The Real Deal New York

The ‘Situation’ at the Jersey Shore

Snooki and friends may be embarrassing for real estate pros in Garden State beach towns, but the market there is stabilizing

July 28, 2011
By Melissa Dehncke-McGill

The Situation and Snooki
“Jersey Shore” cast members the Situation, left, and Snooki
Snooki and the Situation may be embarrassing longtime Jersey Shore homeowners and renters with their hit MTV show “Jersey Shore,” but real estate professionals say the program’s notoriously trashy antics haven’t taken the market down with it.

This month, The Real Deal talked to brokers and analysts who follow the Garden State’s beach towns, from Belmar to Long Beach Island, to find out how their season has been shaping up.

They told us that the market is stabilizing — even if a full bottoming might be as far off as 2013.

While sales volume is still running at two-thirds of its historic average in the so-called anti-Hamptons, it is up from last year’s all-time lows, one source said. The source also added that while there are bigger discounts to be had on the Jersey Shore than in New York or Philadelphia, “it’s still not Florida or Nevada, where they’re practically giving away homes.”

And, of course, the choppiness in the market varies by both town and price range. Most said the higher-end market was faring better, but some said the sweet spot has been the middle of the market, from $800,000 to $1.2 million.

Analysts also noted that new construction homes and condos have been struggling the most, partly because the home-building industry is dominated by local builders who “don’t have the financial resources to carry a large inventory of vacant homes.”

A bright spot, many agree, has been the rental market, which has seen more activity earlier in the season this year. For more on which towns are doing best and worst, what kind of distress exists in the market, and how negotiable buyers and sellers are, we turn to our panel of experts.

 

Jeffrey Otteau
president, Otteau Valuation Group Inc.

Some real estate experts have said they don’t expect the overall New Jersey market to reach a bottom until 2013. How is the residential market doing at the Jersey Shore in terms of sales volume compared to the last few years and last year in particular?
While the market continues to struggle, there are increasing signs that stabilization has begun. We expect the “bottom” to be anywhere between the third quarter of 2011 and the second quarter of 2013. But the Jersey Shore market is performing at a weaker pace than the overall market — with 18 months of unsold inventory compared to 12 months statewide.

How much are residential prices off at the Jersey Shore since the boom?Home prices overall are off in New Jersey by an average 22 percent, which holds true at the shore area as well.

Which Jersey Shore areas are struggling most?
The hardest-hit market over the past few years has been Cape May County, where price declines in places like North Wildwood have exceeded 40 percent from the peak.

 

Kevin Gillen
research fellow, University of Pennsylvania’s Institute for Urban Research

How is the residential market doing at the Jersey Shore in terms of sales volume compared to the last few years?
Sales are currently running at about two-thirds of their historic average, but they are up from the all-time low they hit in early 2010, and rising.

What kinds of discounts are buyers getting off listing prices?
They can get bigger discounts there than they can in New York or Philly, but it’s still not Florida or Nevada, where they’re practically giving homes away.

How much are prices off since the boom?
They are down an average of 32 percent from their boom-level peak, but there is significant variation across different communities and locations.

Which price segment of the Jersey Shore market are you seeing perform best right now for both rentals and sales?
The data indicate that there are bigger discounts to be had for the new construction segment of the market than for older, existing homes. There have been auctions of new condos in an attempt to move inventory. And, since the home-building industry at the shore is dominated by family-owned local builders, these guys typically don’t have the financial resources to carry a large inventory of vacant homes the way the big, national home builders do, so they can be more motivated to sell. That said, even with these discounts, prices for new homes still remain well above those of existing homes.

Is there still a lot of distress, or has that worked its way out of the market already?
The southern half of the Jersey Shore seems to have emerged from the foreclosure crisis, whereas the middle region is still struggling. According to RealtyTrac, the foreclosure rate of Ocean County is well above that of both nearby Atlantic and Cape May counties, and even New Jersey as a whole.

Which Jersey Shore towns and areas are performing best?
Pricier towns have held up better than less expensive places for two reasons: There is a flight to quality during times of economic distress, and wealthier owners and buyers are better equipped to weather an economic downturn. The very wealthy are taking advantage of this market to acquire upper-end homes at a discount, plus they can pay cash and avoid the hassles of financing.

Which segments of the Jersey Shore market are struggling the most?
The middle segment of the market is having the biggest problems meeting the down payment requirements and qualifying for financing. While prices are down the most in the less affluent towns, I think the segment that is struggling the most is new construction targeted for middle-income homebuyers, regardless of location. The buyers just aren’t there in the numbers they used to be. However, if you do have the resources to commission a new home or even remodel/expand your existing home, there is no better time to do it than right now. The housing downturn has left a lot of architects, designers and contractors looking for work, and deals can be made.

