Weakness at the Jersey Shore

From the Asbury Park Press:

Signs of weakness

It wasn't a pretty picture when Charles Kovach and his wife, Brenda Connolly, first took a look at an octagonal-shaped house on LaReine Avenue in Bradley Beach, a block-and-a-half from the beach.

The home was run-down. It had no insulation or closets.

"It was a disaster," said Connolly, a real estate agent at Diane Turton Realtors in Avon.

But Kovach, who buys residential properties, fixes them up and resells them — also known as "flipping," — saw something and bought the house for just under $500,000 last August. He spent about $200,000 for renovations and other costs, completely transforming the structure. Now he hopes to sell it for $849,000.

But the house has been on the market for three months. A year or two ago, it probably would have already sold.
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Last year, real estate investors accounted for 15 to 20 percent of residential sales in Monmouth and Ocean counties, said Jeffrey Otteau, president of the Otteau Appraisal Group, a real estate consulting company in East Brunswick. This year, he estimates it will be less — about 5 percent.

In the near term, Otteau said, investors will be rushing to the sidelines, hurting the market even more.

"Investors will be looking to liquidate and that is going to bring additional supply onto the market and will further weaken the real estate market," he said.

The conditions under which many investors look to buy and sell single-family homes are just no longer present, Otteau said. Typically, they hope that prices will rise quickly and until they can sell, they expect to cover their carrying costs with rents.

Neither is expected to happen. Otteau said the rise in home prices has peaked and will, at best, remain flat for the next three years.