Deep Creek Real Estate Blog

While it is well know that housing location is important, it often is difficult to put a market price on the importance of prime locations. Is there a way to value proximity to key features in our area? What exactly are people willing to pay for vacation rental houses with access to Deep Creek Lake or the Wisp ski slopes?

A recent study by Jon Nelson, a Penn State economics professor, addresses these questions. Nelson examined summer and winter rental rates for houses located in the Deep Creek area, with the objective of isolating the rent premium associated with proximity to lake and ski recreation amenities. Nelson used a sample of 560 houses from the area’s three major real estate management agencies and 50 vacation-rental-by-owner houses. Townhouses and condominiums were excluded from the sample. Using rental catalogs for 2008 and agency web sites, he assembled a data set that included information on the size and quality of each house, plus other features such as lakefront locations and ski-in, ski-out access. The average summer rental rate was about $3,400 per week for lakefront properties and $2,050 for lake access properties. The average winter rental rate was about $2,700 for slope-side properties near Wisp and $2,050 for other properties.

Using the statistical technique of multiple-regression analysis, Nelson sought to isolate percentage and dollar values for sixteen features for house size, quality, and location. For example, he found that one more bedroom would add $190 to the weekly summer rent and $225 to the weekly winter rent. A pool table and game room added about $225 compared to houses without this feature. The largest value was associated with lakefront locations, which commanded a summer premium of about $1,200 per week. This premium is exclusive of the value associated with dock access, either a private dock or dock slip. The premium for ski-slope access in the winter was $500-600 per week. Nelson also illustrates how rent premiums translate into higher market sale prices for houses or undeveloped lots, especially those with prime locations on the lake.

This summary is an overview of the full range of results in Nelson’s study, which are reported in an academic paper entitled “Valuing Access to Lake and Ski Recreation Amenities: Hedonic Prices for Vacation Rental Houses at Deep Creek Lake, Maryland.” Nelson intends to eventually submit the paper for publication by an academic journal. In the meantime, he indicated that he would welcome any critical comments or other responses to the study and its results. The paper will be eventually posted on Nelson’s web page at Penn State, but a copy also can be obtained by request at jpn@psu.edu.



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