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Beach House prices

7,814 Views | 54 Replies | Last: 1 yr ago by SoTheySay
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Does anyone have insight as to where beach house prices might be going? I've been following a few areas in west Galveston and also Port Aransas since I own or have owned property there in the past 4 years.

From a pure listing standpoint property values have shot up as high as 100%. Anecdotally, it seems like houses are staying on the market longer and I'm actually beginning to see some listing prices drop.

Are they selling these houses at such a high rate or are people just listing high to see what happens - and not selling as much?

With interest rates rising I'm wondering where the buyers will be coming from that weren't looking around 3 years ago in the same area. Who will afford a little 1,800' dump for $800K that was holding out 3 years ago when the price was $400K?

KDubAg
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Buddy had a new construction 3/2 beach house in Crystal Beach. Bought it a little over one year ago for ~$360k. Sold it last weekend (2 days on the market) for $575k.
woodyhayes
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I live at Crystal Beach and it's insane. $300-$350 s.f. is the new norm. Front row lots, and not a lot of those left, $325K-$399K. Neighbor built less than 2 yrs ago. 2400s.f. 5 bedroom, 4 bath, 2nd row. Has less than $700K in it, (lot &house). Sold in 6 days $960K.
Mas89
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That's 400 per sf. Wow. Must really love the beach. Never understood if it's the sand or those miniature mosquitoes people love the most down there.


Furlock Bones
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like anything, it depends on the area.
agnerd
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I'm betting prices should be leveling off for a year or 2 because of:
1. higher interest rates/impending recession
2. fundamental change to flood insurance resulting in much higher rates for coastal
3. Opening up of international travel will reduce demand slightly for "local" vacation options.

Around 2024, I expect prices to begin gaining again, and I expect that you will see more rentals and fewer residents since it will be harder to live there full time. Also, you should never believe any opinion I have on real estate because it's probably wrong.
EclipseAg
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Plenty of homes in Pirates Beach listing for $1 million or close to it, even those a little further back. Some going for $450-$550 a square foot.

That's a giant leap from three or four years ago. Houses that would have sold for $399K are listing for $750K or more. Insane.
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EclipseAg said:

Plenty of homes in Pirates Beach listing for $1 million or close to it, even those a little further back. Some going for $450-$550 a square foot.

That's a giant leap from three or four years ago. Houses that would have sold for $399K are listing for $750K or more. Insane.


I wonder if this particular segment is ripe for a huge bust. Maybe not all housing, but segments like the mid to high end beach homes that seem to even outpace insane standard urban/suburban homes.
Furlock Bones
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Depends if you think STRs will crash. Because the rental rates are crazy good.
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Furlock Bones said:

Depends if you think STRs will crash. Because the rental rates are crazy good.


We have one right now, it's cash flowing a ton, so it's easy to compare an almost identical house +/- a few hundred square ft or +/- a room. Great rental numbers now, while true, are compared to the purchase price at less than half the price they go for today. So at the new purchase prices I'm not sure the value adds up even with high rental prices.

We gross around $100K on a house we paid $320K for and put in $150K rehab (4 years ago). I don't think we could buy the same house today for less than $800Kx
MAS444
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Location?
EclipseAg
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Furlock Bones said:

Depends if you think STRs will crash. Because the rental rates are crazy good.
Yep. The increase in rental rates is also astonishing. I'm surprised people will pay that much for a Galveston rental.

A Pirates Beach house we rented two years ago for $2,500 for a week now goes for close to $5,000. Most three bedrooms are around that range now. I guess affordable for two or three families, but that's a lot of money to spend the week in Galveston.

There is actually a house listed on Sand N Sea now that rents for $14K a week. It's a big, beautiful house, and close to the water, but still ...

