Sandy Damage Prompts Some to Walk Away Instead of Stay

In some places, Sandy’s wrath is a reason to walk away from their homes as opposed to staying on and fixing them up.

 

 

 

For many Sandy’s wrath is a memory that happened six months ago.

But some home buyers and sellers are just now feeling its power surge through the real estate market in coastal areas.

 

“Not one property has closed to date in Sea Bright since the storm,” said Donna Markowitz, broker-manager at Gloria Nilson and company real estate in Keyport, New Jersey.

 

In parts of New Jersey, coastal properties are selling for much less than they were worth before the storm. 

 

Many homes that were flooded will have to be raised up to new flood elevation standards set by FEMA.  And they’ll also incur increased costs for flood and homeowner’s insurance.  Those increased expenses, combined with the uncertainty of what new regulations will be, could be spooking buyers and coaxing sellers to drop their prices.

 

“There’s the uncertainty of the [FEMA flood] zones - we don’t have anything firm yet, we don’t have firm maps or elevations,” said Steve Acropolis, the Mayor of Brick Township, New Jersey.

 

The uncertainty is causing some to walk away. 

 

In the working class town of Keyport on the Raritan Bay, two Sandy-damaged homes on the market in Keyport are on the market for about $70,000.

 

“Before Sandy, they would have been, in this market,  like a $240 to 250,000 home,” said agent Markowitz.

 

It’s a similar situation in tony Mantaloking, father south, where only one home sold on the open market since the storm struck. 

 

“It was on the market for $5.5 million before the storm.  The house was destroyed [during Sandy] and sold for $2.7 million, about half the value after the storm,” said Peter Zanowic, with Gloria Nilson and Company real estate in Bay Head, NJ.

 

 

 

According to Zillow, the online real estate site, there’s not enough data yet to determine via sale listings, if there’s a high volume of short selling going on.

 

But Zillow economist Svenja Gudell says there is added pressure on owners of homes seriously damaged by Sandy, particularly in the Garden State.

 

She said that in New Jersey, 25 percent of homeowners with a mortgage were underwater before Sandy hit, meaning they owe more on their homes than their property is worth.

 

“You’re getting the double whammy if you will,” Gudell said of those homeowners. “Not only were you underwater before, but now you’re even worse off because your home has been damaged.”

 

And some of those financially ‘underwater’ are more likely to sell at distressed property price instead of trying to cobble together a way to pay for repairs on what is already, a losing investment for them.

 

“That makes it easier for people to say: ‘It’s going to take so long for me to reach positive equity again in my home, I’m going to walk away from my home now,’ ” Gudell said.

 

This homeowner fatigue is expected to shake out overtime, experts say. 

As powerful as Sandy’s storm surge was, it’s not likely to influence buyers of shore properties a few years from now, if tradition is any guide. 

 

“The older homes that were destroyed, there will be brand new homes in there.  So the houses will be worth more, the market will rebound, and people will want to live here and spend money for it,” said Zanowic.

 

But some fear the rebuilding will force working class families away from the beach.

 

“It’s going to change the character of some towns, and I worry about young people being able to afford being on the water,” added Steve Acropolis, Mayor of Brick.

 

But in some storm-ravaged areas, like Long Beach, and on Long’s Island’s North Shore too, sales this spring have been less affected by Sandy.

 

“Waterfront [property] is a limited commodity [here] and it still commands the high numbers,” said Risa Ziegler, a licensed broker with Douglas Elliman in Huntington, Long Island.

 

The North Shore still lacks inventory, and it’s a desirable area.

 

Long Island’s South Shore sustained much more Sandy damage, and initially, home prices of flooded properties fell sharply.

 

But now, in anticipation of summer, sales are trending upwards.

 

“When Sandy first hit, I thought my career was over, I didn’t know how I’d sell another house here,” said Long Beach real estate agent Joyce Coletti.

 

But over time some started buying damaged homes on the South shore, and prices began rising, even for homes that had been gutted after storm damage.  In Long Beach, nine homes burnt after a car blew up during Sandy.

 

“I had a bidding war on burnt homes, that were burnt to the ground,” and we sold them,” added Coletti.

