LBI Market Updates
LBI Update #8 – January 2023
Looks like 2023 will be ushering in some new challenges to the LBI real estate market. The market has slowed considerably. Number of units closed is down 35% in 2022 over 2021. Part of this is due to low inventory levels. (As of 1/17/23 there were 106 single family homes for sale on LBI.) The other part is that buyers seem to hitting ‘the pause button’.
With rising interest rates (almost double from a year ago), inflation and talk of a recession, buyers are taking a more cautious approach. Some are hoping that interest rates will fall and so maybe will prices.
At this point in time, the Average Sales Price in LBI is holding steady. There has not been much movement in pricing since July 2022. On the plus side prices have risen nearly 40% in the last few years, so even if LBI experiences some backward sliding, for most seller’s there is still a pretty nice return.
For buyers, without as much pressure on the market, you have time to pick and choose a bit and we are seeing sellers with more flexibility. If you feel that interest rates will fall back a bit, then you might want to consider an adjustable mortgage which if the rates do go down, so will your rate.
LBI Update #7 – October 2022
Prior update mentioned that ‘the party’ may be winding down, it appears that ‘the party’ may well be over. The US housing market is in the midst of a major shift and although LBI doesn’t usually feel the same depth of impact as other regions, it still is not immune to economic downturns.
Rising interest rates, which have more than doubled in the last year is a lot for buyers to digest. At this writing it is expected rates will be increased again. Therefore, a buyer’s purchasing power has certainly decreased as prices continued to increase this past year.
Currently, market activity is behind last year, in buyer interest and in actual number of houses sold. Buyers are wary with all the talk about a potential recession and the possibility of a downturn in prices. No one needs to buy an LBI home right now as it is a discretionary purchase and summer is many months off. Some buyers are waiting to see how our market navigates the next few months, which may signal a more active Spring Market for LBI.
Inventory continues to increase as sale volume decreases, but we have a long way to go to get back to pre-pandemic levels. This should keep our pricing on a more even keel. Average Sales Price was been stabilizing the last few months. Homes are staying on the market a bit longer which does give today’s buyer a chance to think about their decision and not be pulled into a bidding war situation.
LBI Update #6 – July 2022
It appears that the real estate ‘party’ may be beginning to wind down. Not to say the party’s over yet; but there are signs that the real estate market is entering a different phase.
Buyers are being a bit more cautious in their decision making to purchase. At this time of the year, they can’t have the shore home for the summer and some are anticipating that perhaps prices may pull back a bit. Buyers also have to take into account that mortgage interest rates have almost doubled in the last year. On a $1M mortgage, that comes to an increase of over $22,000 a year in mortgage payments.
We are seeing more price reductions. Of the current inventory on the market as of July 3, over 38% have had a price decrease. Not that this should be taken as a drop in market value. This is due more to the original listing price being pushed too far ahead of current market conditions. That may have worked in 2021 but not so much today.
On LBI prices continue to rise; however, not near the pace of increases as we saw in 2021.
Inventory remains light, but again we are starting to see an increase in the number of properties for sale and as stated, this is generally our quiet time of the year for new listings. As we approach the Fall Selling Season, we should see more properties come on and this may bring a bit more balance to our marketplace.
LBI Update #5 – April 2022
The LBI real estate market continues to show signs of slowing down; particularly in the number of units closed. The Average Sales Price, although continuing to rise, is not at the same pace as last year. Where we had seen a 17% increase in ASP in 2021; since the beginning of the year, the ASP has risen 7%. Some of this slow down is certainly due to the fact that inventory is at it’s lowest level in decades. As of April 8, LBI had 82 single family homes for sale and 95 homes under contract. You can see that we have closed almost 50% less than for the same time period a year ago. The question would be – is most of this slow down due to lack of inventory or have some buyer’s decided to hold back of bit? COVID is still with us, fortunately not as strongly, and that had been fueling our market. Have many buyers who were COVID driven, purchased and we need a new type of buyer? What will the global unrest and the resulting effect on our economy bring to the 2nd home market? The LBI market, at the moment, is still a seller’s market but activity levels are slowing down, if inventory rises and our economy becomes more affected, we may see a more leveling out.
LBI Update #4 – January 2022
Happy New Year! 2021 was another great year for real estate on LBI. The Average Sales Price (ASP) for 2021 was $1,587,337 which was a nearly 17% increase over the ASP of 2020, and 2020 had a 12% increase in ASP over 2019. Definitely a couple of whirlwind years for the LBI real estate market.
However, some changes may be coming. The first half of 2021 showed higher activity levels and higher increases in ASP than the latter part of the year. In January, we started off with an ASP of $1,322,376; by June the ASP jumped to $1,521,875. However, not much changed between June and December for the ASP – still staying in the $1.5M range. The volume of closed units was down from the first half of the year by nearly 20%. Inventory actually began to show an increase in August. Overall, there were 530 closed properties in 2021, versus the prior year with 720 closed properties. This may show that the LBI market is taking a bit of a breather from the frenzy of our COVID induced market of the last year and half.
LBI Update #3 – October 2021
The LBI market appears to be taking a little bit of a breather from the hectic pace of the summer. Inventory levels are increasing from over the summer with currently 121 single family homes available for sale, even with 119 homes under contract. Average Sales Price show a modest gain to $1,571,460. Homes are selling on an average of 52 days on the market and continue to be near or over full price.