How has the “Jersey Shore” TV show impacted real estate in the area, for better or for worse?
It has helped draw more young people looking to have a good time to visit communities like Atlantic City or Wildwood. This may help the local economy in general, but I don’t know that this necessarily helps the housing market. Most of the year-round locals resent the stereotypes about New Jersey that the actors seem hell-bent on perpetuating. Most Shore homebuyers are middle-aged or older. Just think about it: If you were looking to spend more time at the beach with your kids and grandkids, and were being asked to plunk down $450,000 for a home that had Snooki and the Situation as your neighbors, would you be more or less likely to buy it?

 

Lee Childers
owner/broker, Childers Sotheby’s International Realty

How is the residential market doing at the Jersey Shore right now?
We do the Jersey Shore from Point Pleasant to Island Beach State Park and prices have held up very well here, much better than any area in New Jersey. Our sales volume is excellent and we are having one of our best years ever — that includes 2005, which is probably the highest volume we’ve had. You might say, “How can that be in a soft market?” If the sellers listen and go with realistic pricing, there are buyers. If they try to get 2007 prices, there are no buyers. The bubble that burst was pricked, it is slowly deflating, and we are either at or near the bottom, but that doesn’t mean it is going to go up 20 percent in the next six months.

How much are prices off since the boom?
I think somewhere in the 15 to 20 percent range.

How is the rental season at the Jersey Shore doing this season? Did homeowners struggle to find renters or vice versa?
For the first time in years I can tell you that it’s up. We’ve done more rentals [this year] than in the last three years. … During the boom, homeowners were pulling their homes off the market because they didn’t need to rent. Now we have a difficult economy, so many people have put their houses up for rent to help their income. … We have the inventory to rent and the people who want to rent.

What about rental prices? Were homeowners negotiable on pricing?
If they demand too much money it goes unrented. The ones that are negotiable get rented.

Which Jersey Shore price ranges and areas are performing best and worst?
The real sweet spot seems to be $800,000 to $1.2 million, which for us is the middle. As far as rents go, that would be the mid-range of $2,500 to $5,000 a week. For Normandy Beach and the surrounding communities, it’s a terrific year for sales. Lavallette is another excellent one. Seaside Heights is struggling. I think they overbuilt condos there on the low end. The top high end and one of the highest [markets] in New Jersey is the Mantoloking market and Bay Head, sister towns next to one another. There have been a couple of sales over $4 million, but it’s not like it was. The last time I checked there were 28 homes for sale in Bay Head, which is twice as many as a normal year.

What are you seeing on the high end in general?
We certainly have had some high-end sales. We had a $6 million sale, but that’s the exception more than the rule. We had a $120,000 season rental, but that’s also the exception. On the higher end, which in the sales market is $3 million and up, we have only had a handful of sales. In the rental market, $12,000 a week and up is generally a soft spot.

Who are the primary second-home buyers in the market today?
A typical buyer lives in Northern New Jersey, works in Manhattan, is doing well and wants to vacation at the shore. But it could also be a blue-collar plumber from Hoboken or Bayonne that’s doing well and can afford something here. … The Greatest Generation — the wealthiest generation in history — is dying off and leaving unprecedented wealth to their children, the Baby Boomers. Even in modest estates people are coming into hundreds of thousands of dollars or millions of dollars, so many people are paying $1.2 million cash for a second home.

How has the “Jersey Shore” TV show impacted real estate in the area, for better or for worse?
That Jersey Shore-type subculture is a very small segment, but it’s definitely there. As far as what it’s done to real estate — I don’t think it has affected the areas around [where it tapes]. But in Seaside Heights proper, I’m concerned. I’ve heard that it’s getting more out of hand. It used to be a family place and it isn’t anymore. I don’t think Seaside Heights likes it. It gets publicity, but I don’t know that it’s the type of publicity it wants.

 

Diane Turton
owner/broker, Diane Turton Realtors

How is the residential market doing at the Jersey Shore?
The market here in Monmouth and Ocean counties is showing some signs of vibrancy, but it’s hard to predict. While we saw some real improvement in 2010, in large part due to the first-time homebuyer stimulus, we saw the volume drop off again this spring. Continuing uncertainty in the job market and worldwide economies keep those cautious buyers from moving forward.

