Some of you may remember my posts from this time last year about my all-too-personal experiences in the aftermath of Hurricane Sandy on the New Jersey Coast. Here's an update and a curious tale of increasing property values, despite compelling evidence that the demise of East Coast barrier islands is not far from the horizon.
The small coastal town where my great-grandfather built our multi-generation-occupied shore house 70 years ago experienced a storm surge last year of five feet above street level, for the first time in 100 years. The house was flooded, along with roughly a third of the town's properties of similar vintage. Since most of the devastation impacted similar legacy vacation homes that were mortgage free, most (including ours) were not insured for flood damage at a present value premium savings of about $5K/year. Many, if not most, owners of these homes have since concluded that their structures were not worth remediating and that 90% of their current property's market value is in the land upon which the structures were built.
A land sale boom has ensued from those who have simply chosen to sell, rather than rehab or re-build, and the market has evolved in a counterintuitive fashion. Basic economics would suggest that a glut of land for sale would diminish prices. Not so. New residential developers have bid up land values by as much as 40% over pre-Sandy market prices. Simultaneously, new building codes have been established that require the first floor of new construction to be elevated at least eight feet, and foundations are now universally constructed of deep driven pilings encased in concrete. For the past year, the town has sounded like a war zone of construction, and new 3BR, 2 bath condo's are now selling for over $500K and relatively modest single family houses for more than $1 million-- and demand is brisk.
My reason for suggesting that this phenomenon is interesting is perhaps best explained by a recent New York Times article that claims hard scientific data show "the official stance of the world’s climate scientists is that the global sea level could rise as much as three feet by the end of this century, if emissions continue at a rapid pace. But some scientific evidence supports even higher numbers, five feet and beyond in the worst case. Scientists [also] say the East Coast will be hit harder for many reasons, but among the most important is that even as the seawater rises, the land in this part of the world is sinking. And that goes back to the last ice age, which peaked some 20,000 years ago."
Having navigated the surrounding waters for the past half century, I can readily attest to the fact that the sea level is rising. But how rapidly the rise progresses, and whether or not another perfect storm of tidal surging recurs anytime soon, is obviously not a matter of concern to contemporary buyers of coastal vacation real estate. My local real estate friends also tell me that the majority of new buyers are unlikely to survive their new 30-year fixed rate mortgages and simply wish to enjoy the salty air and shrinking beaches and dine out in the ubiquitous gentrified seasonal upscale restaurants. They're also likely to bequeath a sinking mortgage-laden legacy, and hopefully some memorable summers, to their heirs -- so be it. I'm thinking about selling and spending the summer in Venice.