2011 Real Estate Year in Review

Plus predictions for next year.

Palm Coast, FL – January 17, 2012 – The year is over. Another has begun. The breadth and depth of the housing market crisis has finally sunk in. 2011 marked the first year during which nobody asked me how soon prices would return to previous highs. But many are still suffering from shell shock. There are few who were untouched by the tragic housing market tsunami. In hindsight, it’s pretty apparent that it was coming, but nobody, me included, foresaw the upcoming collapse. Even Alan Greenspan, who recognized irrational exuberance, was caught flatfooted.
Home Sales

I track single-family residential home sales most closely. By that yardstick, the peak was June 2005 when 338 Flagler homes were sold through MLS. The first signal that things were going badly was the precipitous drop in the number of homes sold, as monthly home sales plunged to 195 by June 2006 to 112 in 2007. That’s a 66.9% drop in only two years. The lowest monthly sales were in January 2008 when only 51 homes were sold. January is typically the lowest sales month of the year. The highest January sales number was 141 in January 2006. Summary: Home sales peaked in June 2005 and bottomed in January 2008. They have been climbing back since.

Palm Coast real estate newsletter - home sales v total sales

Median Price
Due to simple momentum (sellers are always the last ones to know), median prices kept rising long after sales had dried up, peaking just under $260,000 in Dec 2005 to February 2006. Median price has been on a downward spiral since. But the price drop was much more gradual than the drop in sales.
Median price is not a pure measure of home values. It’s a reasonable indicator of values, but it also reacts to the product mix that is selling. For the last three years, distressed properties (lender owned or short sales) have accounted for more than one half of all single family home sales in Flagler County. Summary: median prices peaked at the beginning of 2006 and have dropped each year since. Once at $259,950, the median price dropped to $120,000 in 2011. More striking is the fact that only 11.5% of all 2011home sales were above the June 2005 peak median price.
Total Sales
Probably the truest measure of the health of the housing market is total sales (in dollars). What are the transactions worth? Total sales combines price and volume. By this yardstick, June 2005 was again the peak month, when single-family MLS home sales totaled $88.2 million. Total sales dropped to $28.8 million in June 2007 and to a low of $10.7 million in January 2008. Top to bottom, that’s an 87.9% drop. By the way, the real estate community’s commission-based revenue model is based solely on total sales. That means the industry took an 87.9% income hit. Ever wonder what the opposite of irrational exuberance is?
1628 homes sold makes 2011 the best sales year since 2006 and 13.4 percent above 2010. With over $255 million in sales, 2011 marks the best year for the total value of all sales since 2008 and 8.7 percent above 2010. Even with the potential buyer pool limited by overly strict loan underwriting and appraisal standards, buyers are abundant.
Unavailability of credit and appraisals shortfalls will continue to overweigh the mix of depressed sales, keeping the median price down. Remember that median price is that price where half of all sales are below and half above. If over half of the sales are distressed, it’s understandable that the median price will find itself among them.
Looking Forward
Home sales and total sales have already turned the corner. I think 2012 will be the year prices begin to rise again, although slowly.
Look for code enforcement, contractor licensing, and impact fees to become hot topics in the upcoming year. About $17,000 in permitting and impact fees are built into every single family home built in Palm Coast. That’s 15% of the median selling price of existing homes. There were only three building permits issued in Palm Coast in December 2011. Extensive use of unlicensed contractors is also undercutting the legitimate local construction industry.
The flurry of distressed sales will continue through 2012 for the necessary cleansing of inventory. A lot of wealth was wiped out in the collapse. Now, new money is entering the market at prices at which profits can be achieved.
The 340 lots in The Conservatory, which surrounds a Tom Watson signature golf course across from Matanzas High School, sold at prices between $329,900 and $529,900, generating over $141 million in sales when launched in 2005. Since, 55.8 percent entered foreclosure. Many have traded via, foreclosure sale, tax deed sale, short sale and deed in lieu of foreclosure.
But Conservatory lot owners’ actions reflected the rest of the market where sellers’ were reluctant to acknowledge the changing reality of the marketplace. In June 2008, (more than two years after the collapse) 79 Conservatory lots were available for sale. 55 of them were listed above their original purchase price; many by over 25 percent. Of course, there were no buyers.
Nearly all are now appraised at $20,000. That represents more than a 95% drop in value from launch prices. Lots are actively trading, mostly in the $15,000 to $25,000 range. The new buyers will be well positioned for a possible resurgence of interest in that community.
2 replies
  1. ron davis
    ron davis says:

    2011 sales recap

    excellent synopsis of the market we are in today…..only caution would be if other negative events take place, recovery will certainly be extended….most buyers should be users..investors should be very cautious…

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