"Sudden" Financial Crisis Dampen Coastal Real Estate Comeback Hopes

October 16, 2008 by admin

Up until the end of September and the emergence of the current financial meltdown there were glimmers of home that the beach property and coastal real estate markets were on the slow rebound.

But as the depths of the credit crisis began to come to light and worsen by self-fulfilling prophecy, hope faded as well. As the credit and price certainty vanished so did the buyers.

Beach real estate was one of the first fronts to bear the brunt of the economic downturn even as far back as the Fall of 2007, but does that mean that coastal real estate will be the last to recover?

Tough to say.

But one thing that is clear is that the decline in prices and rise in foreclosures will bring something back to certain markets that vanished during the boom of the mid 2000's, rental properties that can carry the mortgage; or at least come close (the rise in taxes and insurance rates take a bite in the margins).

Is the stage set for beach house rentals to become a cash flow play rather than an appreciation play? Depends on the market and probably more likely a short term cash play and loooooong term appreciation play (long being a greater than 5 year time horizon). The days of the quick real estate flip are now the stuff of legend.

What is the incentive for a buyer to buy in the current market? The way things are going now if they have enough cash to make a deal work they would probably be wise to sit on it, unless there is a super cash flow deal on a rental property.

But then there is the predicted long lasting recession, will that dampen rental bookings and even rental rates themselves due to weakened demand?

This is another tough call. Many middle class working family are very reluctant to cut their summer getaways, the American summer beach vacation. How deeply the coming (or should I say continuing) recession cuts will force some tough decisions by families. But I would imagine the average family will just invite a few more friends and split the bill a couple more ways to make it work.

So, time to buy? Only if you have a killer deal, time, patience, and diversified portfolio.

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