Real Estate Boom Was the Bust for Ocean City's Population, Realtors Say

With their modest Ocean City homes more than doubling in value in the span of five years, the sand in their shoes became a little lighter.

For families, it was a chance to get more home for less money by moving to the mainland. For retirees, it was the opportunity to move into a retirement community with more amenities and less maintenance—and still profit from the exchange.

The wealthy buyers kept their new homes only as investment properties or vacation spots.

That's the story behind the 23.9 percent decline in Ocean City's year-round population shown in the new U.S. Census report released Thursday, according to real estate professionals and city officials interviewed for this story. The report shows the city's population falling from 15,378 in 2000 to 11,701 in 2010.

The experts say most of the exodus occurred between 2001 and 2005, when the average sales price on a single-family home in Ocean City increased 111 percent, according to the House Price Index (HPI) published by the Federal Housing Finance Agency. The HPI shows a more modest 44 percent growth in sales prices for all markets during the same period.

"We lost a lot of year-round residency when the boom was going on," said Nick Marotta, president of the Ocean City Board of Realtors. "A lot of people took the money and ran, developed the property."

But with prices falling and mortgage rates at historic lows, Marotta sees the start of a new cycle that could see the return of families and retirees as permanent residents.

Ocean City real estate agencies closed 640 sales in 2010, a 5 percent increase over 2009, according to Marotta. He said the increase included a "tremendous spike" in the fourth quarter of 2010, a good indication for prospects in 2011.

"It’s a great place to invest and a great place to live," Marotta said.

Kevin Redmond of Ocean City Realty said he sees the same reasons for the island's population decline: retirees and families who could move offshore and "get more for their money" in the early part of the decade.

Redmond said he's seen a trend among home buyers in "people in sales who can work from anywhere." The ability to work remotely from home could eliminate one potential obstacle to population growth: the proximity of high-paying jobs.

Gloria Votta of RE/MAX of Ocean City lived on the 1200 block of Central Avenue during the boom and said she watched many of neighboring homes get sold, torn down and replaced by duplexes.

But she, like her colleagues, sees signs of a rebound, including prices that have returned to 2003-04 levels and people buying second homes now with hopes of retiring here.

Mike Dattilo, the city's business administrator, said the city was aware of the population trend but does not anticipate any significant impact in funding or other formulas that might be affected by the new population numbers.

He also said that the city has not seen any dramatic change over the decade in other measures of population such as trash and recycling tonnage or sewerage volume—an indication that regardless of what the census says about permanent residency, a constant number of people inhabit the island at any given time.

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