If you’ve ever dreamed of owning a waterfront home along the Chesapeake Bay, now might be the time to go bargain hunting. Just ask Bill and Brenda Egge.

The Egges retired, sold a home in Anne Arundel County in 2006, and bought a motor home. Two years later, after several laps around the country, they wanted to settle down again and began looking for a home in Southern Maryland.

They fell in love with a sprawling five-bedroom Cape Cod-style home in Piney Point, near the far-flung tip of St. Mary’s County. With a spiral staircase and a pristine view of St. Jerome’s Creek near the Potomac River and the Bay, the home was originally priced at nearly $900,000 in the twilight of the housing boom. It sat empty after the prior owners had passed away. Their heirs, eager to sell, slashed the price again and again, finally down to $550,000.

Along came the Egges last summer. Feeling confident in a cash-strapped market, they low-balled the sellers with an offer of $450,000. “I figured, ‘Let’s see how far we can push them’” Bill Egge says.

A few weeks later, the couple signed a contract on the home for $465,000—almost half its original price.

“Five years ago, I don’t think we could have afforded it,” Egge says.

Today’s market for waterfront real estate is a bargain hunter’s paradise. Just a few years ago, waterfront properties on and around the Chesapeake Bay were doubling in price every few years. Frantic buyers often bid beyond the asking price. They came in droves, some from New Jersey seeking retirement homes, others from the Washington area looking for weekend getaways. And of course there were wide-eyed investors lured in by the run-up.

For many, it seemed, that dream home was slipping out of reach.

But today? Things have changed. The housing market has soured. There’s simply not that many buyers out there—real estate agents say even traffic on their Web sites is way down. The number of homes on the market—the “inventory” as the pros say—is six or eight times what it was just a few years ago. Any sense of urgency has completely shifted from buyers to sellers.

“It’s the bottom feeders out there right now,” says Jean Atkins, an Annapolis real estate agent for nearly twenty years. “We’re scraping the bottom of the market right now, and they’re out there fishing to see how low we can go.”

Take a look at the raw numbers: The average price of a Chesapeake Bay-front home sold in Maryland rose from about $500,000 in 2002 to more than $1 million in 2006, according to the statewide Multiple Listings Service, a database used by real estate professionals. But those days are over. For 2008, the average waterfront home went for about $788,000. And this year could be worse.

“Are we at the bottom with the waterfronts? Probably not—they’re probably still going to come down,” says Rick McNabb, a realtor in St. Mary’s County. The number of houses on the market has ballooned. St. Mary’s and Calvert counties, for example, had about 250 total houses for sale in 2004. At the end of 2008, there was a total of nearly 1,900 with nearly 200 on the water.

“There’s nobody out there looking,” McNabb says. “And we’ve got a lot of owners who just got in over their heads. It all sounded good when everything was going good, but now they just have to get out. They’re saying, ‘I don’t care that I’m not making any money,’ or ‘I don’t care if I put 200K down and I’m walking away with only 20K—I want out.’”

To be sure, not all of the Chesapeake’s local markets have tanked. Bargain hunting still demands research, patience, and trade-offs. Historic homes, deepwater access for boats, and proximity to big cities and nice towns all drive up the price. For about $300,000, you might find a 1970s rancher with a great water view ten miles down a farm road on the Eastern Shore. But a century-old colonial revival with a boat dock near Annapolis will still likely run more than $1 million.

Indeed, the Annapolis area is holding steady. Overall, the market is just 10 or 15 percent off its peak in 2006. Most homes there are primary residences. A daily commute into the Baltimore-Washington corridor is doable. But there are still some remarkable deals out there. One waterfront home in Bay Ridge sold for $1.9 million in 2005. It later went into foreclosure and is now under contract for $1.2 million.

Don’t expect to find any deals in Talbot County. Far from it. A wealthy region for years and more recently a second-home sanctuary for well-off Republicans such as Dick Cheney and Don Rumsfeld, Talbot is the only bay-front county to see prices continue to rise. Buyers with deep pockets are drawn by the trendy shops and great restaurants in towns of Easton, St. Michaels, and Oxford as well as the short drive to the Bay Bridge. Agents there say you’d have to drive all the way out to the remote tip of Tilghman Island to find waterfront homes under $750,000.

Yet those places have always had pricey real estate. The housing bust’s biggest impact has been on those places that were historically more affordable. “The lower end of the waterfront market has been more impacted than the higher end. There is more inventory at the lower end—less than a million—than I’ve ever seen before,” says Carolina Barksdale, a real estate agent in Easton.

Barksdale says she sends her more cost-conscious home shoppers down to the lower Eastern Shore, to Dorchester County or even Somerset. There’s plenty of options as low as $300,000 down there. But you get what you pay for, she warns. There you’ll find no-frills, unremarkable homes in remote villages. Not much to do there except enjoy your water view.

The best bargains might be in Somerset County, around Crisfield, a sleepy town of shuttered seafood packing-houses and stunning sunset views over the Tangier Sound. A large marina makes it ideal for serious boaters. And a poorly timed condo-building binge a few years ago has left a glut on the market. Condo units that initially sold for more than $600,000 in 2006 are sitting unsold now for less than $300,000.

Another budget waterfront spot near the Bay is Virginia’s Northern Neck, a four-county stretch along the Potomac reaching down into the Tidewater region. Real estate agent Lon Crow saw interest in the region spike during the housing boom, and business is resuming now that prices are once again reaching the “magic $399 range.” Drive about two hours south of Washington along Route 301, and that price will get you a newly built three-bedroom home with a great water view, private pier, and deepwater slip for a boat. But, Crow cautions, it’s rural out there. “We don’t have the shopping malls and other metropolitan amenities.” Recently, a new Wal-Mart opened up down in Northumberland County, so “it’s not a total backwater.”

There’s no crystal ball to say where the bottom of the market is. Some agents say savvy buyers are getting the best bargains right now. But there’s not much hard evidence that the slide in prices will reverse anytime soon.

The bottom line: If you’re in the market for a bargain home on the water, there’s no rush.
“I tell people, ‘It’s not like we’re going back through the roof anytime soon,’” McNabb says. “And I’m talking like fifteen or twenty years.”