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How badly will house prices at the Jersey Shore suffer?

chadwickisland111012_optBY WARREN BOROSON
NEWJERSEYNEWSROOM.COM

Fortunately, people forget. So, perhaps after a period of time, people looking for summer homes will largely overlook the devastation that Hurricane Sandy has just wreaked at the New Jersey shore. Especially after sections of the boardwalk have been rebuilt, missing bottom floors of houses replaced, and the moutnains of sand that have been washed away are replenisheded.

After all, most investors have forgotten – or just don’t know – that the stock market lost 80 percent of its value during the Depression years of the 1930s. And they may also have forgotten the vicious bear markets of 1970-73 and 2008. Psychologists tell us that people pay far more attention to what has happened recently than to what happened years ago.

In agreement is one financial planner, Andrew Wang of Runnymede Capital Management in Mendham, who says: ”If one looks at history, natural disasters including hurricanes change the way that potential buyers look at an area. But the stigma attached to areas affected by natural disasters is usually temporary. If a hurricane happens once, it is likely to impact prices and may deter some new buyers for a year or two, then it wears off.”

But if hurricanes and unusual weather in general have become a pattern, as some weather authorities predicted, it will be a different story -- unless the Shore is rebuilt in such a way as to make it more resistant to other Frankenstorms.

Marylou Reeves, CFP, president of Thomas Mack Associates in Rockaway, is also optimistic:

“For all of the same reasons that the Jersey shore has attracted millions of people over many glorious summers, it will continue to attract. Although right now, we are humbled and focused on the damage unleashed by Hurricane Sandy, we will soon start to see a commitment to rebuild, in a better and stronger way. As utility crews and trucks from Joplin, Missouri—home of last year’s lethal tornedoes--assist us here in New Jersey at restoring our power, we must have faith in the fundamentals of human nature. It is all about location, location, location and people are naturally and instinctively drawn to the water.

“Will it be more expensive to own property at the beach? Sure. Your flood and homeowners insurance will go up and it may be difficult to get, but in turn, the houses will be built under more modern codes, and with more durable materials. There will be a better understanding of the importance of dune protection and more recent weather patterns. A serious obstacle to a rebounding shore real estate market will be the ability to get financing on a shore property but eventually, the banks will figure this out and maybe the government will offer some incentives. We also cannot forget that the Jersey Shore contributes significantly to our State’s economy.”

Finally, is it a good time to buy Shore propery—assuming prices have nosedived?

Says David G. Dietze, JD, CFA, CFP, president and chief investment officer of Point View Wealth Management in Summit, “We’re not big advocates of real estate purchases for the average investor, and certainly would counsel against that, absent deep pockets and a pre-existing intimate knowledge of the locale under consideration.”

In any case, he adds, “I don’t think there will be permanent impairment of Shore values. That’s because the Shore remains a jewel, within an easy drive from some of the biggest population centers in the country. Support, both from the Federal and State level is critical, but with tourism being NJ’s third-largest industry, I don’t think there’s any question that politically there’s the will to support the recovery.

“Fear of future storms will remain. But the rebuilding will incorporate new techniques that make structures stronger and thus more valuable. Some areas of the shore were spared the worst by strategic placement of dunes and walls, and so there will be support for more storm protection strategies.

“Memories will remain raw, but eventually will fade. In that way it reminds me of 9/11, when the pundits wrote off lower Manhattan, but it all came back stronger than ever.

“There will be winners and losers. Some land may be banned from rebuilding, but that will make land where rebuilding is permitted more valuable. Some land has been lost to the sea, but the property two blocks back may well be waterfront and worth more now.

“You’ve also got Atlantic City. It’s home to a lot of jobs that span the spectrum of opportunities. It’s hard to rationalize a plan that helps Atlantc City but turns its back on the other Shore areas, and vice versa. That will help political support for the rebuilding process.”

One man who lives in Bergen County says, “10 years ago, I was buying a summer house. I looked at places in lovely Spring Lake and at places in the mountains of Ulster County, New York. I didn’t buy the place in Spring Lake, and later on—when its price jumped to over a million dollars – I was kicking myself.

“Anyway, thanks to Sandy, I’ve stopped kicking myself.”

 

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