Rising Property Values Boost Popularity of Florida Waterfront Homes

An old real estate saying may need to be tweaked. Granted, the home loan industry is still based on “location, location, location.” These days, however, it would be more apt to center it around water, water, water. Take the example of this prosperous Florida home loan endeavor.

Daysi and Jorge Morey purchased a vacation home in the coastal town of Palm Coast, Fla., a four-and-a-half-hour drive north from their Miami apartment. They love it there, partly for the beautiful surrounding. The rising property value doesn’t hurt, either.

Only eight months ago, the couple paid just under $1 million for this four-bedroom, five-and-a-half-bath house in an amenity-rich resort community, a two-minute walk from the beach. If they sold it today, they said they were told, they could get at least $1.5 million.

“I think that’s still pretty reasonable for something so close to the water,” said Mrs. Morey, who runs a real estate business with her husband and has seen firsthand how prices in South Florida, where they specialize, have skyrocketed over the last few years.

Wanting water: Florida home loans soar near the coast

Even as the rest of the residential market is cooling, second-home sales in many parts of the country - especially near the water - continue to thrive. The reasons include low mortgage rates and continued demand from recreation-minded baby boomers, who are flush with cash or equity in their primary residences. Many are buying with retirement in mind, while others see real estate as a stable investment.

Indeed, sales of recreational homes, which totaled 1.02 million in 2004 and 850,000 in 2003, reached record levels last year, said Walter Molony, a spokesman for the National Association of Realtors, citing preliminary results of a survey conducted last month by the association.

“The demographics are very bright for the second-home marketplace,” said David Lereah, the group’s chief economist. He predicts that second-home sales will continue to edge up this year, with rates on 30-year conventional mortgages expected to remain below 7 percent. But he also says he believes that prices will stabilize, particularly in those hot resort areas that have attracted speculative buying. This would include Florida real estate.

Nowhere has the rise in second-home prices been more prevalent than with properties on or near water, where most people seem to want to be despite last year’s hurricane disasters.

“You’re going to pay a 25 percent premium for a view and 50 percent to be on the water,” said David Hehman, chief executive of EscapeHomes.com, an online marketplace for second homes and resort properties.

He puts the nationwide average price of an oceanfront home at around $1 million, about 30 percent higher than last year. (By contrast, the average price of all homes sold by real estate agents that list on his site is $355,000, up from around $300,000, he said, though that encompasses everything from tiny cottages in the woods to multimillion-dollar spreads.)

Continually hot home loan markets

The priciest coastal areas, according to EscapeHomes.com, continue to be in California, South Florida, parts of the Northeast and Hawaii, with interest in the Big Island, in particular, growing this year.

For Diane Saatchi, a senior vice president of the Corcoran Group who specializes in the Hamptons, one of the hottest beach areas in the country, “the activity is surprisingly strong on the buying side.”

“The feeling was that the increase in interest rates we had was going to make people more cautious about buying second homes, but so far that hasn’t happened — the market seems impervious,” she said. “I hear more regrets from people who have waited.”

Palm Coast Florida home loan popularity

An area getting attention lately is Palm Coast, Fla., about 25 miles north of Daytona Beach, where the Moreys have their vacation home.

Though prices are still considerably less than those in many other parts of Florida, the area is steadily shifting to a market primarily of vacation or retirement homes, and the prices are starting to reflect the change, according to Jolita Barry, a local broker at By Appointment Only Realty. Two-bedroom oceanfront condos start at about $900,000, she said, though units by the Intracoastal Waterway start at about $300,000 and are as low as $120,000 farther inland.

The trick to profiting from your Florida home loan, it seems, may be in finding those hidden gems.

“The emerging markets are the fun ones,” Mr. Lereah said, “because they haven’t really been discovered.”

According to data provided by EscapeHomes.com, “areas to keep an eye on,” include Kings Bay, Ga., on the southeast coast; Mountain Home, Ark.; and Spirit Lake, Idaho. Brokers in those communities say they are seeing a steady pickup in interest.

But prices shouldn’t be the only criterion for buying, said Andrew Schiller, founder and president of Location Inc., a company that specializes in relocation software and runs the home search Web site NeighborhoodScout.com.

“When people purchase vacation homes they’re investing in a location as well as a family retreat,” Mr. Schiller said. “It makes sense to invest in a community that has quality schools. Better quality schools will command higher values. In a lot of vacation places people do live there year-round, because of the way people telecommute with their jobs now.”

Mr. Schiller has his own list of emerging-market favorites as well. They include

• Blue Hill, Me.
• Carolina Beach, N.C.
• Mount Pleasant, S.C.
• Port St. Joe, Fla.
• Arcata, Calif.