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.
Mortgage lenders are severely tightening their underwriting guidelines (as perhaps they should have done 3 or 4 years ago) but are they also tighening the noose on the housing recovery.
Interest only, 100% financing, no-doc loans/refinancing and other creative products are all but gone from the marketplace save those will all but the most stellar credit. But lenders are not only tightening up on requirements moving forwards but they are also scrutinizing borrows’ pasts more closely as well.
Whereas a late payment on a mortgage 3 years may have previous been seen as unremarkable, lenders now are looking as far back as 5 years for such delinquencies and penalizing borrowers for them.
In addition, they are tightening their methodologies and requirements for appraisals, providing very strict guidelines for comparable. In many coastal and beach areas where the market has been slow or dead for the past year or more homes not appraising the offer price could be a huge problem.
We have entered a VERY difficult time. Whereas before banks and lenders were competing for the business of the borrower they are now competing for the business of the secondary mortgage market; all clamoring now to orginiate and package mortgage that are more scrutinized and risk-mitigated than their competitors.
