Home sales volume dips slightly from last year’s buying frenzy, but prices are way up and demand is still strong
By Lynn R. Parks
Illustration by Emeraldgreen
From the October 2022 issue
From her vantage point as an agent with the Long & Foster Real Estate office in Bethany Beach, Cindy Souza sees clues that the market in coastal Sussex could be slowing a bit from last year’s pandemic-inspired boom.
In a few cases, she is seeing buyers resume — at least at first — the time-honored tradition of making offers a bit less than the asking price.
“That wasn’t happening last year,” she says. “Buyers were even offering more than the asking price. I just think that the pendulum is swinging to not a total seller’s market. It is swinging back to being a little more equal.”
Christine Davis, associate broker and owner (with her husband, Bill), of Active Adults Realty near Lewes, agrees. Over the first six months of this year, her office had far fewer sales than it had in the same period in 2021.
“The frenzy has been extinguished,” Davis says.
The market is seeing “a bit of a slowdown,” particularly for the most expensive properties, says Justin Noble, an agent with Ocean Atlantic Sotheby’s International Realty near Rehoboth Beach.
That slowdown is reflected in statistics about the number of houses sold. In the first six months of this year, 1,417 single-family homes were sold in the 11 ZIP codes that make up coastal Sussex. That is 90 short of the 1,507 homes that were sold in the same period last year — a 6 percent drop.
But despite that slight decline in sales volume, prices in the first half of the year skyrocketed in the other direction. The average selling price of a single-family home from January through June was just under $847,000, a whopping 22 percent higher than last year’s average of just over $693,000. In 2005, during the last real estate boom, the average selling price was a shade under $534,000.
Five of the 11 coastal Sussex ZIP codes saw average price increases of more than 25 percent in the first half of this year. In three of the 11 ZIP codes (19930, the Bethany area; 19944, the Fenwick Island area; and 19971, the Rehoboth-Dewey area), average prices topped $1 million. In the remaining eight, the average selling price was about $567,000.
The demand for houses is being driven by the pandemic and by the current political climate, Noble says. “Whenever there’s a lot of uncertainty, people want a change.” And that change is often away from cities and toward the beach. “I think that it’s safe to say that people have chosen a slower-paced life, and we are seeing that in the market here.”
Speedy sales, surging rates
Besides sales volume and selling prices, “days on market” is another indicator of the health of the real estate market. The quicker houses sell, the hotter the market, and that describes the coastal scene — at least in the first six months of this year.
From January through June, it took an average of just 35 days for houses in eastern Sussex to go from being listed to settlement. Compare that to the first six months of 2021, when the average days-on-market time was 53, almost three weeks longer than this year. And even that was a short time period, comparatively speaking: In 2005, at the height of the housing boom before the start of the Great Recession, average days on the market for local homes was 119.
“I can remember prior to the pandemic that if a property in Bethany Beach sold within 90 days, it was lightning fast,” Noble says.
However, mortgage rates might have started an increase in the days-on-market figure as the second half of the year began to evolve. The time that houses stay on the market is increasing, Davis said in July, as is the number of houses for sale.
Said Souza: “Earlier in the year, things were busy. As interest rates started to climb, buyers ... started to back off a little bit.”
Real estate agents agree that recent rising interest rates have changed the picture. In an attempt to control inflation, the Federal Reserve increased its benchmark interest rate four times this spring and summer: by a quarter of a percentage point in March, another half point in May, three-quarters of a percentage point in June and another three-quarters of a point in July. As a result, mortgage rates jumped from an average of just less than 3 percent at the end of last year to over 5.5 percent by midsummer. And that “impacted affordability and moderated the market,” says Davis, of Active Adults Realty.
Faced with higher monthly mortgage payments, buyers have had to curb their expectations a bit. “Those buyers who were qualified to buy a home in the $500,000 to $900,000 range last year might only be able to afford something in the $400,000 to $700,000 range now,” Noble explains.
