Is Beachfront Property Really Worth Having?

Well, we came back from Hilton Head, South Carolina the other day where we spent some time looking at how the real estate market was doing there with the housing slump fully underway. I must say that I have always wondered why people buy oceanfront property or even off-beach housing as an investment as it seems so risky and expensive.br /br /What we saw were a lot of rental signs with price tags that still seemed too high (to me anyway). For example, the condo we stayed in at the beach would sell for around 1.65 million — even though the rent on it was pretty low, nowhere near enough to cover the mortgage even if it rented steadily. Apparently, some investors don’t think that prices are too high. According to one real estate paper, span style=”font-style: italic;”Palmetto Previews,/span baby boomers are looking to buy second homes, vacation properties and retirement venues in the “red-hot South.”br /br /In addition to the boomers, big corporations, the paper says, are starting to buy properties in bulk and these corporations include a recent influx of buyers from Canada and Europe, including Eastern Europe. A real estate veteran in Hilton Head, Billy Baldwin, attributes the trend in foreign sales to greater buying power. “The softening US prices combined with favorable exchange rates makes homes here big bargains for many Canadian and European buyers.”br /br /But are these properties really going to stay good investments? Potentially not, according to the book a href=”http://www.amazon.com/gp/product/0312377401?ie=UTF8amp;tag=wwwviolentkicomamp;linkCode=as2amp;camp=1789amp;creative=9325amp;creativeASIN=0312377401″ span style=”font-style: italic;”Cash-Rich Retirement,/span/aimg src=”http://www.assoc-amazon.com/e/ir?t=wwwviolentkicomamp;l=as2amp;o=1amp;a=0312377401″ alt=”” style=”border: medium none ! important; margin: 0px ! important;” border=”0″ height=”1″ width=”1″ / that I am reading for an upcoming podcast.br /br /The author, Jim Schlagheck, says that the recent boom in real estate prices are not “business as usual:”br /br /blockquoteIt is the result of an unprecedented surge of people looking for homes and “quick flip” investment opportunities as never before…. span style=”font-style: italic;”Boomers have so far had a resounding impact on consumer spending, investing, and asset prices. They have been a powerful locomotive, contributing to strong economic growth and substantially higher investment valuations./spanbr /br /That, of course, brings us to the million-dollar question: What is going to happen when this same mass of people enters retirement and begins selling off assets to raise cash? How will mass boomer retirements impact asset values?/blockquotebr /br /I sure don’t know the answer to that question. But regardless of what happens, I think I’ll just stick with renting a beachhouse–it seems cheaper and safer than investing in this market.