LBI NJ Real Estate Bubble October 2023

Long Beach Island Real Estate Bubble-October 2023

Long Beach Island Real Estate

There is no doubt that the LBI real estate market is challenging right now. Inventory is low, mortgage rates and home prices are high, and there is still considerable competition. This would lead some to the conclusion that we are facing a real estate bubble on Long Beach Island. The LBI real estate market has roughly doubled in value since COVID. Even in the face of rising rates, home prices have continued to rise (as I mentioned in past posts, the LBI real estate market is not that sensitive to rates in either direction). Last month, September 2023, there were 29 single-family sales with an average price of just under $2,100,000. In September 2022, there were 27 sales with an average price of just under $2,000,000. Therefore, in a year-over-year comparison, prices on LBI have increased by several points. So, is the LBI real estate market in a bubble? Personally, I do not believe we are.

By : Nathan Colmer | The Van Dyk Group

Cell: 609-290-4293 | Office: 800-222-0131 | ncolmer@vandykgroup.com

www.BuyLBI.com

Click here to search all homes for sale in the Long Beach Island NJ real estate market

LBI NJ Real Estate Bubble October 2023

A true bubble sees a massive rise in prices, which has happened since COVID, but for it to really be a bubble, the intrinsic value of the asset has to be overstated. That does not appear to be the case on Long Beach Island. A portion of the rise in prices and values in the LBI real estate market has to do not only with sales but also with the end result of nearly a decade of new home building all over the Island. The style and nature of homes have changed, and with newer, larger homes taking the forefront, the overall value of the market has increased. In other words, a new build with five bedrooms and a swimming pool is worth far more than a 1950’s era Cape Cod style home without heat or air conditioning. Even in 2008 and 2009, which was a real estate-fueled crash, the LBI market only dropped around 15%. It is hard to imagine a scenario where that happens again in this market, so IF there was a drop, it is probably more like 5%-10%. That is ironic because that is about the same amount the market increased on average last year alone!

There has been negative rental news about some high-end rental markets like the Hamptons, which has caused some to forecast a crash in the LBI real estate market, but we must remember that the Hamptons is a different price point than LBI. The rental rates on LBI have never been as high as the Hamptons; therefore, they can appeal to a much larger audience. Rentals for the upcoming summer are looking quite strong. The 2024 rental season is off to a strong start with a number of repeat rentals already in place and some rental homes filled up already! This is not to say LBI is immune to a loss of rentals, but with a larger audience and a lower average price point, more owners will be able to maintain their home (especially if they are owned outright as many homes on LBI are or if they have a low mortgage).

To me, the inventory levels are the real benchmark of the market on LBI. Prior to COVID, there were about 600 homes for sale on the market, and at that time, the market was increasing by about 3%-5% each year. Now there are only about 100. That is a massive ladder to climb before we are back to a pre-COVID inventory level, and keep in mind that even if we hit that level, the market was still rising. For there to really be a fall in prices due to a surplus of inventory, we would need 5x-7x times the number of homes as we see today. Every single week, we see a balance between new listings and pending sales, so confidence in the market is still very strong.

Long Beach Island Real Estate Bubble-October 2023

There are some buyers who are understandably concerned about investing in a high market. To me, the rationale to buy now is to get your foot in the door. Inventory is low and will likely remain low. This makes it all the more important to buy the “right” house, and that will take time in any market. Interest rates will fall at some point, and with demand still so high, a meaningful fall in rates will probably increase the buyer pool and likely cause prices to rise. Lastly, there are a number of ways to lower the current interest rate, from ARMs to relationship banking. I have recently had buyers get mortgages in the high 5% to low 6% range, and that is really not that bad. Of course that will vary from buyer to buyer, but the options do exist. When rates go down at some point, mortgages can always be refinanced if it makes sense as well. At the end of the day, trying to time any market is impossible, but by investing in good assets that have value in the LBI real estate market, your investment is reasonably secure. For more information about Long Beach Island or about the LBI real estate market please do not hesitate to contact me.

By : Nathan Colmer | LBI Real Estate Agent | The Van Dyk Group

Cell: 609-290-4293 | Office: 800-222-0131 | ncolmer@vandykgroup.com

www.BuyLBI.com

Click here to search all homes for sale in the Long Beach Island NJ real estate market