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Ocean City June Real Estate Market Report
🏠 Ocean City, NJ's only useful real estate newsletter
Kyle Scott
July 14th, 2023
📈 Ocean City June Real Estate Market Report
June market data is in, and it's... not great.
The hard numbers:
Median Sale Price: $815,000 (-14% YoY, -21% from May)
Single-Family Median Sale Price: $1,585,000 (+5% YoY, -2% from May)
Condo Median Sale Price: $764,000 (+2% YoY, -11% from May)
Active Days on Market: 33 (+42% YoY, +12% from May)
New Listings: 101 (-12% YoY, -4% from May)
Sold: 63: (-5% YoY, -10% from May)
None of these numbers are good. Overall median sale price is way down year-over-year and month-over-month. Activity (listings, inventory, sales) are down across the board. But somehow single-family and condo median sale prices are up, however slightly, year-over-year.
How is that possible?
It’s because fewer single-family homes sold in June compared to last year.
In June of 2022, there were 23 single-family homes sold (34% of residential sales). This June there were 18 (28% of residential sales). That's enough to skew the median quite a bit.
So you may soon see "Ocean City Home Prices Were Down 21% in June!" headlines. They will be accurate, but also not tell the whole story.
Either way, we are no longer seeing dramatic year-over-year gains. Here's the median sale price chart for the first six months of the year from 2018-2023:
And the monthly trajectory is negative:
Homes are staying on the market longer than the last two years, though still way shorter than 2018-2020:
Prices are holding steady likely because of a baron wasteland of new listings (first six months of previous years):
Active inventory is around 225 (typically expected to be around 700-900).
As we discussed last month, the most likely reason for the lack of inventory, both nationally and locally, is higher interest rates keeping current home owners with 3%-4% rates from wanting to sell. The Jersey Shore has the added benefit of being a great second home market, so despite the high prices, demand from cash-flush second-home buyers is still there. Locals and investors, however, are beginning to get priced out.
🏘️ Developer Observation: Mick Duncan Says Two of Three Types of Ocean City Buyers Are Out of the Market
I talked to developer Mick Duncan of Duncan Homes last week about what he's seeing in the market right now, and I thought his observation was a great distillation of what's going on.
Mick says there are generally three types of buyers in Ocean City, and two of them are moving to the sidelines:
1) Locals, year-rounders, residents
Mostly single-family buyers, they are now largely priced out of the market. Four years ago, the median single-family home in Ocean City was less than $700k. Now it's $1.5 million. Locals may have equity in their current home, but that doesn't help when the new home is just as expensive-- never mind a switch from a 4% mortgage to a 7% mortgage.
2) Second-home buyers
According to Duncan, they are still keeping the market propped up. Largely cash buyers (read: rich), prices and mortgage rates are less of a concern for them. Demand is still strong for Shore real estate, particularly in family-friendly Ocean City, and so they are still able to pay a premium to live here.
But, the hysteria of 2021 and 2022 is largely gone, according to Duncan. And coupled with the lack of local and investor (more on them in a minute) buying, second-home buyers are being more selective and patient, and thus the longer average days on market we're seeing lately.
3) Investors
I'll let Mick take this one:
"The investors are having a hard time making the numbers work. So, you know, an investor looks at it and says, okay, what can I buy it for? What's my rent? What are my rentals? And then what are my carrying costs? And with prices up so high and rates so high, their mortgage payments or their carrying costs are probably almost double what they were a year or two ago, and rents have gone up, but not nearly enough to make the numbers work."
Mick said his firm is more picky about properties they are buying right now. They try not to speculate on where the market will end up-- rather they focus on how the math works now. He says carrying costs (costs to maintain a property before it's sold) are up thanks to increased interest rates, but that's a smaller piece of the pie. What's worse is construction costs have doubled the last few years. Prices kept pace with costs while the market was hot, but now that things have cooled a bit, it makes it that much more risky to build a place. Mick says if his cost estimates are off by 10%, he may wind up making little or no profit at current prices.
📊 Poll
👁️ CBS News Story Doesn't Accurately Reflect Rental Market in Ocean City
CBS News found a single couple at the Jersey Shore (north of Atlantic City) who has had trouble renting their vacation property this year, so the network used it as a jumping off point for a story on how the vacation rental market is struggling in the US:
Cape Cod, Massachusetts, Maui, Hawaii, Santa Rosa Beach, Florida, and San Diego, California have all seen a decline compared to last year, according to AirDNA, a tracking company that monitors the performance data of 10 million vacation rentals on platforms like Airbnb and Vrbo.
...
Jeannie Wheat, a seasoned realtor specializing in rentals at the Jersey Shore, said the 2023 vacation rental market in the area is down by approximately 15%. One five-bedroom home just a block and a half from the beach, which typically rents for $9,000 per week, is not fully booked, Wheat said. But this year, she has noticed more last-minute bookings.
As is always the case in real estate-- location matters.
The Jersey Shore couple and realtor are from Monmouth County. And Airbnb data in San Diego is about as relevant to Ocean City as the price of grain in the midwest.
By all accounts, Ocean City and the real Jersey Shore (South of Atlantic City) market is still thriving.
So we checked with Kevin Laskowski, a realtor at Berger, which is the city's leading rental agency by a wide margin. Here's what he had to say:
"We are not seeing a decline at Berger. Keep in mind that we may even be unlike other South Jersey towns. OC is a family town with many activities for children and families. Demand is still high. I’m on the phone every day about tenants requests for 2024.
He says 2021 and 2022 were record years for rentals in Ocean City, and this year Berger projects to be even with last year in terms of rental volume, even with prices up.
That said, Berger has seen some availability and last-minute rentals extended into summer. They were maybe about 2% off their pace from last year as of last week, but expect to wind up in the same place. Though they have launched a page for last-minute discounts.
Meanwhile, the city reported a 7% decline in beach tag sales up to Memorial Day Weekend. And The Inquirer has happily run articles about people being "priced out" at the Shore.
Still, Ocean City officials claimed record crowds over Fourth of July weekend.
In short, this CBS News story is getting a lot of play around here, but it doesn't necessary apply to Ocean City.
🐣 3 Useful Tweets
1) Mortgage rates have slipped under 7%
Rates have come down a bit since inflation data came in lower than expected this week.
2) Morningstar Sees Mortgage Rates Decline to 4% in 2025
Things may stabilize in 2 years.
3) Most people have a rate under 4%
And thus, the prevailing theory for why so few homes are available for sale right now— no one wants to leave their lower-rate mortgage.
But what happens when interest rates dip under 5% and it’s safer for people to sell? Do we see a surge in listings, with supply outpacing demand? Or does new demand from cheaper borrowing costs outpace supply?
That is the, quite literal, $1 million question.
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