But, he adds, higher interest rates didn’t lessen demand for local homes: “Instead, it just shifted the demand to different price ranges. People are still very much looking to buy and are likely even more motivated than before to get into a house before the rates rise even higher. A lot of buyers are thinking, ‘We waited and we learned our lesson’ rather than ‘The market is too hot and we need to bail out.’”
In fact, Clarksville, Md.-based Northrop Realty recently added a fifth location in coastal Sussex to manage the demand that its agents were handling. The office on Route 1 near Lewes opened in July.
“Our sales in coastal and inland Sussex County doubled in the first six months of this year compared to the same period last year,” says founder and CEO Creig Northrop. And that continues a trend: The company’s sales in 2021 were double what they were in the first six months of 2020.
“When the shutdown happened, we certainly had clients thinking about where they wanted to quarantine,” Northrop points out. “The coastal area was a big draw since being at the beach always evokes a feeling of calm. Now, as the economy continues to adjust, we are experiencing more clients who are looking for staycation homes where family and friends can gather.”
The price of peace
Despite the mortgage rate factor, buyers are still eager to find their dream home at the beach.
Michele and Tim Young live in Northwest Washington, D.C., and traditionally vacationed at Atlantic beaches in North Carolina. But with the start of the pandemic, they wanted a getaway place that was closer to their primary residence. “We were eager to get something to have to escape to and that we didn’t have to drive seven-plus hours to reach,” Michele Young says.
A friend recommended that they give Bethany Beach a look. “We started to go for weekends, and we loved it,” Young recalls. “That kind of got us on the search.”
She admits to being concerned about the price she and Tim would end up paying for a beach house. A home in their D.C. neighborhood had recently sold for $2.3 million after being listed for $1.64 million, and even then it needed renovation. “We saw that — people who were paying way over what something is worth — and we weren’t willing to do that.”
They also thought that whatever they bought, they would have to rent it out occasionally to help with the mortgage payments. But that turned out not to be the case. After a five-month search, during which they visited fewer than a half-dozen residences and bid on two, they ended up buying a home on 6th Street in Bethany. The asking price was $995,000, but the owners accepted $100,000 less after discovering that the town code did not allow a garage they had advertised as living space to be used that way. Closing was in March. “Because of that lower price, we can budget enough so that we don’t have to rent it out,” Michele says.
Although the couple were concerned about how much they would have to pay for their beach getaway given the eye-popping increase in selling prices, they are now enjoying the newfound benefits of a home in coastal Delaware.
Michele Young notes that “when we first bought our Bethany house, we went there every weekend for the first five or six weeks. My daughter, who is 15, told me that the moment I get inside, my expression changes and I relax. Everything here is slower. And we are definitely able to have some lovely family time.”
Dana and Patrick Miller sold their Dagsboro home in July, less than two weeks after putting it on the market. One of its selling points, Dana says, was its backyard recreation area, with a pool, fire pit and bar — perfect for relaxing.
“You could go out into the backyard and not see or hear anyone, and just enjoy being outside,” she adds. “We kind of had our own little haven back there. We hadn’t gone on vacation in years, because we didn’t need to.”
The Millers, who moved to Pasadena, Calif., to be near their daughters and only grandchild, had bought their Dagsboro home in 2007 for $240,000. They sold it for $400,000, their full asking price; the buyer was able to pay in cash and agreed to forgo a home inspection as well as an appraisal.
“We received multiple offers,” Dana says. “We chose this one because it fit with our time frame, and because there were no contingencies. And with the cash, it was a great offer.”
Cash sales grew in popularity last year as potential buyers had to compete for homes. And they have continued this year, says Active Adults Realty’s Davis: “We are still seeing a lot of cash transactions, but now it’s because of the interest rates.”
As for forgoing inspections, “in the lower price points you are still seeing that, but not across the board like last year,” she notes.
“Contingencies are popular again,” Long & Foster’s Souza says. “Home inspections, financing and appraisal contingencies are back into contracts.”
Northrop adds, “Buyers are beginning to see more inventory come onto the market and they are bringing inspections back into their offers to avoid any surprises.”
