? by Mike Sharkey
Staff Writer
Spring is in the air and people are flocking to the beach. Usually, many of those folks aren’t the weekend warriors looking for a tan and something different to eat. Many of them often arrive in U-Hauls loaded with furniture and boxes destined for beach apartments and new ways of life.
Not this year.
Drive around the beach on the main roads. Try to notice all the “for rent” signs tacked to utility poles without causing a wreck. It’s tough.
Now start weaving up and down the side streets. In Neptune Beach alone, there are dozens and dozens of apartments and homes for rent — and that’s just east of Third Street. Property managers say the rental market is over-saturated and even the influx of usual summer residents won’t put much of a dent in the glutted rental market.
Wayne Jones is the property manager for Watson Realty at the beach. He’s been in the real estate business for two decades and property management the last nine. Jones says he’s never seen anything like what’s going on at the beach these days.
According to Jones, there are several factors conspiring to create a bigger supply of rental property than current demand dictates. Interest rates, rental rates (at least what’s being asked for places) and skyrocketing property values all figure into the equation.
Jones also said a shift in investments in response to a fickle global stock market has prompted investors to purchase tangible assets rather than ambiguous stocks and bonds.
“There’s a trend of late to get out of the stock market and invest in retail properties with those assets,” explained Jones, who has been a property manager with Watson since 1996 and ERA prior to that. “People are buying now instead of renting and with today’s prices, sitting on that investment for retirement. The baby boomers from up north are coming down here and buying houses in order to homestead them, rent them for three to five years, then live in them.”
Jones, partly, blames the Yankee home buyers for almost artificially inflating property values at the beach, which, in turn, are forcing other homeowners to raise their rental prices. Someone from New Jersey can buy a house that’s two blocks from the beach for half what they would pay near the Jersey shore. And, the house here will be twice as big.
That purchase drives up the assessments all around. When assessments go up, property owners are forced to raise rents. However, the local incomes are going up as fast as rental rates, hence the glut of rental property.
“The major problem is that rental prices have not caught up with property values,” said Jones, explaining that a client trying to rent their oceanfront condo is having a tough time. “They are asking $2,700 a month. But, they are paying $20,000 a year in property taxes. They have $8-11,000 in condo fees and a mortgage payment. The rent they are asking, which is already high, will not come close to covering their costs.”
Jones believes the simple Economics 101 theory of supply and demand will eventually bring rental rates down. While renters will benefit, Jones says owners will actually lose money. However, getting something for a year is better than getting nothing.
“I don’t think people can talk about breaking even,” he said. “They [owners] may have to be $100 or so out of pocket for a while until appreciation catches up. I think it will happen one day.
“When they run ad after ad after ad and they still can’t rent it, they realize they have to come down to get it rented. Condition and price are the biggest concerns, but the major concern is price.”
Jones said his company keeps close track of rental properties and how long they’ve been on the market. When he notices a property is becoming a struggle to rent, Jones contacts the owner about reducing the price.
“I copy all the owners at the end of the month on their ads,” said Jones. “We have a 30 percent market share and we push price reductions weekly. We advertise in four papers and through our web site. If we have not rented it, it costs the company money and I suggest we need to adjust the rent. I push for $25-50 increments downward.”