BY SUSAN ERLER, Times of Northwest Indiana

GARY | A lakefront home carrying a $1 million-plus price tag hit the market this year, a first for Miller Beach.

The breakthrough could be a sign of better things to come for the community built on a stretch of Lake Michigan shoreline bookended by steel mills.

"It's definitely a sea change here," said Gene Ayers, whose family-run Ayers Realty is a Miller Beach mainstay since the 1920s.

Realtors hope the rising demand for vacation homes will re-fuel interest in the beachfront community, only now emerging from a hit delivered a few years ago when parts of Lake County saw residential property taxes spike after a state-wide reassessment.

Before the tax hike, Miller Beach home values had been moving up the charts on par with those in lakefront communities further east: Ogden Dunes, Dune Acres, Porter Beach and others, in counties not as hard hit by fallout from the reassessment, Ayers said.

Afterward, values continued to rise, "but not like they had been," Ayers said.

Efforts to mitigate the tax, including a temporary 2 percent cap put in place by local officials, are helping property values to rebound.

"What we have in store for us is a nice jump in values, for sure in the next couple of years," he said.

Buyers recently snapped up two vacant lakefront lots in the upper-$400,000 range, Ayers said.

In what has become a common scenario, one of the buyers was a Chicagoan, Ayers said.

Donna Hofmann, an agent with Coldwell Banker in nearby Chesterton, said the majority of buyers for the beachfront properties she deals in -- exclusively in Porter and LaPorte counties -- come from Chicago and its suburbs.

Most are seeking a getaway from the city.

"About 90 percent of the houses in the beach areas are second homes, and the majority of the buyers are 50-plus," Hofmann said.

"The 50-plus group are looking at it long-term, possibly as a retirement place as they leave their professions," she said. "Some are keeping an apartment in the city and a house at the beach."

Baby Boomers and others are snapping up vacation homes at record rates, the National Association of Realtors reported this year.

Vacation home sales increased 16.9 percent last year to a record 1.02 million, from 872,000 in 2004, according to the report, based on 2005 surveys.

Baby Boomers are at the optimum point to make such purchases, Association chief economist David Lereah said.

"They're at the peak of their earnings; interest rates remain historically low and boomers want to diversify their investments," Lereah said.

The rate of second-home purchases has gone through the roof, said Blanche Evans, editor of Dallas-based Realty Times.

"Because people are strapped for time," Evans said, "the closer by they can get their second home, the better."

Some buyers are willing to go up to 500 miles away, if quick, cheap commuter flights are available, Evans said.

"Otherwise, they want it to be an easy drive," Evans said.

Miller Beach, established in the late 19th century and later annexed by Gary, is the closest of the Indiana beachfront communities to Chicago, about an hour away, and often less.

It's still catching up to neighboring beachfront communities further east, in terms of appeal as a vacation-home mecca.

Still, Ayers said, about 75 percent of buyers in Miller Beach are in the second-home market.

Its location within the struggling Gary school system district limits the number of families who buy year-round homes in Miller Beach, Ayers said. "There's a lot of singles."

Gary's blue-collar history -- the city is home to U.S. Steel -- could hold buried potential.

"Developers are going to take advantage of rundown blue-collar housing and turn it into white collar," the Realty Times' Evans said.

East Edge, being developed in Miller Beach, might be a case in point.

Land for developer Jay Gallagher's planned 28 upscale homes and townhomes once housed 40 concrete-block two-flats built about 50 years ago and razed as they fell into disrepair in the 1980s.

Long-time Miller Beach real estate agent Len Pryweller bought the land piece by piece as it went on the market, and sold it last year to Gallagher, Pryweller said.

Gallagher had completed a loft-style development in Chicago and was scouting new projects when the Miller Beach land came available, he said.

A transplanted Chicagoan, Gallagher said he and his wife, Ann, discovered Miller Beach and bought a home there in 1999.

"We were looking for a single-family home because we were tired of living in a condo. We saw an ad in the paper that said lakefront. We'd never been to Miller Beach," he said. "We just fell in love with it."

He opened the first East Edge Homes structure last month, a single-family home being shown as a model.

Plans are for 12 single-family homes, priced between $429,000 and $519,000, and 16 townhomes priced at just under $300,000, bordering a common area at the center.

The Miller Beach community appears poised to enter the second-home market, said Evans.

"In order for that to be viable, there has to be places to go and things to do, so you can look forward to appreciation," Evans said.

That could take time.

While it has a number of highly regarded restaurants, including the Miller Bakery Cafe, and a single grocery market, "what we're lacking most of all is other kinds of shopping," Ayers said.

That's something Miller Beach will have to overcome, said Gallagher.

"It's not New Buffalo, with all kinds of cutesy shops," Gallagher said of the trendy Michigan resort community.

"But we are across from a national park," Gallagher added.

The community's future could be similar to the South Loop in Chicago, where decaying inner-city structures were replaced with upscale condominiums and homes.

"(South Loop) was such a natural location, but it just never happened. It took a few developers going in and, before you know it, everybody's in the South Loop," Gallagher said.

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