Water Everywhere, and Yet Home Prices Shrink

By Elizabeth Razzi

Sunday, May 25, 2008; Page F05

An ebbing tide lowers all boats, at least if you take the analogy to water-related real estate. Lower prices and longer times on the market mean it's easier for boating enthusiasts to find a home that puts them closer to casting off from shore.

Kathy Green and Terry Masser weren't even planning to buy a waterfront home. Masser, who works for a company that fixes properties after fire or water damage, was looking at a house in Pasadena, Md., in November with the idea of finding something he could buy, rehab and sell for a profit.

Then he discovered the house for sale just across the street. It had deep-water frontage on the Magothy River, not far from the Chesapeake Bay, outdoor decks offering wonderful views at sunset, lots of room and a reasonable price

Out went the investment idea, replaced by a plan for Green and Masser to sell their homes in Germantown and College Park and consolidate housekeeping along the banks of the Magothy. They now commute from their waterfront home to his job in Beltsville and hers in Rockville, where she works at a digital imaging company.

"We feel we got a very fair price for the property and the waterfront location," Green said. It has four bedrooms and three bathrooms; an in-law suite; a large, heated garage; a boat slip; and a boat lift. When Masser discovered the place, it was listed at $749,000, down from $800,000. They negotiated the price down to $700,000 and closed the deal in February.

"This is not a fix-and-flip," Green said. "This is a fix-and-stay. This is a 'we aren't leaving unless you drag us out' house."

Now they're in the market for a power boat. "The empty boat slip is just killing Terry," Green said.

Different buyers value different types of water-related real estate. Waterfront homes with expansive views typically draw top dollar. Storms can tear up those shorelines, though, so boaters place a premium on sheltered waterfront along creeks that offer safer harbor for their fragile watercraft. Sailors, in particular, value deep water along sheltered shores, because it can take six feet or more to accommodate a sailboat's keel.

Prices tend to be more affordable for homes without shores of their own but situated in communities that offer water privileges, such as use of community-owned docks or boat ramps and put-ins where a boat can be slipped into the water off a trailer.

"It's a mixed bag," said William Glasgow, a real estate appraiser based in Riva, Md. "For very in-demand properties, values are holding steady." And the market has returned to a more traditional selling time of more than six months, he said.

Waterfront is always a special category, he said, and a home along the shore can cost hundreds of thousands more than a similar house just across the street that lacks water frontage.

"There's no way to compare the two," Glasgow said. When doing an appraisal on a waterfront home, he uses only other waterfront properties for comparables.

That makes home-price statistics tough to use as gauges for boat-oriented real estate. Even breaking them down by Zip code won't reflect different values for waterfront, water view and water access for homes that may lie within a few hundred yards of each other.

Foreclosure and defaults (serious lateness on mortgage payments) are lower in Maryland's prime boating areas along the western shore of the Chesapeake. RealtyTrac, a company that sells leads on foreclosed homes to investors, reports that Anne Arundel, Calvert and Howard counties all have default/foreclosure activity in the range of one per every 525 to 578 households. That's better than the rate for the nation (one per 519 households) and for Maryland (one per 380).

While there may not be a fire sale on water-oriented homes, buyers willing to hunt can find better opportunities than they could two years ago.

Leigh Lawson-Everstine, owner of the Metro Bay Realty brokerage in Edgewater, helped Green and Masser negotiate their purchase. She said values "obviously have taken a hit, but there's still a high demand for these water-privileged areas."

She said she has seen "significant drops," especially in waterfront homes. She described one 1940s cottage near Pasadena with water deep enough to accommodate a sailboat's keel. It's now listed at $650,000, though she said it probably would have had an asking price above $1 million just a year ago. "A lot of homes were significantly overvalued," Lawson-Everstine said.

Boaters don't necessarily need to own the shoreline to have a home on the water. In some respects, the boat itself fills the need. "A lot of people, instead of getting a home, they'll live on their boats for the weekend," Lawson-Everstine said.

By the way, if it has a galley, berth and a head (that is, kitchen, bed and bathroom), a boat counts as a second home as far as the Internal Revenue Service is concerned. Interest paid on a boat loan may be tax-deductible.

With fuel costs pushing the price to fill up some motorboats beyond $1,500, more boaters will enjoy their weekends dockside this summer.

For many area boaters, convenient access to the water translates to easy access to Route 50, so they can cut out of work early on a Wednesday or Thursday evening and get to Annapolis in time for weekly sailboat races.

Bobby Frey, president of the Chesapeake Bay Yacht Racing Association, said most of the sailors who own or crew boats in the weeknight races live within 30 miles of the bay. Two of their member clubs are based in the Washington Sailing Marina, just south of Reagan National Airport.

Considering the area's close commute to the waters of the Chesapeake, Potomac and the Occoquan River, good "water access" could mean a landlocked Tysons Corner address -- as long as it's not far from a Beltway on-ramp. But this summer, with gas prices at $4 a gallon or more, fuel costs will affect even sailors, who ride the wind for free.

Given the price declines near the water, this could be the time to replace the drive with a dockside address.

E-mail Elizabeth Razzi atrazzie@washpost.com.