a tsunami of prosperity like the one that's been sweeping the resort community lately. It's hard to find an Ocean City property owner who hasn't at least doubled his or her investment.

"Five years ago, you could find an oceanfront condo for $150,000 to $200,000," recalls Mr. Moore, 62. "I just developed four units on 91st Street that sold for $1.5 million each. The bar is rising fast. I've never seen anything like it."

Memorial Day weekend marked the official start of the summer tourist season for Ocean City. Between now and Labor Day, as many as 343,000 people will come here on peak summer days to frolic in the surf and sand, swill tropical drinks, dance in clubs, play miniature golf and eat fried dough on the boardwalk.

Ocean City's popularity has helped drive property values into the stratosphere. Lower interest rates and the downturn in the stock and bond markets have helped, too. It's a delightful turn of events for real estate investors who suffered through stagnant markets in most of the 1980s and 1990s. But the consequences are more far-reaching than that.

Development pressures are rising again. With land at a premium, older buildings are being knocked down and in some cases replaced with taller structures. The boom is moving west out U.S. 50, putting pressure on the sensitive coastal bays. A one-time shanty village will soon be condos. Even West Ocean City's commercial harbor is attracting pricey homes.

"More cars, more traffic, more paving, more runoff," says Jay Charland of the Assateague Coastal Trust, a nonprofit environmental group.

Year-round residents are angry about their property taxes. New assessments mean higher tax bills, and while Ocean City's tax rate has fallen, some say it hasn't dropped fast enough. And seasonal housing, always an issue for businesses that depend on low-cost labor, is quickly becoming a bigger challenge.

Even the economics of Ocean City real estate pose a tradeoff. With properties so expensive, new owners can't always count on rental income to make mortgage payments. The result? The dream of a beach home is getting a little more distant for younger families, the resort town's traditional core customers.

Still, these are problems that can be managed. Ocean City Mayor James N. Mathias Jr. wants to better coordinate with Worcester County's commissioners, who are in the midst of updating the county's comprehensive plan. Might nearby towns such as Berlin and Snow Hill be better places to house seasonal workers? The city is wisely investing some of its new wealth in mass transit and infrastructure to accommodate the growth.

Real estate prosperity like this can't last. It's up to elected leaders in Ocean City and Worcester County to manage it wisely.

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