Photography by Tony Lewis, Jr.
The values of real estate go up and down, depending on the decade. Lately, the downward trend which commenced in 2008 has been starting to reverse itself, particularly those communities that offer a high quality of life. The Eastern Shore possesses several highly desirable communities where the investment potential is strong. Interest rates are running five-percent or lower on a 30-year loan, making 2011 an ideal buyer’s market.
That’s good news, particularly if you are interested in renting your future retirement or second home. Buying a good rental property could be a better option than investing in a volatile stock market or in CD’s with a one or two-percent yield. Additionally, there are tax advantages (depreciation) you can discuss with your financial planner or tax advisor. The Federal Reserve Board states that a homeowner’s net worth is 46 times that of a renter’s.
Those who have long dreamed of strolling up to their boat dock next to their waterfront villa will be glad to discover that this once unattainable goal is now within their reach. Depending on which county they’re looking in, these homes can run from as little as $500,000 or less, to well over $1,000,000.
With all this great news, what’s holding buyers back?
“People are very cautious right now and sensitive to economic conditions,” says Dick Sells, Realtor with Champion Realty, board member of the Bay Area Association of Realtors–BAAR, and Chairperson of the BAAR Legislative Committee.
“Buying is usually driven by the economic comfort level of potential buyers and by stock market conditions, especially for retirees who depend on the market for part of their income,” he continues.
“High gas prices are an issue for those who are considering commuting to work from the Shore,” adds Cindy Genther, Realtor with Rock Hall Properties Real Estate, and a board member of BAAR. “We have commuters who travel as much as two hours to get to work on the Western Shore—some traveling as far as Virginia.”
Condition, Location, and Price - the three basic factors that drive the market.
rBoth Realtors agree that prospective buyers are becoming more financially astute and are focusing on improving their credit scores.They also state that conventional lenders are being pressed by federal regulators to now require 20-percent down payments, which many prospective buyers can’t qualify for.
“We’re seeing a significant uptick in cash purchases,” says Genther. “Some sellers are offering their own financing to buyers, and we’re seeing some FHA loans and 1031 exchanges.” A 1031 enables a homeowner to sell his property and within a specified amount of time, buy another property in order to avoid paying capital gains taxes.
United States Department of Agriculture (USDA loans) are also becoming more popular, according to Genther.To qualify for this type of loan, buyers must meet certain income requirements and must buy in a USDA approved rural area.VA loans are always popular with military veterans.
Genther and Sells believe that the most important factor in selling a home is pricing it right. Many homeowners are insulted when told what their home is currently worth. But if they don’t price it to move, it lingers on the market like a sad song.
“There are three basic factors that drive the market,” says Genther, “price, condition of the home, and location.”
Real estate brokers work hard to educate other Realtors on these points and to explain financing regulations and new laws so they can better serve their clients. Yet even with all the obstacles facing buyers and sellers, the real estate market is slowly returning to Shore counties.
“Each county has a unique real estate market that’s often influenced by its distance from the Bay Bridge,” says Sell.
Multiple Markets in Queen Anne’s County
Queen Anne’s County, including popular Kent Island (particularly Stevensville), is unique because it’s a commuter county. Sixty-percent of its workforce travels daily over the Bay Bridge.
Before 2006, the demand was high here and resales were scarce.Now prices have dropped and homes are moving.Four hundred and fifty six housing units were sold here in 2010—a 12 percent increase from 2009. The median price for housing units sold was $280,000.
“We have three housing market slices, which emerged when the housing slump impacted the market and now when it’s beginning to recover,” says Sells. “The top-priced market runs from $800,000 to well over $1,000,000.
“The second market runs from $400,000–800,000. The third slice—$400,000 or less—is the market for first-time homebuyers and for those purchasing second homes.” The highest and lowest priced markets have begun to recover first according to Sells. “Although we have a vibrant first homeowner’s market, the inventory is declining.”
The number of waterfront homes sold in Queen Anne’s in 2008, dropped by 50-percent while their prices during 2007–2009, dropped by nearly 30-percent. Since then, they’ve leveled out at a median price of about $750,000.
Sells is concerned about the proposed hike in Bay Bridge tolls and also the pressure on commuters who are paying high gas prices. “What needs to happen in this county is responsible commercial and job-producing growth. Residents need to be able to find work locally.”
They also need affordable housing. Queen Anne’s is considered to be a rural county and there’s still controversy about how much the county can grow, retain its rural character, preserve its wetlands and keep its serene beauty.
In spite of that, new developments have sprouted up. Gibson’s Grant on Kent Island ranging from the $400,000s to the $800,000s and Symphony Village for those 55 and older in Centreville, are two growing developments as is the highly rated Ellendale-Kent Island—a mix of townhomes and single family homes located on Rt. 8 and priced from the $300,000s.
