According to a recent analysis, home buyers purchasing waterfront property in the United States are paying less of a price premium than they were six years ago. In the second quarter of 2012 waterfront homes were selling for a 54% premium, that number jumps down to 36% in the first quarter of 2018, an 18% decrease in just six years, according to research from real estate firm Zillow. This shows that the extra cost for waterfront living is on the decline, it’s at the lowest price point since the second quarter of 2002, and below the average premium since 1996 of 41%.
It is well-known in the real estate world the common phrase “it’s all about location” – and waterfront properties are the essence of what makes a property a desirable location. Across the country, homes on the water have had higher prices than their inland counterparts, but the gap has steadily been closing in recent years. The average home in the United States has well beyond recovered from the recession, but waterfront properties have not. Zillow defines waterfront homes as properties where the homeowner can reach the water's edge, anything from a lake, river, or ocean, without leaving the comfort of their property. Zillow's analysis compares the sale prices of waterfront homes with homes in the same metro that are similar in features but lack waterfront access.
Buyers are willing to pay extra for features that add a unique benefit to a home, and being right on the water’s edge is one of them. These homes are relatively rare, making up only a small portion of the housing market, and that scarcity keeps prices high, said Zillow senior economist Aaron Terrazas.
“With inventory as low as it is, buyers are spending more just to get into the market, which has narrowed the gap somewhat between waterfront homes and inland homes. Still, having waterfront access is incredibly appealing for many buyers, and even as environmental risk factors like rising sea levels and storm surges gain more attention and make some buyers more cautious in the homes they consider, the premium for waterfront homes is likely to endure,” he explained. The highest premium paid for a waterfront property is in Jacksonville, Florida, at 72%, followed by 68% in Cleveland, next with Denver and Baltimore at 53%, and finally 50% in Milwaukee. Waterfront homes have retained their value in cities such as Los Angeles, where the average home on the water is worth around $2,08,200, along with three other West Coast markets such as San Francisco, Seattle, and San Diego, with a median value of waterfront property of above $1 million. Zillow’s research also shows that the city that provides buyers the most waterfront property options would be Miami, where 5.9% of properties offer waterfront access.