The Millers also sold a Millsboro-area house in which Dana’s mother, Linda Owings, was living. (Along for the adventure, Owings is moving with her daughter and son-in-law to California.) The small, two-bedroom, two-bathroom dwelling sold for $229,000, “a lot more than we expected,” Dana says. She and Patrick paid $115,000 for it in 2012.
And they sold a one-bedroom condo in Los Angeles that they had acquired last year, and bought a two-bedroom condo to accommodate the three of them (as well as three dogs). They had thought that they would buy a small house, “but the market in L.A. is crazy,” Dana explains. “Every time that we tried to put in a bid on a single-family home, it would go for $100,000 or $200,000 over the asking price. And they were very modest places! The L.A. situation makes the situation in Sussex look pretty calm.”
The turnkey factor
The real estate situation in Sarasota, Fla., is also crazy, says Laurie Roshfeld, who recently moved from that Gulf of Mexico city to the Pilottown Village neighborhood in Lewes. “My real estate agent and I were trying to decide what to sell my Florida house for, and prices were going up even as we talked,” she says.
Roshfeld started looking for property in Delaware in June of last year. “Houses were going so quickly, and I was sitting in Florida looking at them every day online,” she recalls. “But I couldn’t fly up here fast enough to act on any of them.”
Finally, she decided to leave and stay at a friend’s condo on the boardwalk in Rehoboth while she continued her search. Souza, her real estate agent, showed Roshfeld the Lewes home in January, the day it came on the market, and she put in an offer right away. Asking price was $699,999 and the final selling price was $715,000.
“At that time, houses would typically get multiple offers, so we offered slightly higher to entice the seller to take her offer immediately,” says Souza. “And it worked! There were lots of showings scheduled and we were able to beat everyone by presenting quickly and offering just a little more.”
Before she moved in, Roshfeld had to have work done to encapsulate part of the crawlspace. She didn’t mind: “I knew how the problem could be remedied, and knew that I had to spend the proper money to fix it.”
But increasingly, notes Northrop, people want homes that they can move into right away. “The newest trend we are seeing is a demand for turnkey homes, with no need to make big repairs or improvements,” he says. “The buyers want to just walk in and start living.”
Washington, D.C., residents Joe and Kelly Banuls recently bought a home in Bethany Beach as a rental property as well as a getaway place. Asking price was $850,000, which they paid in full.
“It was the primary residence of the people we bought it from and it was literally turnkey,” Joe says. “It was important to us to have a house that was ready to move into. And it’s perfect the way it is. I’m not touching it.”
Ocean Atlantic Sotheby’s Noble, who served as the Banuls’s agent, agrees that buyers increasingly want a house for which no improvements are required. “The demand here is typically for homes that are move-in ready, or that need limited work, so that the buyers can rent them when they aren’t using them to offset the mortgage,” he says.
An enduring appeal
As for the next 12 months, Noble believes that even as things seem to be slowing a bit, coastal Sussex houses that are priced appropriately will continue to bring in offers quickly. But, he adds, what is the appropriate price can change over the course of just a few weeks.
“Historically, when figuring out the asking price for a property, agents looked back over the past 180 days for comparable sales,” he explains. “In today’s ever-changing market, though, it’s super important to have your finger on the pulse of the market now. Looking back just 30 to 60 days gives you a more accurate snapshot of what the market is doing.”
Davis believes that the price hikes that marked the first six months of the year will continue to slow down. “The accelerated increases of the past two years were just not sustainable,” she says. But homeowners need not worry that property values will go down. “Decelerating home prices do not mean depreciating home prices,” she adds.
Similarly, Souza believes that the prices “will continue to level off because of volatility in interest rates.”
Regardless of how prices play out, though, and how much interest rates rise, Noble believes that demand for area houses will remain high.
“Southern Delaware will always be an attractive escape for city dwellers and for those who are hoping to retire to a place with a lower cost of living and a slower-paced life,” he says. “These characteristics of Southern Delaware will never change.”
“Our house is just a 15-minute walk to the beach,” says new Bethany homeowner Michele Young. “And we can easily bike to the beach. We have two children, both teenagers, and they love it here. They can just get on their bikes and ride, go to the beach or to Rita’s for a treat. There is no worry.”