OCEAN CITY – As the resort feels the largest hotel boom it’s seen in more than a decade, the condominium market is quietly reaffirming its footing in the coastal real estate game.
During the early- to mid-2000’s, condominiums were exploding in popularity. Prices soared and local Realtors made huge chunks of cash, but once the market crashed in 2008, everything came to a screeching halt.
Since then, the market has been slowly recovering, but according to statistics and local experts, it appears to be on the front foot again.
“It’s not roaring back, but it’s definitely on the way back,” said Buck Mann, owner of Mann Properties in Ocean City, “I think it will be another six months to a year before we can really tell how healthy the market is, but what I can tell you is there is a lot of interest right now.”
Sales On The Rise
October’s monthly housing report for condominiums issued by the Coastal Association of Realtors reveals the facts back up Mann’s summation.
Inventory in Ocean City has been steadily dropping since March (listings are down 13.8 percent year to date) and that indicates condos are selling. Furthermore, condos are spending fewer days on the market, and the sell price/list price ratio has risen slightly in 2015, which shows that sellers are getting what they are asking for, and in some instances, they are getting more.
Condominium settlements are up 10 percent, and contracts are up a corresponding 10 percent through the first 10 months of 2015. Yet, the one thing that is still an issue for some folks who are looking to buy into this market is financing.
“While there is a definite increase in real estate transactions, and an uptick in requests, people are still having a difficult time if they want to either get financing to buy, or refinance their current unit,” said Stephan Kenny, President and CEO of Ocean Point, Ltd., a full-service property management firm. “Interest rates have been at historic lows, but it’s still tough to get a loan.”
Joy Snyder, Associate Broker for Condominium Realty, says in most cases, you need to have a 20-percent equity position to seal the deal.
“You need about $25,000 in cash to bring to the table for every $100,000 on the sales price”, she said.
But Snyder, a 40-year real estate veteran, says those interest rates might be jumping up a bit in December.
“People who have been looking are rushing to action now because the interest rates might spike,” said Snyder, “but we are receiving multiple offers on units for the first time since probably 2004, and we are seeing escalator offers too, which we haven’t seen since then either.”
Even though the summer season is over, Snyder says it’s a busy time right now for Realtors.
The ‘My Turn’ Effect
“I’d say mid-September to Thanksgiving is always busy for us, and then we are busy again from mid-February to June,” said Snyder. “People think that we are just slammed in the summer, but it’s almost impossible for us to gain access to units in the summer due to rentals. Usually, we can get in to show them about four hours per week in the summer.”
Buck Mann says the other interesting thing about the current inventory is that while there are still foreclosure properties, there are far fewer than in past years, and that’s helping the market as a whole.
“We had four or five years where the market was getting flooded with foreclosure properties, and that was driving down all the prices,” said Mann, “but I think that is finally starting to even out a bit.”
Almost 55 percent of the units on the market are priced below $300,000, with almost 40 percent in the $200,000-$299,000 range, according to the Coastal Association of Realtors’ market report.
Snyder says that is attracting consumers on both ends of the spectrum.
“We are seeing many young professionals coming in and purchasing units in that $150,000 range and below, mostly for investment properties,” said Snyder, “while we are seeing many baby boomers coming in and buying up properties that are $350,000 and above.
In some cases, baby boomers have been paying for their units in cash, and as Snyder describes it, capitalizing on something she calls the “my turn” effect.
“They’ve got their kids through school, and their houses paid off, and they are saying, you know what, it’s our turn,” said Snyder. “They are buying up units and they are using them purely for them and their families. They are not looking to rent these units out.”
Yet, Mann says with an uptick in people who are purchasing condos for the primary motive of renting them out, coupled with the changing consumer travel trends, it’s creating a new market for condo rentals altogether.
“Ten years ago, nobody would rent a condominium for less than a week at a time,” said Mann, “but that has changed dramatically. People are coming for long weekends, or four days and nights at a time so the condo rental market has had to adjust. Honestly, I think that’s part of the reason that we are seeing this hotel boom.”
Market Has Long Way To Go
But what about the people who bought condominiums in Ocean City during the boom when prices were astronomical?
Kenny says many of those owners are sort of stuck.
“I think it’s pretty reasonable to assume that many of those owners are upside down,” said Kenny. “They aren’t looking to sell, and they likely can’t borrow against it, and that’s a definite negative. So now, they just are waiting.”
Kenny says there are also folks still fighting to keep their properties, and people who are actively looking to sell, but he says the one group that has been unaffected by the market crash has been the wealthier buyers who have pristine credit.
“They have been able to buy up a lot of property at low or greatly reduced prices, and they will use them as very profitable rental opportunities or they will sell them for a profit once market prices go back up,” said Kenny.
Snyder says one of her clients who purchased an oceanfront condominium for $650,000 during the boom has been trying to sell for a few years now. Six months ago, the price of that same unit was listed at $425,000, but now it’s listed at $500,000.
“We may never see those prices again that we did during the boom, but the important thing to remember is the people who kept or improved their equity in their units will be okay,” said Snyder. “The market is improving and the condominium market is much more family oriented than the hotel market.”
Kenny agrees that while the market is improving, there is still room to grow.
“Values will go up again, but maybe not to those absurd prices we saw during the boom,” said Kenny. “The market has stabilized and we are out of the woods, but we still have a long way to go.”