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PALM COAST, FL – August 18, 2015 – The total value of single-family Flagler MLS home sales in July exceeded $50M, the highest level since June 2006 and 502% above the January 2008 low. Still, the July total remains 41% below the June 2005 peak. How so?
It has been said, “Numbers lie and liars figure.” Assuming the numbers are true, how do I paint such a dramatic picture? Up 502% from the low yet 41% below the peak??
The single most important statistic to the average homeowner is the value of their home. They want to know if home prices are rising or falling. How fast? And by how much? That is why we tend to measure the health of the housing market by tracking selling prices. But that’s not the only way to look at the market.
For instance, we don’t read about the average price or the median price of a new car. Instead, the car market is typically measured in the number of cars sold while individual auto manufacturers are measured in gross sales (and profits).
Real estate agents and brokers are compensated through commissions. Their income is directly related to total sales; a combination of price and the number of homes sold. In their case, the gross sales numbers mentioned above truly represent the fluctuations they have experienced through both the rising and falling market. Real estate practitioners’ incomes fluctuate more wildly than do home prices.
The total sales value of SFR (single-family residential) Flagler County homes dropped a whopping 88.3% in only two and one half years. That’s true, but the high was in June 2005 and the low was in January 2008. Not a valid comparison. January is typically the slowest month for home sale closings in our market. June is typically among the best months.
In 12 of the most recent 13 years, more home sales have closed in June than in January, averaging 59.7% more. So agents and brokers expect a seasonal swing in monthly sales volume. Still, comparing January and July sales statistics without noting the seasonality is misleading.
On an annual revenue basis, local realtors had their best year in 2005 when SFR sales totaled $792.7M. Their worst year was 2010, when SFR sales totaled $235.1M, a 70.3% drop. Still big, but not as bad as the true but misleading 88.3% above. (Of course, by 2010, there were fewer agents and brokers to share the commission pie.)
By comparison, total SFR sales revenue over the past 12 months was $482.7M. Total sales have exceeded $500M in only on year (2005), so the past 12 month period is on a par with 2004 and 2006.
Some areas in the country are reporting that they are back to or above the housing bubble peak. Normal sale prices in Flagler remain 27.3% below peak. Does that mean that our recovery is slower than the recovery elsewhere? Perhaps, but it probably says less about our recovery rate than it does about the extreme price inflation at the peak locally. Our market was severely above intrinsic value.
Flagler buyers abandoned the market suddenly after the number of homes sold reached its highest level in June 2005, when the median selling price was $214,450. Sheer market momentum continued to propel selling prices another 21.2%. I would argue that the point of buyer abandonment is more representative of intrinsic value than the $259,950 reached six months later. It would be a full two years for selling prices to drop back to June 2005 levels.
The median price of all normal July home sales was $188,900, only 11.9% below the June 2005 prices.
The underlying value of land is what drives housing prices up or down. Granted, construction costs are not constant so the cost of building varies, but if the value of the lot rises, it drives up the value of the improved lot (meaning house and other improvements included). So watching what is happening in the vacant lot market is a good way to feel the pulse of the housing market.
Palm Coast lots, are the closest thing to a commodity that we have in the local market. While some are on canals and some on golf courses, they are predominantly 10,000 square foot lots. Over the same May, June, July period, 154 Palm Coast lots sold at a median price of $18,000, up 24.1% from the prior year. Many of you probably don’t remember January 2006 when Palm Coast lots peaked at $77,000 (median price). Those were the days of “irrational exuberance.”
The PC lot price differential between January 2006 and July 2015 is -$59,000. The comparable (over the same period) non-distressed Flagler home selling price differential is -$71,000. Coincidently similar? I don’t think so.
While the market is moving forward at a reasonable pace, it is still a great time to find a bargain in Palm Coast and Flagler County. It has to be the best lifestyle per dollar place to live on the east coast.
The average age of a Flagler County home is only 7.6 years greater than the average age of all cars on American roads. And North America’s oldest continuously occupied city, St. Augustine, is only a 30-minute drive away.