In New Jersey, Summer Deals Amid a Downturn Close

 

By STEVE BAILEY

Published: April 9, 2009

PEOPLE like Seema and Ken Schappelle give real estate agents along the Jersey Shore reason to hope. They closed Feb. 27 on a small house in Cape May, a four-hour trip from their home in Potomac, Md., a Washington suburb. Skip to next paragraphLower prices and interest rates helped Ken Schappelle, seen with Kaya, 4, and Sarina, 16 months, buy a house in Cape May.

“We started looking in 2005,” Ms. Schappelle said. “We stayed on the sidelines watching the crazy market and taking time to do our research.” Ms. Schappelle said it was the right time for them to jump into the market. “Interest rates are low, prices are low, and we were ready to make a move,” she said. “Prices may go down more, but interest rates could go up.”

It helps that the Schappelles “have relatively stable jobs,” she said. She is an environmental protection specialist in Washington, and her husband works in marketing and communications for Johns Hopkins University.

She said the house that they bought had been on the market for a long time and that the seller had dropped the price to $485,000 from $525,000 before they saw it. Ms. Schappelle said that she and her husband got the seller to go even lower, to $435,000.

The house, which is just under 1,000 square feet and has three bedrooms and one and a half bathrooms, is “something of a fixer-upper,” she said, but it comes with the promise of idyllic summers for their two daughters, ages 1 and 4. It is four blocks from the beach and within easy walking distance of restaurants and shopping.

The Jersey Shore experience that lies ahead for the Schappelles has long made the area a favorite summer destination for millions, but the shore’s many attractions have not given it immunity from the real estate slump that is affecting most of the nation. This year, some Jersey Shore brokers are saying the market is dead, but others are optimistic that 2009 will be better than 2008, primarily because dropping prices may attract buyers like the Schappelles.

People who are looking to rent their bit of the Jersey Shore typically wait close to the season’s start. This season they are finding more properties to choose from and some owners who are willing to negotiate, though oceanfront and other especially desirable properties are holding their prices. Kim Evans, an agent with Van Sciver Realtors, an Ocean County firm with offices from Point Pleasant Beach south to Normandy Beach, said she had seen a trend toward shorter stays, “more two-weeks and weeks, not so many all-summer.”

Indeed, 2009 may be a good season for the rental market. Dee Lanzalotti, owner of Jersey Cape Realty in Cape May, said that “in today’s economy” 85 percent of the properties that pass through her agency will be rented out at least part of the season and that owners can look forward to strong bookings. “We have one beachfront house in the East End of Cape May that’s fully booked this summer at $12,000 a week,” she said. In 2007, it went for $10,500 a week.

Van Sciver, which handles more than 400 rental properties, said that about a third of its available weeks were booked by the end of March. “We’re busier rental-wise now than we were last year,” Ms. Evans said, but if a lot of properties are not rented by the end of April, “it could become a renter’s market.”

People who want to buy are finding that “it’s a buyer’s market for sure,” Ms. Lanzalotti said, but how long it will last is uncertain. “I’m telling people not to wait much longer,” she said. “If you’ve had your eye on something for a while and want to make a lowball offer, do it now.” She said that buyers from northern New Jersey, Pennsylvania, New York, Washington and Baltimore are again looking for vacation and investment properties, many drawn by prices that are about 20 percent lower than they were in 2006. “We’re seeing an increase in buyer activity since the first of the year,” she said.

Allan Dechert, a broker with Ferguson Dechert Real Estate in Avalon, N.J., and the immediate past chairman of the National Association of Realtors committee on resorts and second homes, is also upbeat. “So far this year,” he said, “we’re seeing more people coming through and more properties under contract.” He said that “on the islands, 95 or 98 percent of sales are to second-home owners or to investors who plan to rent out the property.” Avalon is on Seven Mile Island, about 20 miles north of Cape May. He added that in his office the average sale price last year was $1.2 million, and that about a quarter of sales are for cash.

