EAST BRUNSWICK, NJ – New Jersey-based real estate consultant Jeffrey G. Otteau predicts investors will be swarming the Jersey shore this spring, looking for post-superstorm Sandy property bargains.
Because of the limits on what flood insurance will cover, and the fact that many shoreline home owners do not have coverage, “investors will be aggressively looking for opportunities to cash out these property owners and implement a repair-and-sell or repair-and-rent strategy,” said the market analyst in the latest report from his Otteau Valuation Group, which was shared with GlobeSt.com
“Expect that investors will be going door to door searching for these opportunities,” said Otteau. His company, based in East Brunswick, prepares monthly analytical reports to subscribing brokerages and professionals.
Based on estimates so far, about a third of the $50 billion worth of damage done by the storm to insured residential property occurred in New York, 30% in New Jersey, 20% in Pennsylvania and the remainder in other states.
Otteau said Jersey’s overall residential market had actually been positioned for a surge in sales before Sandy struck Oct. 29. Barring wild-card economic events, he continues to predict a surge in home-buying in most of the state, even as the rental market remains vibrant.
“The exception to this however, will be the coastal markets along the Jersey Shore where the devastation has been greatest, and the rebuilding process will take years,” Otteau wrote in the report.
About 284,000 residences with a total value of $88 billion were in the storm’s path, according to data from CoreLogic, including $4.81 billion worth of homes in the Atlantic City area and $3.44 billion in the Ocean City area.
A large number of state owners – about 250,000 total, including business properties – hold policies through the National Flood Insurance Program, Otteau noted. But many don’t. And the flood insurance program, set to expire in 2017, was already bumping against the limits of its credit line with the U.S. Treasury before Sandy smashed into the coast.
Furthermore, coverage is capped at a maximum of $250,000 per dwelling. FEMA aid will apply in some cases, but does not extend to secondary or vacation homes.
“All of this tells us that only a portion of the waterfront properties that did not experience flooding damage have the potential to command a price premium,” Otteau wrote. Flood-damaged residential property, on the other hand, will have to be unloaded by those who are uninsured, under-insured, or not prepared to wait years for recompense and reconstruction.