Beach property is Hot(ZT)

Forget global warming: Beach property is hot You'd think that the prospect of flooded coasts would mean thatbeachfront real estate prices would be sinking. But you'd be wrong.Fortune's Jon Birger dives into the topic. By Jon Birger, Fortune senior writer June 5 2007: 4:10 PM EDT NEW YORK (Fortune) -- It took me a while, but I finally got around toseeing Al Gore's global warming movie, "An Inconvenient Truth".(Clearly I don't get out enough. The last first-run movie I saw was"Happy Feet" with my kids.) Truth be told, I was bored silly by much of the movie - I'm not adocumentary person, I guess - but there was one part of the movie thatreally stuck with me. It was Gore's assertion that, by 2100, hugeswaths of coastal America would be washed away by a 20-foot rise in sealevel. As someone who writes about real estate off and on, I thought itbegged an interesting question: With so much attention now being paidto global warming, why isn't the market for beach homes...well...underwater? The stock price of Florida beach-community developer St. Joe Company(Charts) is actually up 9% since "An Inconvenient Truth" opened in Mayof last year. And real estate agents who specialize in sellingseven-figure homes on the ocean say demand remains hot, despite thebrutal market for real estate generally. "It really hasn't been an issue," says Cape Cod, Mass. real estateagent Paul Grover. Grover has had a few warming-wary buyers who onlywanted to look at homes on a bluff as opposed to right down on thebeach, but such sentiments are rare. "The high end has been stable," hesays. "In fact, I just sold a house [on the beach in Osterville, Mass.]for $9 million that probably would have sold for $7 million five yearsago." Wyoming's natural gas boom sees growing pains On one level, I can understand why someone looking to enjoy a beachhouse in 2007 might not obsess over what will happen in 2050 or 2100.Still, one of the key attractions of real estate as an investment hasalways been its permanence. As the saying goes, they're not making anymore of it. So if a $5 million property is going to be graduallyswallowed up by the sea, to me it doesn't make a whole lot of sense topay a premium price for what appears to be a depreciating asset."Personally, there's no way I'd make a coastal land investment withoutlooking at all these factors," says global warming expert MichaelOppenheimer, a professor of geosciences at Princeton University. Do today's beach-house buyers have their collective heads in the sand?My own answer is yes - but with some caveats that suggest that they maynot be buried quite as deep as Gore's movie would have you believe.First off, the sea level rise shown in "An Inconvenient Truth" is atthe high end of scientists' predicted range, essentially reflectingwhat would happen if the entire Greenland or West Antarctic ice sheetswere to melt. The United Nations' Intergovernmental Panel on ClimateChange (IPCC) posits that sea levels will rise anywhere from 4 to 35inches by 2100. The great corn gold rush Also, predicting changes in sea level is complicated by the fact thatthere are more variables than just air temperature. For instance,Oppenheimer points out sea levels are actually falling on the WestCoast due to tectonic plate shifts. They're falling in Europe as well.And there's some thought that some of the glacier melt will end up inthe air - in the form of higher humidity levels - as opposed to in theocean. I guess the bottom line is this: if you're a CEO or a hedge fundmanager with $5 million burning a hole in your pocket, go ahead and buythat beach home of your dreams. You just might want to buy the lotbehind too.