Sales handled by his office in 2008 were down 50 percent from 2005: 225 sales in 2005, and 110 in 2008. Despite an increase in activity since the first of the year, he said, many sales are hindered by tougher mortgage guidelines. “Lenders are asking more questions,” he said, “and they want to see assets verified.”   Mr. Dechert said that prices for houses not on the beach were down about 20 percent from the peak, which he said was 2005 and early 2006. “For beachfront and other prime locations, the drops are less severe,” he added, with those values down 10 to 15 percent. Three of his current listings are “underwater,” he said, with the would-be sellers’ mortgage debts exceeding their properties’ market values. “These are people who haven’t owned their properties very long — not over two years,” he said. “People who bought longer ago are still in pretty good shape.”

Joe Mancini, owner of Mancini Realty on Long Beach Island, however, does not see the slump ending, and said that 2009 did not get off to a good start. “We always have a January-February upsurge, but this year it’s been very small,” he said. “Our sales are usually driven by bonuses on Wall Street, and this year they haven’t amounted to much.” (Long Beach Island is a two-hour drive south of New York City.)

Although sales are slow — 2008 sales amounted to about 60 percent of the number of sales in 2006, Mr. Mancini said — the Long Beach Island market is relatively calm. “I have seen no foreclosures here,” he said, “and no distress sales.” He said that many vacation-home owners there paid cash for their homes, so they have no mortgages and are under no pressure to sell. As a result, he said, values for oceanfront properties have not dropped, though properties without water views are down about 15 percent from 2007.

One example of what’s happening on Long Beach Island is a three-story house on 33rd Street in Brant Beach that went under contract the last weekend in March. It was completed in 2008 by Joe Mancini’s other company, Mancini Custom Homes. Only two other houses are between it and the beach, it’s near a marina, and it has bay and ocean views from the top floor, which has the kitchen and living areas. Its amenities include two master suites, an elevator, five decks and a granite and stainless-steel kitchen. The house, which brought in $70,000 in rental income in 2008, was professionally decorated and was offered fully furnished, including dishes, pots, pans, towels and bed linens. It was originally listed at $1,799,000 and had been reduced 5.5 percent to $1,699,000.

Closer to New York, in Long Branch, a renovated three-bedroom, two-bath colonial, seven blocks from the beach, has been put on the market at $269,900. The seller, Ken Lehman, who bought the house in October 2008 and never moved into it, is preparing for an unexpected opportunity to live in France. The house has a white picket fence with an arched trellis over the entrance, tumbled travertine bathroom tiles, new fixtures, granite counters in the kitchen and stainless-steel appliances. Mr. Lehman, who works as a real estate agent a half-hour away in Middlesex County, said he looked at comparable houses on the market, saw what was selling, “and tried to price it below everyone else.”

Chuck and Maria Nucci have also put their Jersey Shore waterfront home on the market. Their house, in Osborne Island, 35 minutes north of Atlantic City by car and 20 minutes away by boat, is on a deep-water natural lagoon and has a floating dock and a boatlift that can handle a 25-foot boat. Mr. Nucci said that a seven-minute boat ride would take you from his dock to the Atlantic. “It’s a good place to live year-round,” Mr. Nucci said, “as well as a great vacation house.” The Nuccis still live full time in the house, which has three bedrooms and two baths. They hope to move farther north in Ocean County.

Mr. Nucci is philosophical about the market and optimistic about their prospects. “It’s all relative,” he said. “If we sell at a low price, then we’ll be buying at a low price.” They are waiting until their current home is sold before buying a new house, and they think a sale is possible. “There aren’t too many on the market here,” he said. They are asking $439,000 for the house, which they are advertising themselves on Craigslist. It is on a 65-by-100-foot lot and was renovated in 2002, the year they bought the house.

Others are not so blasé. Mike Buckley, a real estate agent in Toms River, N.J., who works mainly in Seaside Park and Seaside Heights, sees the real estate market as “dead.” His last sale on the shore was in January in Seaside Heights, and he said that the sale was possible only because the seller was willing to go down $100,000 from the original asking price of $525,000. The property, two houses on one lot a block from the beach, had been on the market “only six months,” he said, while many other houses there have been on the market much longer. He said, though, that he has had more people looking as the weather has gotten warmer.

Mr. Buckley, who owns four vacation rental properties on the shore, is much more optimistic about short-term rentals. “We’re about on par with last year,” he said, “and last year was a pretty good year.” He speculates that some of the renters may be people who are choosing the Jersey Shore over more expensive summer vacations elsewhere.