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Vacation home sales sizzle; rentals book up 

by Diana Olick /  / Updated 
St. Michaels, Talbot County, Chesapeake Bay area, Maryland, United States of America, North America
Summer rental properties in St. Michaels in Maryland's Chesapeake Bay are nearly booked for summer.R H Productions/Robert Harding

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In the kitschy community of St. Michaels on the Maryland shore, businesses are gearing up for the official start of the season: Memorial Day weekend. Trucks carrying dozens of bicycles unload into waterside racks and shopkeepers move their brightly-colored wares out onto the sidewalks. For real estate rental agents, though, the heavy lifting is mostly done. The biggest houses are already booked.

"Those houses do tend to book up in January," said Deborah Lipscomb, owner of Eastern Shore Vacation Rentals. "Because of the Jersey Shore and the things going on there, we are seeing more of a demand for this area."

(Read More: Map: Tracking the US Real Estate Recovery)

The recession hit home buying in this area, which increased competition in the rental market, but that may change. Low mortgage rates, returning consumer and investor confidence, and the recent migration from New Jersey could turn this Maryland market around.

"We're getting the calls again from people looking to really buy, buy into the market and start renting again," said Lipscomb.

The impact of Super Storm Sandy is less apparent further south on Hilton Head Island in South Carolina.

"It's a great time to buy, it's a bad time to sell is what I tell people," said James Wedgeworth, who has sold real estate on the island for over a decade. "There is a light at the end of the tunnel."

The rental market on Hilton Head, which caters largely to the golfing set, has remained strong throughout the recession, likely because so few people wanted to buy. Confidence is slowly returning here, but prices are not.

"It hasn't really started going up, but at least it's not going down. We had seven straight years of prices going down. That's no fun," Wedgeworth said.

(Read More: Financing a Vacation Home)

Vacation home sales rose 10 percent nationally in 2012, according to the National Association of Realtors, but as with all things real estate, location is key. Prices are just stabilizing in South Carolina, but in the tiny towns of eastern Long Island, New York, better known as the Hamptons, rentals are fully booked for the season and home prices are roaring back.

"We've seen bidding wars in the four to five million dollar range as well as in the overall market," said Laura Nigro, a real estate broker in Bridgehampton. "It's so much better than when the 2008, 2009 economy shrank and people were very much afraid to invest in anything.”

Nigro said the potential of rising mortgage rates is the key driver. She said the Hamptons are not seeing too many migrants from the Jersey shore. The newest clients are coming from much farther away: China.

"In the Hamptons there is a new influx of Chinese buyers. In the past, they haven't been prevalent in this Hampton marketplace, but this season, for whatever reason there is, they are out looking for properties."

(Read More: Want a Million-Dollar Home? Tips From a Mega-Broker)

Neither the Chinese nor the locals seem particularly concerned about more storms coming to the coast. Potential buyers are, however, looking more closely at FEMA flood requirements and coastal erosion zones, according to agents, but they are still ready to buy.

On Hilton Head, James Wedgeworth said clients are asking more questions about storms, but he has the perfect answer: "If you look at a NOAA map of all named hurricanes since 1950, the safest place, believe it or not, is Jacksonville, Florida to Hilton Head. For whatever reason, they always hit up north."

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