Free gift with purchase - of home

Vacation houses tough to sell in cooling market

September 07, 2006|By Lorraine Mirabella | Lorraine Mirabella,sun reporter

Greg Siciliano first put his Ocean City bayside condo on the market for $699,000 in May. By August, he had dropped the price of the two-year-old, two-story condo to $550,000 - and had thrown into the package two WaveRunners and the pier out back.

"I'm just a little discouraged with the lack of interest," said Siciliano, owner of Baltimore-based Capital Floor Preparations, who bought the four-bedroom condo to use on weekends but has since traded up to an oceanfront home.

He and other sellers have found their properties stuck in a glut of condos and townhouses that have flooded the market. It's a phenomenon that Ocean City and other resort areas, such as Western Maryland's Deep Creek Lake, are seeing amid a general housing slowdown gripping the Baltimore area and much of the nation. After several years of rapid price appreciation and soaring sales, the market is cooling as inventory has climbed and properties sit on the market longer.

Nationally, the market for condos slowed significantly during the first half of the year, with more for sale now than at any time since the early 1990s, according to statistics from Moody's Economy.com. Second-home markets tend to get hit harder - especially in areas where prices have increased rapidly - because vacation homes are discretionary rather than necessities, experts said.

Siciliano's condo on 94th Street is one of nearly 1,700 condos for sale in Ocean City, and there is nearly twice as much inventory as in July 2005, according to the Coastal Association of Realtors. In the first half of this year, 528 condos were sold in Ocean City - 42 percent fewer than in the first half of last year. Over the same period, sales of single-family homes fell more than 14 percent.

At the rate condos have sold this year, it would take more than a year and a half to sell the existing inventory.

Sellers and agents in the Deep Creek Lake area of Garrett County, another popular Maryland resort area, report similar backlogs of homes for sale. Home sales in Garrett County were down nearly 14 percent in July, compared with the previous July, with the average sales price declining nearly 15 percent, to $373,973 from $438,768. Some 518 homes were listed for sale in Garrett in July, compared with 385 a year earlier, according to Metropolitan Regional Information Systems Inc.

"The market is a little slower now, not quite as brisk as last year, when we were starting to see things where there were multiple offers," said Frederick Washburn, an agent with Coldwell Banker Deep Creek Realty and president of the Garrett County Board of Realtors. "We're not seeing a lot of that this year."

Vacation homes have felt the impact of eroding affordability, said Celia Chen, director of housing economics for Moody's Economy.com.

"When people find an environment where mortgage rates are not quite as good as they were a year ago, and where prices are still quite high, that would be a greater deterrent to purchasing a second home than a first home," she said.

While potential new buyers are taking their time deciding to buy, housing investors and speculators have been staying out of the vacation home market in the Deep Creek area, Washburn said.

"We had a lot of people buying homes to hang on to for a year or two to flip it and make some good bucks off the appreciation," he said. "With the rise in interest rates, those people are being shaken out of the market."

Linda Moran, a real estate agent with Long and Foster in Ocean City who listed Siciliano's condo, said she started noticing the slowdown in October.

"It progressively has gotten worse, with more and more people putting properties on the market and less and less buyers," Moran said. "We're at the saturation point of listings at this point. We have some really good nice properties, but they're not selling."

When it comes to buying a vacation home, "the buyers don't have any real motivation to buy unless it's a good deal, because they have a place to live, this is something extra," Moran said.

To sell a home faster - or at all - sellers have had to lower prices, typically to 5 percent to 10 percent below what similar properties sold for in spring 2005, said Ryan Haley, a real estate agent with Compass Resort Real Estate in Ocean City.

Ned Montgomery, a 63-year-old sales manager from Harrisburg, put his 20-year-old, but completely renovated, oceanfront condo at the Surfcaster on 64th Street on the market in March for $599,000. In June, he dropped the price to $550,000. He hasn't had a single offer.

"We thought we priced it to sell," Montgomery said. "But the market started to soften. I just think with this gas situation and the war continuing, all the emotions of all of these things are sinking into people. Buyers are just a little nervous."

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