A few years back when we owed a house in PB, we were forced to reduce our rental rates for three years straight due to oversupply in Galveston. At the end, our nightly rate was about the same price as a hotel and we still struggled to fill dates. Hard to believe now.
carl spacklers hat
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This reflects an overall change in the vacation rental market. A lot of people are aware of VRBO/HomeAway/AirBNB now who weren't 4-5 years ago. I think the pandemic opened a lot of travelers' eyes to vacation home rentals when before they only considered hotel/motel. And with Galveston's proximity to Houston, you have a massive built-in demand driver 45 minutes away. When Houston's economy is cranking, those second home prices only an hour away are pretty attractive (relatively speaking, anyway).
People think I'm an idiot or something, because all I do is cut lawns for a living.
EclipseAg
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carl spacklers hat said:

A lot of people are aware of VRBO/HomeAway/AirBNB now who weren't 4-5 years ago. I think the pandemic opened a lot of travelers' eyes to vacation home rentals when before they only considered hotel/motel.
I agree completely. There's been a sea change in traveler preferences and it's benefited vacation rental owners.

Also, my own impression as a former rental owner is that beach rentals tend to attract multi-family guests -- two or three families come together to rent a place and split the cost. In that regard, $5,000 for a week isn't that outrageous.

Still, it's surprising (and a bit painful) to see how dramatically rates have risen.
Keeper of The Spirits
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Quote:

I'm betting prices should be leveling off for a year or 2 because of:
1. higher interest rates/impending recession
2. fundamental change to flood insurance resulting in much higher rates for coastal
3. Opening up of international travel will reduce demand slightly for "local" vacation options.

Around 2024, I expect prices to begin gaining again, and I expect that you will see more rentals and fewer residents since it will be harder to live there full time. Also, you should never believe any opinion I have on real estate because it's probably wrong.


We bought one in Port A after watching it climb for several years. We overpaid a little but it will still cash flow just fine and I don't plan to sell it. Some stuff has been listed at nutty prices for a while. I do think higher second home interest rates, higher flood insurance negative effect on prices and opening up flights again will have a negative effect on STRs. Raising the limit on conventional mortgages may offset some of the flood insurance, interest rates as now there are more buyers in the up to 800k market. I don't think it will be huge. Same as everybody, I should have bought 4 years ago.

We booked Spring Break, Sandfest, Easter, using it this weekend, have booked for most of June and the 4th of the July. A full 7 days in June costs $3,454, of that we will clear about $2,500. We forecasted total revenue of about 60k for the year using airdna, historic performance and a couple other sites, AirBNB, VRBO and large property managers have made booking a house much easier and comfortable. If it does not crash we plan to add a bedroom and small pool and based on quotes we have that will cost another 100k but then we expect to make 80-100k a year on the rental side.

125,000 people a year are moving to the easily drive able metros (austin, sa, houston) for Port A and Galveston. During the pandemic, many people "discovered" port A who had previously looked down there nose at it. Port A is getting "nicer" because of it.

If any of y'all are looking for a place we'd love to have ya and depending on the weekend might be able to give you a discount.

Farley Beach House

https://instagr.am/p/CYKAjq9r9lE
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MAS444 said:

Location?


Port Aransas. One of the highest rated places in town.

https://www.vrbo.com/1088404

We have a few last minute booking openings, can go about 50% discount a week or so out from arrival.
SoTheySay
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Our family's in Port A is going up today. I believe it's $435/ft.
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SoTheySay said:

Our family's in Port A is going up today. I believe it's $435/ft.


That's sick if wanting to purchase these days…

Are you in Palmilla or something similar?
Keeper of The Spirits
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Are you managing yours yourself?

We paid a little under 400 a square. A 3/2 on Nautilois just went for 434 a square. Palmilla is commanding higher and HOA is 1k a month and that doesn't include golf. That's where we would like to end up

I can also offer a significant discount less than a week out
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Yes, we manage ourselves.
rlb28
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Down where we are in lowly Surfside Beach, the houses are being listed (and selling) at $300-$500/SF. This one is $545/SF and not on the front row. It's unreal.

651 SF for $355,000
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If someone wants to buy mine for $1 Mil I'd consider it.

$106K gross, not counting cleaning fees! Come and take it!


Diggity
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That cleaning fee income line item is starting to turn a lot of people off regarding ABNB/VRBO's.

