After years of decline, the Ocean City real estate market may have found its floor


People crowd the beach in Ocean City in June. Real estate data for the resort town suggest that the prices may have stopped falling. Fewer people are putting their properties up for sale and more appear poised to buy vacation homes. (Amanda Rippen White/AP)

The view of Assawoman Bay’s sparkling waters from the fifth-floor balcony of a newly for-sale condominium in this Maryland resort town is dazzling enough to forget the living space even has an interior.

Yet the three bedrooms, two large bathrooms, corner fireplace and granite-countertop kitchen are impressive in their own way. And priced at $379,000, real estate agent Chris Jett expects it could sell in two weeks.

But this condominium, built in the early 2000s as part of an amenity-rich community called Sunset Island, may be a bit of an anomaly in a real estate market blighted by the recession.

The volume of condominiums that flooded the market during the recession drove down prices and created a severe disparity between supply and demand.

Today, properties hover around the prices they might have fetched just over a decade ago, said Jett, an agent at Vantage Resort Realty.

But real estate data suggest that the prices may have stopped falling. Fewer people are putting their properties up for sale, tightening up supply, and more people appear poised to buy a vacation home, giving demand a jolt.

A revival of the real estate market here is considered one of the keys to the resort’s recovery. The broader economy in Ocean City did not suffer as much as the real estate market. But tourism to the Eastern Shore slowed in the economic downturn as families slashed vacation budgets, putting a squeeze on the hotels, restaurants and shops that dominate the local economy.

Those tourists seem to be returning and spending more money, revenue data show, and some of them may be looking to put down roots. Still, the timeline for the market to fully recover, assuming it does, remains uncertain.

Data from the Coastal Association of Realtors show total property listings were down at the end of both 2010 and 2011, a sign that fewer owners are trying to sell. This year, active listings were down 22.3 percent at the end of May compared with the prior year.

Meanwhile, the percentage of condominiums under contract or at settlement has begun to rise. Contracts were up 9 percent at the end of May compared with the prior year. Settlements were down 5.8 percent, although that may be due to the lag time between when a home is under contract and officially sold.

Jett, who also serves as the association’s president, said that as long as those figures continue to improve, the market may have reached an equilibrium between supply and demand, causing prices to stabilize.

“I would say we are probably very close to that point,” he said. “I don’t have a crystal ball to tell you it’s not going to get lower, but if you look at these statistics it looks like we’ve found the floor in the market.”

Makai Condominiums offers a case study in how far the market fell.

The 96-unit complex along Ocean City’s Coastal Highway came to market in February 2008 when the national economy was scraping through the depths of the recession. The building’s final unit sold last month — more than four years later.

“If the economy had not been what it was, we probably would have sold the building out in a year,” said Ben Dawson, an agent for Condominium Realty. Of the 41 units that were spoken for before construction wrapped, only two actually went to settlement.

Even steep price declines and an auction didn’t help to unload all of the units in a timely manner. The building owner had hoped to fetch as much as $399,000 for a two-bedroom, Dawson said, but the last one garnered just $230,000.

“We went from what could have been a very good, profitable building to a big loss,” he said.

Dawson said it may take longer for the sale of vacation homes to return to past levels.

“They’re not a necessity. They’re nice to have or a luxury for a lot of folks that buy here, and it does take a little bit longer, I think, to bounce back,” he said.

Steven Overly covers the business of technology, biotechnology and venture capital in the Washington region for The Washington Post and its weekly Capital Business publication. In that capacity, he has written about start-up struggles, investment trends and major drug discoveries.
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