Building a New Home in the LBI Real Estate Market

New Construction in the Long Beach Island Real Estate Market

Building a new house on Long Beach Island offers many advantages over buying an existing house. A new construction will allow you the ability to design and customize the house to fit your needs. Building a new home will often see immediate equity, as the finished home should cost much less than buying a similar home in the market.

Building a house involves finding a suitable building location, knocking down the existing house, and constructing the new dwelling. Since there are very few vacant lots left on LBI, the majority of new construction takes place in this fashion.

Building a new house in the LBI real estate market is usually a 6-8 month investment in time, but the rewards are numerous. Apart from getting the house and layout you want, the finished project usually will come in about 20%-25% under market value. This means that someone with a $750,000 budget could end up with a $1,000,000 house without spending any additional money! There are many ways to finance new construction, including home style renovation loans for storm damaged homes and construction loans designed to fund the building project.

Lot Sizes and Locations When Building a New Home in the LBI Real Estate Market

The size of the lot will determine how much house can be built. Generally, anything smaller than 40’ of width will require a variance from the town, but ideally, a lot should be 50’ wide, as it allows for a better design. Most side yard setbacks are 4’ and 11’ feet. This means a 40’ lot would allow, at most, a 25’ wide house. The extra 10’ in a 50’ lot allows for much more space and flexibility! Most lots are between 75’ and 100’ deep. The depth of the lot is not as critical as the width, but ideally you should have 75’-100’ as a building depth.

The location of the building lot will determine not only the price, but the future appreciation of the home. Typically, oceanside, oceanblock and oceanfront locations will hold their value better than bayside homes, but they will also cost more to purchase.  Regardless of the location, you want to make sure to not “over improve” a lot by spending too much on the new house!

The cost of construction will depend on the size of the house, the finishes that are installed, and the overall market conditions. Quality new construction should cost about $160-$185/ square foot for a house with hardwood floors, granite counter tops and other attractive features.  The final cost of the building project will also be influenced by the size of the house. For example, a 1,000 sq. foot ranch style house will cost much more per square foot than a 3,000 sq. foot house. This is due to certain “fixed” costs such as plans, permits and demolition, as well as the fact that simple expansion of a home is not that costly.

Building a New Home to Flood Guidelines After Hurricane Sandy

New Construction and the Long Beach Island Real Estate Market

Building a new house on Long Beach Island can be an excellent investment and can realize immediate equity in the LBI NJ real estate market. There are still some excellent opportunities to buy storm damaged homes on LBI, as well as non-damaged knock downs. When rebuilding after Hurricane Sandy, remember building to the new flood codes will lessen the risk of damage from future storms and lower your costs of flood insurance. There are some important  points to consider when rebuilding after Hurricane Sandy on LBI:

• Flood insurance is based on the perceived risk associated with the property.
• Risk levels are determined by many factors, but flood zone and elevation above sea level top the list.
• Foundation systems and flood vents can greatly impact the amount a homeowner pays for flood insurance on Long Beach Island.

All properties on Long Beach Island have a base flood elevation associated with them. There are three predominate flood zones on LBI. They are an “A” flood zone, a “V” flood zone and a “X” flood zone. The majority of Long Beach Island falls into the “A” flood zone. Homes in an “A” zone are permitted to have solid block or piling foundation systems, and usually fall into a Base Flood Elevation (BFE) of 7-9 feet.

“V” zones are the most restrictive with higher elevations (usually 9-15 feet), and limitations on what can be used as a foundation system.  For example, solid wall foundations (blocks) are not permitted, as the foundation system needs to have break away walls. “V” zones are mostly limited to the oceanfront and some bayfront areas on LBI. The “X” zone is actually the best zone to be in, as it is the least restrictive, with some lenders not even requiring flood insurance in these zones!

