Many paying top dollar for island living in a 2nd home
S.C. getaway ranks near the top among nation’s costliest vacation-home spots
New York Times
SULLIVANS ISLAND, S.C. – A sudden rainstorm sends beach-goers off the expansive stretch of sand toward the center of town. The main drag, all three blocks of it, includes a Kangaroo Express gas station, a dentist’s office, a day spa and a handful of restaurants — including Bert’s Bar, a local pub with the motto “If it hurts, go to Bert’s.” Across the street, inside Poe’s Tavern, known for its burgers and fish tacos, the scene is unhurried and casual, with shorts and T-shirts favored over button-down shirts and slacks.
Unlikely as it may seem, this is also the location of some of the most expensive second-home real estate in the country.
Sullivans Island ranks right up there with Aspen, Colo.; Nantucket, Mass.; Palm Beach, Fla.; and the Hamptons with its median home price last year of $1.1 million.
A varied collection of historic cottages and summer villas dot this unassuming barrier island off the coast of Charleston, from quaint beach bungalows to stately officers’ quarters — remnants of the island’s long military history. There also is a growing number of McMansions. Residents cruise around in golf carts even though there is no golf course. The beach has no restrooms, lifeguards or parking lots.
Thanks to the nation’s unprecedented and currently much-debated real estate boom, houses in top vacation spots like Sullivans Island have been fetching record prices. And those prices have been fueling record sales. There were 2.82 million second-home sales last year — 1.8 million were strictly investments, and just over a million were vacation homes. Total sales marked a 16 percent increase from the previous year, according to the National Association of Realtors.
But there is surprisingly little information on vacation home markets.
To get a better sense of the priciest vacation markets, The New York Times asked Fidelity National Financial, a major real estate title insurer, to help identify high-end second-home markets across the nation. To locate spots with a significant number of these homes, the study used 2000 census data, organized by the Queens College sociology department, which noted ZIP codes where at least 10 percent of homes are used seasonally. Then Fidelity looked at public sales records of single-family homes.
The study examined 358 second-home markets with median single-family home prices of at least $300,000. It also threw out ZIP codes with fewer than 70 sales during the last year, eliminating some high-priced areas with just a handful of houses. Finally, the data was sorted by state to identify the priciest markets in each one.
Top of the heap? Not surprisingly, it was Aspen, where the median home price through the end of 2004 was nearly $2.5 million. But even the most jaded real estate hound might be surprised by the fact that some “fractionals” (a fancy name for time shares) in Aspen are now going for $1 million for six weeks — and a tear-down will cost you even more.
Also at the top of the most-expensive list are many other familiar names: Newport Beach, Calif. (its quaint Balboa Island); Palm Beach, known for Gatsby-era architecture and highbrow shopping; Water Mill, N.Y., a standout even in the wealthy Hamptons on Long Island’s famous East End.
But sprinkled among them were some destinations that might be familiar to aficionados but not the wider public.
They are places like Sullivans Island; or Jamestown, R.I., a stone’s throw from Newport; or Mantoloking, N.J., where about 525 homes sit on a sliver of land less than half a square mile between the Atlantic Ocean and Barnegat Bay. There are no restaurants or hotels in that town, just a fire department, police department and post office. And the local yacht club has a four-year waiting list.
Whether well known or obscure, the top markets had a few things in common. Few of the Top 12 are bigger than 15 square miles. That means homes are relatively scarce and the market has built-in limits, driving up prices. Then there is water. All but Aspen and Scottsdale, Ariz., were either on water or surrounded by it. And without exception, they are a reasonable drive — or helicopter flight — from a major city.
While talk of a real estate bubble is rampant these days, these top markets have continued to appreciate — most saw double-digit gains last year — though in some places more slowly than in recent years. The median home price in Water Mill climbed 31 percent to nearly $1.6 million last year, compared with the year before. Though that would still be considered a huge increase at nearly any other time, it is down from the 50 percent surge in 2003.
Have these markets peaked? Mike Sklarz, head of analytics at Fidelity, who conducted the study for the Times, does not think so. “No one really knows when the market will peak,” he said.
If housing prices stumble, as some economists predict as interest rates rise, those in vacation areas may be hard hit as discretionary spending slows. Investors may also pull out quickly as prospects for big returns start to dim. The most expensive destinations, however, may see less impact, since the wealthiest buyers often are not deterred by rising interest rates or an economic downturn.
Some real estate agents maintain that today’s prices will hold.
That has been the case so far on Sullivans Island, the seventh most expensive market in the study.
Sullivans has long been popular with buyers from nearby Charleston, and many of the modest beach bungalows that weathered Hurricane Hugo in 1989 have since fallen to the wrecking ball to make way for oversized McBeachhouses, some topping 8,000 square feet. Things had gotten so out of scale that the Town Council this year limited new houses to 5,600 square feet, on top of restrictions on leasing places out for less than four weeks at a time. Just 72 of the 850 homes can legally be leased short-term.
Some longtime residents worry the new popularity will ruin the island’s serenity. “I don’t blame people for wanting to come here,” said May Jones, 61, who has lived on the island for 30 years. But the influx of newcomers and sky-high prices are “like killing the goose that laid the golden egg,” she said. “What made this paradise was it was a laid-back place to live.”
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