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Shore Real Estate: Bubble or Balloon ???
For the last couple of years the most frequently asked question for real estate agents has been: "That list price seems awfully high... don't you think so?" That was always followed by this statement: "We'll wait until the Fall, or next year, when the prices come down."
Well the Fall, and next year, has come and gone several times, and guess what: The list prices haven't come down, or even stayed the same... they have continued to go up.
The same questions continue, but a new one has been added: "When will the bubble break?" The "bubble question" haunts many investors due to the stock market drops during the last two years. And, of course, they wonder about a bubble in the real estate market. Moreover, since shore property has been appreciating so dramatically, they particularly wonder about this area.
Let's look at some specific information:
1. Read almost any investment magazine these days, and the buzz word is "real estate." The article in Fortune (August 12, 2002) read: "Should you invest where you sleep?" The article in Time (August 5, 2002) said: "real estate is an incredibly steady investment. Not since the 1960's, when records were first kept, has the nation's median home price declined in a calendar year."
2. Federal Reserve Chairman Alan Greenspan told the House Financial Services Committee on July 17th that, "the housing market's foundation is solid. On the supply side, the inventory of houses for sale is lean, and buildable lots in desirable neighborhoods are scarce. On the demand side, an increase in immigration, the coming of age of baby-boomer children, and affordable-loan programs for low-income families are fueling the market for starter homes. And best of all, interest rates are low. We've looked at the bubble question, and we've concluded that it is most unlikely."
3. "The median price for a home in the U.S. is $151,000, up 30% from five years ago. And existing home sales are headed for a third straight record year. After all, in a world of epheeral paper profits and giant accounting lies, real estate is real," also from the Fortune article.
4. Another advantage to real estate... low volatility. "Since 1968, stocks, with dividends reinvested, have returned 10.7% a year on average; the median home price, meanwhile, has risen an average of 6.3% a year. But despite what you may have read about bursting bubbles and hyperinflated housing prices, residential real estate is surprisingly drop-free. Indeed, since the major housing organizations began keeping records in the 1960's, there has never been a year in which the average existing U.S. residence lost value," again from the Fortune article.
So we return to that age-old question: "Is the glass half empty or half full?" In the last two years the only safe investment that made any money has been real estate. And the resort and second home market in locations like South Jersey have been a major driving force. When you reread several of the above-mentioned points of information, guess where people have been investing their money... real estate. And several years from now, reflecting back, guess which type of investment will look like the "shining star"... real estate.
No bubble out there... the balloon is in the sky,-high and rising. Make sure you have a strong string on your balloon, or get out and look for one before it gets too high.
Dustin A. Peters is an Agent with French Real Estate, Inc. (Ocean City, NJ), and he can be reached via email at www.DustinPeters.com or DustinPeters@Realtor.com
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![[two beach chairs and umbrella on the beach]](images/image5a.jpg)