Building in the A Flood Zones on Long Beach Island

FEMA defines an A”” and “AE” flood zone as having a 1% chance of an annual flood (it is partly from this definition that the term “100 year storm” comes from when speaking of Hurricane Sandy). Homeowners in an “A” or “AE” flood zone on Long Beach Island can expect the following:

• Flood insurance rates in an “A” or “AE”  zone will be less expensive than a “V” zone.
• Building codes will be less restrictive in an “A” or “AE” flood zone on LBI.
• Breakaway wall foundations are not required (although they are recommended).

Due to FEMA’s interpretation that flooding will be less destructive in an “A” or “AE” flood zone, flood insurance is less expensive than a “V” zone. In order for a property to be zoned a “V” zone on LBI, FEMA must ascertain that the subject property will sustain the direct impact of a 3 foot or higher wave. In the eyes of FEMA, properties on LBI in an “A” or “AE” flood zone do not share this risk. It is for this reason that homes in “A” and “AE” flood zones can be built on a solid block foundation with flood vents rather than the break away wall system required in a “V” zone. For some buyers, an “A” or “AE” flood zone on Long Beach Island will be more attractive in the real estate market. In the wake of Hurricane Sandy, the LBI real estate market has become very reactionary to flood zones and flood insurance. Many buyers are concerned with the potential for flood insurance rate increases, and the impact these increases will have on the future value of the Long Beach Island real estate market. The good news is, most homeowners will see very manageable rate increases.

Building in the V Flood Zones on Long Beach Island

A “V” flood zone is considered to be an area of higher risk. Therefore, flood insurance rates tend to be higher in a “V” zone as compared to an “A” zone. Also, there are building restrictions and additional methods that are recommended to safeguard the house. It is very important to understand new construction in a “V” zone on Long Beach Island, NJ. In short, homes must be built higher, with breakaway walls, and to achieve the best rate, built without enclosures below the structure. When building in an “A” or  “V” zone, both FEMA and the towns on LBI have established a minimum required height, often known as the BFE (Base Flood Elevation). Building higher than the BFE will lower both the flood insurance premium on LBI as well as future flood risk. A helpful example is offered by FEMA to demonstrate that by building higher, the flood insurance rate (premium) on Long Beach Island will drop significantly

• A single story home built on wood pilings in a “V” flood zone built to BFE (base flood elevation) would have a monthly premium of roughly $878/ month.
• A single story home built on wood pilings in a “VE” flood zone built 3 feet ABOVE BFE (base flood elevation) would have an estimated monthly premium of only $315/ month!
• This is a savings of almost $6,800/ year on flood insurance on Long Beach Island, NJ!
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  Rebuilding in an “A” zone on Long Beach Island after Hurricane Sandy offers a very similar situation as building in a “V” zone, however, it is important to note that flood insurance rates are generally less expensive and building codes are more relaxed.

Foundation Systems on Long Beach Island New Jersey

There are two foundation systems commonly used for new construction on Long Beach Island. The most common is a piling support system with a breakaway wall foundation and flood vents. This system will be viewed as less risky by insurance companies, and can often result in a discount on the flood insurance premium.  Less commonly used are block foundations. Although this was the go to method for homes built in the early stages of development on LBI,  these systems are rarely used for new homes on LBI. You do see this foundation system commonly used for raising homes on LBI. In either case, flood vents are an important upgrade that can significantly raise or lower the cost of flood insurance on LBI. The rule of FEMA, and to meet code, you need 1 square inch of flood vent for every 1 square foot of enclosure. Regardless if your plan is to buy a knock down on LBI or build on an existing property, keeping in mind the guidelines imposed by FEMA will not only lower your risk, it will also save you money in the long run! 

Does Building a New Home in the LBI Real Estate Market Make Financial Sense?

As a buyer, let’s assume you find a nice 50x80 lot on the oceanside in Long Beach Township. This lot will cost about  $500,000-$600,000 in the current market, and can accommodate a well designed 2,200 sq. foot house with large decks. This house will cost about $350,000-$375,000 to build, making the total project cost about $975,000.

Similar new construction oceanside homes will sell for about $1,200,000, so it is easy to see how building a new home can create instant equity and appreciation in the LBI real estate market! If you are looking for value in the LBI real estate market, new construction is the way to go!