Real estate appraiser, Brent Lewis of May and Krause Appraisal Service, is also cautiously optimistic. He’s seeing homes that are super affordable—priced at about $125,000. “Prices have gone down as much as 30-percent in the last few years,” he says. “The market has generally stabilized, but there are always bumps and fluctuations.”
As an appraiser, Lewis sees the market from a different perspective. “Banks care about what a house will sell for,” he says, “I have to consider the buyers—the entire potential market—both positive and negative.”
Lewis points out that the homeowner and the lending institution have different viewpoints. A lender sees a home as having value and exchange (what is house is worth monetarily). A homeowner sees his home as having both value and use. (What a house is worth in enjoyment and value.)
Crests and Troughs in Kent County
“There’s been a slight decrease in this year’s market for existing homes,” says Genther who covers Rock Hall and the surrounding areas, which consist of many retirees and those with second homes.It’s also home to several marine industries and Washington College.
Last year, 146 housing units were sold in Kent County at an average detached price of $268,409. Although 56 homes were purchased with conventional financing, 47 were cash purchases—the rest with other types of financing.
In May, 2011, the median sold price came in at $204,500 for the 10 housing units sold during the month. “Prices are more realistic during this adjustment,” Genther says.
“As for new construction, there are some positive signs here.” She cites the small housing development of the Village at Kennedyville, north of Chestertown as an example. Smaller homes here start at about $165,000.
“They started building three houses in the last six weeks and they’re still building,” says Genther.
Dogwood Village in Galena is also selling as is Millington located 12 miles east of Chestertown on Rt. 301. Both communities are close to Delaware, which means shopping and job opportunities for their residents.
Higher priced waterfront is also selling in this area for around $500,000 and up.
Snapshot of Caroline County
For the best values, Sells mentions Caroline County, which also has plenty of waterfronts. “You can get deals here from $500, 000,” he says. “A good home in Denton or Greensboro can be bought for under $270,000.” In fact the average sold price for 220 detached housing units sold in 2010, was $175,056.”
Migration to Talbot County
Associate Broker, Wink Cowee, with Benson & Mangold Real Estate in St. Michaels, agrees with Money Magazine, which in its May 2011 issue rated St. Michaels in Talbot County as one of the best places in the U.S. to retire to. In addition to its Maritime Museum, quaint shops, restaurants, and historic ambience, it also boasts welcoming bed and breakfasts and restful inns.
“For this reason,” says Cowee, “couples in their 30s and 40s are buying second homes here. They enjoy raising their children in this peaceful place. The property tax rate in Talbot County is also the lowest in the state.”
St. Michaels has held its value, and homes in the historic district are ranging from the mid- $400,000s and up. “St. Michaels is back to the 2002 market,” says Cowee. “New businesses are opening, and we are seeing more real estate sales activity. There are wonderful opportunities here.”
Waterfront properties near here may still demand a million dollars and up, but there’s a larger inventory of homes to choose from.
Just west of St. Michaels, Easton is seeing similar action. “I’m more optimistic about the future,” says Bill Neary, past-president of Maryland Realtors Association and associate broker at Fountain, Firth and Holt Realty. “Easton is a vibrant town and lots of people want to live here. People come from across the Bay Bridge and from points north to buy second homes. The only problem is that so many of these potential buyers need to sell their other homes first.”
Homes in town start from around $225,000. Currently there’s about a 30- month inventory of properties.
With miles of waterfront, the Easton area is also famous for its stately waterfront properties, which usually range from about a million dollars and up.
“Prices have bottomed out in Talbot County, and it’s starting to turn around,” says Ashley Childs, a real estate appraiser with Appraisal Source LLC. She cites good deals in developments such as Easton Village where homes, which used to sell for over $800,000, are now priced from the $300,000s and up. Prices have also fallen at Cooke’s Hope and at the Preserve in Wye Mills.
Director of the Talbot County Office of Economic Development, Paige Bethke, is optimistic about the new commercial growth in the county. A Kohl’s department store, three new restaurants, and a tractor supply store are coming soon. Four more new business and several manufacturing companies are also in the works.
Opportunity in Dorchester County
“Our town is booming,” says Valerie Powell Brown, president-elect of the Mid-Shore Board of Realtors and broker with Charles Powell Realtors in Cambridge, the centerpiece town of Dorchester County. “We have four new businesses in town and a wonderful Arts Center. This past May we had over 100 volunteers paint the facades on our downtown buildings. We’re now becoming more of a tourist location, and people are buying second homes here.”
She emphasizes that real estate opportunities are the best she has seen in years. Homes in the local market are priced around $200,000 and under. Waterfront properties are ranging from the $350,000s to the $800,000s and there’s lots of inventory. “It’s like putting money in a savings account,” says Brown.
Cambridge, which has traditionally been an industrial community, is promoting its technology park and the town council is giving a tax credit to both seniors 65-and-older and to commercial firms.
What’s up with Eastern Shore real estate? Plenty. Any lifestyle you want, you can find here and now’s the time to get it.