More power to you for taking what the market gives you but the daily rates I'm seeing right now when you add in fees are making hotels look like a bargain

People were looking for more "open spaces' during covid but eventually folks catch on to dislocations.

You'll clearly be fine because your cost basis is low but I wouldn't want to be the guy/gal paying $400/sqft and counting on rents to keep increasing at this rate.
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Diggity said:

That cleaning fee income line item is starting to turn a lot of people off regarding ABNB/VRBO's.

More power to you for taking what the market gives you but the daily rates I'm seeing right now when you add in fees are making hotels look like a bargain

People were looking for more "open spaces' during covid but eventually folks catch on to dislocations.

You'll clearly be fine because your coat basis is low but I wouldn't want to be the guy/gal paying $400/sqft and counting on rents to keep increasing at this rate.


About $150 per stay and we do a few extra deep cleanings per year. $150 isn't bad, I've seen some like $300+
Diggity
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I've definitely seen worse, but the point is it's clearly a profit center and not a pass through. I think we paid $60 for our cleaning crew in Galveston, but our management company charged us a "pass through" of $150. What a deal

When a nightly rate shows as $250 and ends up being $400+ because of cleaning fees and service fees, people get pissed off.
Keeper of The Spirits
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We aren't close enough to handle issues as they arise, like we had a tenant who put out too much trash, otherwise I'd love to manage myself.

I agree on all the fees, I wish you could have a toggle switch that just showed the total rate because it's not like it's optional. Our goal is to break even although our projections show good cash flow. 1 mil still has you renting at 10% per year so the math isn't bad at 1M
Keeper of The Spirits
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Premium your location is great! We stayed next door last year before we bought ours. We have some friends on park place with numbers in the 140s there's is a 5 bedroom. Also I thought Port A regulations said you could only advertise # of bedrooms x 2 + 4 for number of sleeperrs
SoTheySay
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Here is ours… I'm not super thrilled about selling but it's what my parents want to do.

https://www.realtor.com/realestateandhomes-detail/115-Five-Dove-Cir_Port-Aransas_TX_78373_M84355-78757
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Keeper of The Spirits said:

Premium your location is great! We stayed next door last year before we bought ours. We have some friends on park place with numbers in the 140s there's is a 5 bedroom. Also I thought Port A regulations said you could only advertise # of bedrooms x 2 + 4 for number of sleeperrs


They just lowered it, so 10 is our max. Ours should be lowered to 10, if you noticed more it needs to be updated.

If you want to handle it yourself, find a high quality local maid who has a backup or two. They can perform house checks and fixes of things as if you were local. Also have a handyman you pay well who can do other projects.

We handle 100% remote from Houston.

To me it isn't about the cost savings from paying a management company - it's about the poor service and poorer reviews that result in much lower number of total bookings. Lost bookings and reputation will cost you way more than the fees you pay the management company.
Husky Boy Jr.
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I've been following TX coast condos closely, particularly Port A (where we want to be) and N Padre. A 2/2, 800-1000 sq foot condo in Port A where the complex is on the beach will run 375-500 depending on any number of things (this is low rise property and excluding properties with 1200+ per month HOA). In North Padre, the same properties are easily 100-150k less. Wishing I had bought a few years ago...or maybe I should compromise location a bit.
Medaggie
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We have been thinking about buying a beach STR but always wary of the high maintenance esp with all the salt/sand damage. Are you finding repairs to be a constant issue? Plus, how much is hurricane/property insurance?
MAS444
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Anyone with nearby lake rentals? Conroe or Livingston? I'm guessing they're not quite as in demand ...?
Reload84
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Check this Sea Isle listing out that posted today. Looks like a great view of Galveston Bay and bird sanctuary. Probably will go fast given location and view!

https://www.zillow.com/homedetails/3754-Concho-Ky-Galveston-TX-77554/27694517_zpid/?view=public
MAS444
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Not that it won't still go fast - but it would get a ton more views/interest with a better listing.
Yordaddy
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