- The Washington Times - Friday, June 7, 2002

Consumers are getting accustomed to the hot market for homes in the Washington area, where properties are listed and sold in the same weekend, sometimes for more than the asking price.

Outside the area, the market for vacation homes is just as hot. Few homes are available for sale in places such as Ocean City and Deep Creek Lake in Maryland, Lake Anna in Virginia and the Woods in West Virginia, and prices are climbing fast.

Not all sales are alike, but many transactions involve multiple contracts for the same property, with buyers competing to close the deal.

"The housing market here in Ocean City is phenomenal right now," says Hal Glick, broker with Moore, Warfield & Glick, one of Ocean City's largest real estate companies. "If a property is anywhere near the market price, it will sell immediately, and often with multiple contracts to choose between."

Mr. Glick says that Ocean City's boom has lasted for almost six years.

"After the tax reform in 1986, [which cut deductions for interest on consumer loans for second homes] we had 10 soft years where things moved very slowly, but starting in 1997 when interest rates went down, things started getting better," he says. "For the first three years or so, we had lots of inventory to sell, and that drove the market and created lots of excitement. At one point, we had thousands of homes on the market, but now it's down to a couple of hundred homes. Prices are rising fast, too. The popular two-bedroom, two-bath oceanfront condos that make up a lot of Ocean City's market used to be priced at $110,000 to $125,000, and now units like this are priced at $275,000."

According to Ray Johnston, founder of the Woods Resort in Hedgesville, W.Va., "This past year has been the best we've ever had. During the 1990s, we had some slow years and even some deflation in value, especially when the prices in D.C. were dropping, too, but now we're doing so well that our resale homes are almost totally sold and our inventory is almost gone.

"We have probably only 1 percent or less of our properties available for sale, and it's not unusual to list and sell a house within one weekend," Mr. Johnston says.

Realtor Mitch Shumate of Lake Anna Realty says, "This has probably been the best year we've ever had, with homes selling fast, especially for homes that are priced from $300,000 and up. Waterfront homes are particularly in demand because there's very little available, probably only about 30 homes or so. Waterfront homes now can't be found for under $400,000, with waterfront lots starting in the $110,000s.

"Lake Anna's only about 20 years old, so the resale market is just at the beginning, but waterfront property has been going up in price by 20 to 30 percent per year recently," Mr. Shumate says.

At Deep Creek Lake in Western Maryland, it's the same story.

"Homes are selling really quickly here and have been for the past year or maybe two years," says Ruth Seib, a Realtor with Coldwell Banker Deep Creek Realty. "The market just suddenly jumped up, and it's been maintaining a fast pace ever since. The best properties, which are waterfront or lake access properties or those close to recreational areas, come and go in a few days."

On one recent day there were 46 active listings for lakefront property on Deep Creek Lake, with an average price of $629,872.

"The low end of homes on the lake are priced from $175,000 and into the $200,000s, some of which are condos," Ms. Seib says, "but houses at that price are generally fixer-upper or tear-down properties. There are currently 12 listings for lakefront homes priced from the $300,000s to the $500,000s, and 15 in the $600,000s and $700,000s. Four homes are priced in the $800,000s and $900,000s, and there are four priced between $1.2 [million] and $2.2 million."

Regardless of which vacation home market they are familiar with, these real estate experts agreed on several of the driving forces behind the rising sales volume and rising prices.

"First, interest rates fell so far so fast that housing became a better investment," says Mr. Johnston, who has been developing vacation properties in the region for more than two decades.

"In the '90s, people thought they were getting rich off their investments," he says. "Now that the stock market isn't doing as well, people are choosing to buy real estate instead. A third reason that a lot of people are attracted to the Woods and other resorts is that after September 11 people want a safe place where they can retreat. We had a lot of people come here right away that day and in the days after to feel safer."

Mr. Glick points to the baby boomers and suggests that they are the reason vacation homes are so quick to sell.

"The war babies are inheriting trillions of dollars as their parents pass away, and they're spending that money on second homes and property," Mr. Glick says.

"On top of that, as bad as the stock markets have been, real estate starts to look better," he says. "People are beginning to realize that real estate can be a safe investment. It might not appreciate as fast, but it also won't depreciate by 90 percent, either. In vacation areas like Ocean City, people also recognize that they just aren't making any more land, so their property here has to appreciate. Plus, after September 11, people want to put their money into something both safe and pleasurable, so they can get the most out of their life and not put things off."

Resort properties can be attractive as investments, but the experts say most buyers choose to use their vacation home as much as possible. While some vacation areas also serve as retirement communities, at Deep Creek Lake, home buyers represent nearly every age range.

"The majority of our buyers are still purchasing vacation homes, although we have a small but growing number of retirees, too," Ms. Seib says. "Typically, our buyers are looking for a vacation home they'll use themselves and maybe rent out a little, plus some buyers who will never rent it out at all. There are a few who want to maximize their investment and will rent it out almost all of the time.

"Our buyers range from young couples to couples with young children to the typical baby boomers with older or grown children," she says. "We see a little bit of everybody, and we're not a very segmented market."

"At Lake Anna," says Mr. Shumate, "most of our buyers are retirees and people who want to own second homes. The second-home market reaches all ages, it's just a question of who has the money. We're seeing lots of owners of real estate companies lately, so we think they're aware that it's a good investment. Most of our buyers are from Northern Virginia, and lots of them have Internet money."

While Lake Anna is mostly built out, with few new homes on the way, Deep Creek Lake is seeing the Deep Creek Highlands area come under development.

"Deep Creek Mountain Resort is selling homesites for custom homes which offer elevated views of the lake plus proximity to Wisp Mountain for skiing," Ms. Seib says. "Another nearby development is Roman Ridge at Trader's Landing in the same area. This community is partially built out, but it has condominiums, single-family homes, duplexes and some quad-style town home units. These homes are base-priced from $196,900 to $306,900."

At the Woods, new sections of housing open all the time, and plans call for about 350 more homes to be built in the community.

"When we started building here in the 1970s, we mostly built small cottages with one bath," Mr. Johnston says. "Now we mostly build vacation homes with three bedrooms and two baths. Probably about 80 percent of our homes are vacation homes which people use on the weekends, and some people are buying them to use as retirement homes.

"We do have a few larger homes priced in the $500,000s, too," he says. "Some families here have bought and sold their vacation homes and are on their third home."

While Ocean City's housing market still primarily represents condominiums, the community has changed considerably in the past 30 years.

"Most of our homes are sold to vacationers, but some are retirees, too," says Mr. Glick, "but most people who choose to live here year-round live off the ocean or on the bay side, where they can keep a boat at their back door. One thing that has changed a lot is that back in 1976 Ocean City used to close its doors after Labor Day, but now it goes every day of the year. Lots of people use their condos all year, and the shops and restaurants stay open all year, too. There are always lots of conventions and entertainment here, too.

"Another way Ocean City has changed is that as the market picked up, we've attracted buyers with more money, who don't need to pinch pennies as much," Mr. Glick says. "This used to be known as a blue-collar town, but now more of our buyers are high-income people. There are still some smart people who've figured out that it makes sense to buy a vacation home for the tax benefits and rent it out for income, but now we also see people who don't need the money and never rent out their home."

Ocean City has little open land available for future development, but expansion is beginning to take place west of the resort.

Buyers interested in vacation homes need to prepare themselves in much the same way as buyers of a primary residence: Get preapproved for a loan, find a Realtor with knowledge of the market, and be ready to make the best possible offer in case competition arises for the property.

The experts agree: The relaxation part comes after the purchase is over.


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