Joan Farrell Ocean City Real Estate

The Standard and Poors 500 gained only 4% over the last decade.  The Ocean City real estate market gained 81.5% over the same period, making it the clear winner even before one considers the intangibles.  Investors in seashore property faced the same kind of risks that Wall Street investors did, and both markets exhibited a roller-coaster performance over the decade.  At the shore, the ride was often as wild, but the views were much better. 

Those purchasing early in the decade were the clear winners, and those buying in late 2004 and onward might have suffered a loss if they were to have sold in 2010.  The worst hit, as expected, were those who bought in 2005-06, when irrational exuberance was the norm, it seemed like everyone had become developers, and new construction projects were trading like futures, with two or three flips before a building was finished.  Buyers in that time period are down 20 – 25% on average. 

Perhaps the biggest losers were 2004-2006 buyers of dated 4BR/2BA beachfront condos on 40 x 100 lots.  These buildings typically had carports or garages with low ceilings and first floors with negligible views.  Those owners, selling today, are looking at prices 20 – 33% below what they paid.  The newer beachfront condos are facing a different kind of loss – loss of buyers.  There are simply far fewer buyers of the highest-ticket properties, and increasing inventories.

But how about the market as a whole?  It is such a diversified market that any shift in the mix of properties sold can skew the overall statistics.  The average sale price is about $500,000, but the inventory includes $40,000 hotel efficiency units and $5,000,000 beachfront condos. Priced at just about $500,000, the 3BR/2BA duplex condo is the closest the market comes to a commodity in terms of availability, similarity, and popularity.  Those owners saw improvements in value of up to 93% if they purchased in 2000; losses only as high as 15.6% if they bought in 2005, and have actually seen price increases since 2009.  The inventory of these properties is being depleted, and as a result we saw fewer sales in 2010 but at an average price 7.5% higher than in 2009.  The attached performance graph tells the story.  We also saw a big jump in activity for 4BR/2BA condos, with a more than 60% increase in the number of units sold from 2009 to 2010, and with stable pricing.

Those who have relied on summer rental income to help defray some of the costs of ownership found rental occupancy fairly steady throughout the period, with more fluctuations due to weather patterns than to the economic climate.  The average owner might maintain that rental pricing has seen little improvement in the decade, but a quick check of some rental histories do not bear that out.  One of the premier beachfront properties was renting for $7000 per peak week in 2000, and commands a healthy $17,000 today.   Other less unique properties have not seen that kind of climb, but an increase in asking price of 25% over the period is not unusual.