How much are prices off since the boom?
In many areas it’s 30 percent below peak.

How is the rental season at the Jersey Shore doing this year?
Rentals are pretty stable. The nicer properties that are closer to the beach are generally gone, but we still have availabilities.

What’s going on with rental pricing? Are homeowners negotiable?
We are again negotiating prices. Tenants that booked early may have paid full price, but they got the first choice of properties. Tenants booking now are getting better prices, but have to take the time frames that are left.

Which price segment of the Jersey Shore market are you seeing perform best right now?
In many areas the mid- to high end has been hit the hardest. Our Lavallette office reports $750,000 to $1 million is the worst. Rentals are just the opposite. The lower-priced, smaller units are not as popular.

How has the “Jersey Shore” TV show impacted real estate in the area?
I don’t think sales have been affected at all. As far as rentals are concerned, many younger people are looking to rent in Seaside to be part of the scene. I do hope that the world knows we have much more wholesome lifestyles to offer than are depicted on the show.

 

David Cowles
realtor, Prudential Zack Shore Properties

How is the residential market doing on Long Beach Island, your coverage area?
We have already reached the bottom, more or less. There could be a slight downside continuing in the market, but if so, nothing traumatic.

How is Long Beach Island’s rental market doing this season?
The rental business on Long Beach Island has been amazingly consistent in terms of the demand. It really doesn’t fluctuate very much like the sales market does. But this year we have actually seen a pretty significant increase in business compared to last year. … Normally most of the rentals were booked by March 1 or the end of March. In the last three or four years there was plenty of availability and we had a lot of rentals as late as May, June or even into July. This year more rental properties booked earlier in the year. The number of leases is up about 40 percent from last year. Our total dollars are up in the neighborhood of 40 percent as well. So it is the healthiest rental market we have had in the last few years.

What’s going on with rental pricing? Have owners been negotiable or have they held the line?
They held the line a little more this year, and that is evidenced by the fact that there were fewer rentals available late in the season. Usually if you have rental properties with a couple of weeks unrented and it’s June, that’s the time that homeowners will negotiate. There has been less of that this year.

How has the “Jersey Shore” TV show impacted real estate in the area?
It doesn’t have an effect on us at all. Personally, as a native New Jerseyan and a lifelong Long Beach Islander, it’s embarrassing, but it doesn’t affect us on the island.

 

PJ Rotchford
broker/manager, Rumson office, Gloria Nilson Realtors

What kinds of discounts are buyers getting off listing prices?
The market at the Jersey Shore is clearly still considered a buyer’s market. But an appropriately priced home can still sell within days. And in fact, bidding wars are not out of the question. However, many of the homes currently on the market are in need of price adjustments.

How much are prices off since the boom?
Unlike the traditional communities of the Jersey Shore, in our market on the northern tip of the shore, 95 percent of residents are year-round homeowners. From our record highs during 2005, we have seen a price decrease of approximately 23 percent.

Which price segment of the Jersey Shore market are you seeing perform best right now?
The high-end market within Rumson itself — very much driven by the Wall Street market — has performed exceptionally well this year. In fact, we set a new record this year with a sale of $12 million. New construction, mainly due to its limited supply at this time, has also done very well.

 

Judy Appleby
owner/broker, Appleby Realty; 2010 President of NJAR

How is the residential market doing at the Jersey Shore right now?
In our area we have one large MLS that covers Monmouth and Ocean counties, a good portion of the Jersey Shore. In May, the median sales price for the shore and inland year-round communities had dipped $7,000 in the last year. Looking at the whole MLS, we have about 25 less sales overall than last year at this time, which is not a big dip. Last year we had a pretty decent spring season, and this year the same thing occurred. In my area there are still properties for sale, but a lot of those are priced by people who can’t get over 2006 sale prices.

Is it still a buyer’s market?
Yes, it is absolutely a buyer’s market. That’s the name of the game.

Which price segment of the market is struggling most right now?
We really don’t have a lot of properties that rent for more than $6,000 a week. If there were some for $8,000 a week, those would be struggling, but I don’t have any of those. Older homes need certain amenities. People want air-conditioning, laundry, TV and Internet. If houses don’t have those amenities, those houses will go for a lot less.

How has the “Jersey Shore” TV show impacted real estate?
I don’t know that it has impacted it. I had a car pull up next to me at the bank and two women asked, “How do we get to Karma?” That’s the nightclub that the group goes to. They just wanted to see it and take a picture. It certainly hasn’t impacted real estate; it’s not reality and they aren’t even from here.

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