Part of the ‘slow down’ probably is due to people going back to work at the office and children going back to in school learning. The need for that 2nd home at the beach for refuge may no longer be at the top of the list.
LBI is not alone in this slight down turn in activity, most leading experts in the real estate field report the same slower activity levels. A breather is not necessarily a bad thing, the market was over heated and rising so fast the buyers became frustrated and this level of price increases couldn’t continue.
Some national reports say there will be a correction to the market in the next year, LBI usually is less susceptible to large movement change. It is expected that the rest of the LBI Fall Selling Season will continue at a good pace, just not as furious as it had been experiencing.
LBI Update #2 – July 2021
MID YEAR UPDATE
Average Sales Price continues to rise and has hit a record high of $1,521,875. This is a nearly 30% increase over the same time period of last year. Days on market have decreased to an average of 57 days which is about half the time of a year ago. The List Price % to Sales Price sits at 100%. Showing just how many homes are obtaining sales prices above asking. Yes, it is a very hot market right now.
We know that real estate is generally cyclical. LBI has shown that the ups and downs are more tempered than many other areas. But ups and downs always occur. No market can keep up this pace. We are now seeing an increase in available inventory for sale. As of 7/17/21 there are 96 single family homes for sale. This is compared to 62 single family homes for sale on 4/23/21.
Our local MLS recently released some stats that showed buyer demand is ebbing somewhat. This is based on traffic on real estate sites that our MLS controls which covers, Virginia, Delaware, Pennsylvania and New Jersey.
It also appears that some tax law changes are gaining traction. (See Below) and in NJ there has been a bill introduced that supports going back to taxing summer rentals.
3rd Quarter should continue to show strength and most likely well into the 4th Quarter. Determining factors will be how much inventory comes on the market and how the Fall shakes out with COVID surges or not. COVID rates are beginning to rise and vaccination rates are not keeping pace with earlier this summer.
Some slowdown may come in the beginning of 2022.
LBI Update #1 – May 2021
HOW LONG WILL THIS MARKET LAST?
What we do know is that 2020 was an amazing year for the LBI real estate market. When news of COVID first hit and we were told to ‘shelter in place’ most real estate activity stopped dead in its tracks. We mostly fielded calls from renters that wanted to cancel their summer vacation and more than a few sales contracts were withdrawn. But by May, one year ago, a complete turnaround happened. Visitors and 2nd homeowners were flocking to the beaches as LBI and other more remote areas were considered safer. Where would it be better if working from home — than a home at the beach.
A whirlwind year has come and gone, and now by the end of the first quarter of 2021 the activity continues. Average Sales Price has increased over 25% since the beginning of 2020.
The Big Question Remains: How Long Will This Market Last?
According to Google, one of the most searched phrases the first week of April was “when is the housing market going to crash”. Should we be wary? Somewhat, according to most articles. There are several factors to consider and how the up (and perhaps the eventual down) is felt.
One factor may depend on your property’s location, how desirable has this location become to the COVID driven purchaser. We know LBI ranks high on this parameter.
The length of time the pandemic affects a buyer’s life style will have an impact. We are moving in the right direction for more freedom of movement and ‘going back to the office,’ but we aren’t completely there yet.
Two other issues will be the level of inventory and how quickly mortgage interest rates begin to rise. It is anticipated by year end that mortgage rates will be around 3.5%, almost a point higher than the beginning of the year. One point increase generally does not affect the LBI market. Given the tight inventory levels on LBI – as of 4/23/21 there were 62 single family homes for sale, which is an incredibly low number, demand is not keeping up with supply
Therefore, buyer demand will most likely remain strong through the 3rd Quarter of 2021.
Will we continue to see the surges of the past few months, probably not. The market is slowing down a bit, some due to lack of inventory, but also because prices have climbed so high so fast. This may cause some buyers to take a pause.
There are also some new tax laws being bantered about in Washington, DC. The areas to watch are:
- Raising of the top tax rate from 37% to 39.6% for individuals
- Raising capital gains taxes for those earning more than $1M to 39.6% from the current 20%. This could go as high as 43.4% with the 3.8% surtax to fund Medicare Expansion
- 1031 Tax Deferred Exchanges may also be severely reduced with the program being eliminated for earners with income over $400,000.
These changes affect the most upper reaches of our market, however, even if most are not affected, these changes would have some impact on an LBI real estate purchase if enacted. Much of this has been spoken about for years and little change happened. There will be push back in Congress and the Senate. This is an area to watch closely as a significant change in taxation to the upper levels of taxpayer will likely lead to less incentive for real estate and securities.
On the plus side, inflation most likely is coming and real estate is a good protector against inflation.
As new information becomes available, I will continue to issue updates on this page. You also may wish to sign up for my LBI MarkeTrends Newsletter, which gives a more in-depth overview of the LBI real estate market. Next issue will be out July 2021.
If you have specific questions, I would be happy to discuss them with you or if beyond my scope, point you in the right direction. You can reach me at: PatonLBI@att.net or my cell at 609-290-5360
Pat Sepanak, Broker/Owner
Sand Dollar Real Estate
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