Short term profits and losses in the real estate market are primarily based on inaccurately valued information. Every buyer or seller has the opportunity to value real estate based on their own opinion. Most opinions are inaccurate. This the opportunity for short term profits (and losses).
I expressed concern over local pandemic era home purchases at the NJ bayshore by people who don’t know local issues. Some said to me and my family they bought online without knowing anything more. Last week I heard a local rumor that some of those buyers realized this problem and are now selling their homes. Zillow now confirms that there are four newly listed residential home sales offerings at Gandy’s Beach in the past week. I think that’s more new sales listings than we’ve ever had here before. I’ve advised every person who spoke with me about real estate here to focus on the fundamentals. I suspect that most ignore or do not understand this advice. That’s not my problem if they are not clients.
There is one sales listing at Money Island. Comments and questions mostly focus on the pricing. As usual, I think other more important things should be considered. I have a personal non-client relationship with the owner so I will not comment on this property.
Separately last week, a speculative investor questioned my comment that it would take a million dollars to build a sustainable waterfront home here. This comment does not mesh with their ‘home flipping’ psychology. Owners don’t like to hear that their homes won’t be around as long as their mortgages. They resist the concept that even new buildings here should be analyzed as ‘tear downs’ in a market valuation. Issues of storm and erosion resistance, insect control, alternate water access and disaster preparedness are all difficult to comprehend and expensive to deal with for a new buyer. He accurately pointed out that there hasn’t been a single million dollar real estate sale here yet. I said that’s why all the potential residential and commercial real estate at Money Island he is looking at is classified as ‘held for long term investment’. This is also why I forecast that there will be no significant market for real estate here for a long while. I forecast it will be after 2030 that the next significant wave of redevelopment happens. Yes, I know this is an unpopular opinion. Also, I remain skeptical that it this redevelopment be for residential use, but of course can’t rule that out. Never underestimate affluent people’s willingness to spend money. It’s just that a person seeking a bayshore residence would more likely want to avoid competing with government and the fisheries for the limited available space here that drives up prices here at our location.
One thing that is not a factor here (and should not be in the future) is increased mortgage interest rates. Except for this pandemic era oddity, mortgages have not been a factor here for decades. This is a cash or seller financed market. That would apply to almost all Money Island properties.
Yesterday I spoke with the ‘heir apparent’ for the lead role in local oyster industry. He confirmed that their corporation is taking a long term view and investing accordingly. They have plenty of non-mortgage financing already. Other large seafood corporation officers have indicated more or less the same thing earlier (Others are so direct with their comments on business plans).
The local real estate investment opportunity remains the same as it was before this pandemic bubble. If you want to invest, you must find an owner who does not share this long term vision (they do still exist here) and plan to invest for the long term based on economic fundamentals, not speculation, emotions or hunches.
Last night another non-client regional investor suggested a follow up meeting over the summer. I always say yes, even knowing that this is mostly a waste of my time from the real estate perspective but I value the relationships otherwise. I happen to know that some of their other non-real estate investments are in trouble. Ripple effects from the pandemic era bubble will play a role in the years ahead for many people. Reallocation of investments is possible, but I must stay clear of trying to forecast performance in other markets (especially technology, media and cryptocurrency) outside of my focus.
In the end, financial advice is often worth what you pay for it. So consider that in reading this post. I do have conflicting personal, business and client interests in this area.