 

In New Jersey, especially, many homes that were flooded not only have to be repaired. They will also have to be raised up to new flood elevation standards set by the Federal Emergency Management Agency. And they will incur increased costs for flood and homeowner’s insurance. All those potential expenses are making homeowners think twice about whether it is worth it to stick out the rebuilding process.

In the working class town of Keyport, on the Raritan Bay, two Sandy-damaged homes are listed for about $70,000.

“Before Sandy, they would have been, in this market, like a $240,000 to 250,000 home,” said Donna Markowitz, broker-manager at Gloria Nilson and Co. Real Estate in Keyport.

And while some of the properties for sale might be deals, buyers appear skittish, especially in areas where storm damage was heavy.

“Not one property has closed to date in Sea Bright since the storm,” Markowitz said.

A Sandy-damaged home in Keyport, New Jersey, listed for $70,000—less than a third of what it was once worth. (Terri Langford/WNYC)

Even along the coast of New Jersey, agents say properties are selling for much less than they were worth before the storm.

In tony Mantoloking, for example, only one home has sold on the open market since the storm struck. 

“It was on the market for $5.5 million before the storm," said Peter Zanowic, with Gloria Nilson and Company Real Estate in Bay Head, located on the Jersey shore. "The house was destroyed, and sold for $2.7 million."

The fact that the FEMA flood maps have not been finalized is compounding the urge some have to give up on their home.

“There’s the uncertainty of the zones," said Steve Acropolis, the mayor of Brick Township. "We don’t have anything firm yet.”

According to Zillow, the online real estate site, there’s not enough data yet to determine, via sale listings, if there is a high volume of short selling—that is, pricing the home for less than the seller owes on the mortgage—going on.

But Zillow economist Svenja Gudell says there is added pressure on owners of homes seriously damaged by Sandy, particularly in the Garden State.

She said that in New Jersey, 25 percent of homeowners with a mortgage were underwater, figuratively, before Sandy hit, meaning they owe more on their homes than their property is worth.

“You’re getting the double whammy if you will,” Gudell said of those homeowners. “Not only were you underwater before, but now you’re even worse off because your home has been damaged.”

A pile of debris left over from Sandy in Keyport. (Janet Babin/WNYC)

And some of those financially "underwater" are more likely to sell at distressed property price instead of trying to cobble together a way to pay for repairs on what is already, a losing investment for them.

“That makes it easier for people to say: ‘It’s going to take so long for me to reach positive equity again in my home, I’m going to walk away from my home now,’ ” Gudell said.

But in other some storm-ravaged areas of the region, like Long Island’s North Shore, agents say the market is still strong, and sales appear unaffected. 

“Waterfront [property] is a limited commodity and it still commands the high numbers,” said Risa Ziegler, a licensed broker with Douglas Elliman in Huntington, Long Island.

The North Shore still lacks inventory, and it is a desirable area, she said.

Long Island’s South Shore sustained much more Sandy damage, and agents say that initially tamped down prices.

“When Sandy first hit, I thought my career was over," said Joyce Coletti, a Long Beach real estate agent. "I didn’t know how I’d sell another house here,”

An example of one home in New Jersey that is being raised up to comply with FEMA flood maps. (Janet Babin/WNYC)

But now, in anticipation of summer, sales appear to be trending upwards and prices have begun rising, even for homes that had been gutted after the storm. In Long Beach, nine homes burnt after a car blew up during Sandy.

“I had a bidding war on burnt homes, that were burnt to the ground, and we sold them,” added Coletti.

Experts also say any homeowner fatigue there is can be expected to shake out overtime. 

As powerful as Sandy’s storm surge was, it’s not likely to influence buyers of shore properties a few years from now, if tradition is any guide. 

“The older homes that were destroyed, there will be brand new homes in there," said Zanowic, the agent on the New Jersey coast. "So the houses will be worth more, the market will rebound, and people will want to live here and spend money for it.”

But some fear all of the selling will force working class families away from the beach.

“It’s going to change the character of some towns, and I worry about young people being able to afford being on the water,” added Brick Mayor Steve Acropolis.