Amidst surging demand, available housing inventory has vanished, further hyping potential buyers’ sense of urgency. Only 0.53% of Flagler County’s housing stock is listed for sale (MLS).
PALM COAST, FL – March 3, 2021 – There is no lack of housing market news in Flagler County and Palm Coast. There is, however, an acute lack of homes for sale. Median home selling prices are rising at an unsustainable rate. Are we headed for another bubble? Wifi Panama
Reflect on these improbable metrics:
Available inventory of For Sale homes and condominiums
A 2020 report by the Joint Center for Housing Studies of Harvard University estimated that about 13% of Americans move each year. There currently are a total of only 237 single-family Flagler County homes, 56 condominiums, and 10 duplex homes (totaling 20 living units) listed for sale on MLS. This represents only 0.53% of Flagler’s estimated housing stock. Of the listed homes, only 138 are existing homes. The balance is new/under construction.
There is a traditional relationship between active listings (properties available for sale) and pending listings. In a neutral market (neither a buyer’s nor seller’s) the inventory of homes for sale is about six times the average month’s sales. In other words, there are six months of inventory. For the past several years, the number of active listings has ranged from 800 to 975.
The list of pending contracts (those that are under contract but waiting to close) is determined by the closing cycle and the sales rate. In sales other than cash sales, the closing cycle includes mortgage application and approval, inspection, etc. Electronic closings have accelerated the closing cycle to about 45 days.
In early May, a few steps into the shutdown, there were 815 active listings and 357 pending listings. The number of active listings fell below 700 in June, for the first time since GoToby.com has tracked that metric. Six weeks later, it had cracked the 600 level. Today it stands at 237 homes for sale. Meanwhile, the pending pile has grown from May’s reasonably normal 357 to today’s 726. By normal economic cycle standards, these changes are abrupt and dramatic.
For each active single-family listing, there are three contracts in the pending file. For each single-family listing, there are about six Flagler County Realtors®.
Booming home sales
Home sales previously had peaked in 2005 with 2,914 Flagler homes sold through MLS. This level was not seen again for 15 years, until 2020, when 3,019 homes were sold. Through the first two months of 2021, home sales are up 21.5% over last year. Keep in mind that February results are preliminary. Additional February sales will continue to be reported over the next few weeks.
A new surge in demand collides with a declining supply
The inventory of For Sale homes is down in part because there are still an unknown number of potential sellers unwilling to allow strangers through their homes. It is down also because of the surge in home sales, but the reason is meaningless to potential buyers. They care only that there is a limited number of choices which will be snapped up by other buyers if they do not move quickly with substantial offers. The result; a powerful sense of urgency.
This urgency is directly measurable. The median Days On Market (DOM) for homes sold in February was only 32 days. The eight duplex homes on the pending list were on the market for a median of 6 days before going under contract. The DOM for the 138 listed existing homes is only 22 days. DOM for the existing homes under contract (pending) is a mere 12 days.
Rising median home selling prices
Flagler County median home selling prices have risen steadily (without a correction) since bottoming out at $106,000 in both September 2011 and January 2012. The pace is accelerating, reaching $275,000 in February; a 259.4% gain. Through two months, 2021 median selling prices are up 16% year over year. The housing bubble peak of $259,950 was reached in December 2005. That level was first seen again in June 2020. It has remained above that level every month since.
Rising Palm Coast lot prices
Palm Coast’s original 45,000 plus ITT platted lots are often referred to as PC lots. A meaningful subset of PC lots excludes those with golf course or saltwater canal frontage. They are typically 10,000 square feet (80X125). Like a commodity, they are numerous, and they react quickly to market conditions. Their sales volume and selling prices are market signals that new construction is imminent. They are the canary in the coal mine. GoToby.com tracks this subset.
During February 2020, 88 PC lots were sold with the median price being $21,000 (one half below, one half above). In February 2021, 89 lots were sold, but at a median price of $38,000. In February 2021, one year later, only one lot sold for less than $21,000. The median DOM was only 13 days. Only one lot is currently listed below $34,900.
This is not your 2005 bubble. The underlying conditions are too different. Rather than being propped up by profligate spending with 100% financing and ridiculously loose credit standards, this market is characterized by more stringent credit requirements and record low mortgage rates.
Unlike the speculative bubble buyers, today’s buyers are buying homes to live in or to put into a rental program. Flippers are absent. One local Realtor couple has notched 38 properties sold or pending since the new year. 22 buyers are from other states. Some are buying vacation homes, but the majority are planning to live here. Those purchasing lots are building right away and most plan to live here.
Five factors are driving and will sustain the migration to Flagler:
- Taxes – Florida is one of the low tax states continuing to benefit from people fleeing increasing taxes in other state and cities, particularly the northeast and upper Midwest.
- Health – Coviid-19 forced many people for the first time to confront their own mortality. Florida has become the gold standard for how to handle the pandemic while protecting the economy, even with an older population. Flagler County with an even higher percentage of aged 65 plus residents remains among the lowest COVID-19 affected counties in the state.
- Safety – The extreme and poorly managed civil disobedience (riots) in the northeast and upper Midwest has caused many to rethink their priorities going forward.
- Workstyle/Lifestyle – Covid-19 has taught us that many types of workers can work from home and that outdoor activities are good. Why not combine that home office with a warm sunny climate, miles of beaches, trails, and waterway, and plenty of opportunity for outdoor activities year around?
- Cost of living – Florida is a bargain, but Flagler is a bargain within the bargain.
The available home inventory will increase as the pandemic dies down, but all the current sideline sellers are not going to join the fray at the same time. A gradual reentrance will take some pressure off and gradually reduce the sense of urgency. Builders are trying to increase production, but land availability, the cost and time required to bring raw land to the construction stage, and the lack of skilled workers will temper any desire for rapid construction growth.
This is not another bubble. Population growth, guaranteed by the above factors, will continue to fuel the need for new housing. There are no more vacant distressed properties to absorb new residents. Hosing requirements can only be met by new construction.
The word is out. Flagler County, Palm Coast, Bunnell, and Flagler Beach are being rediscovered. MedNex with its satellite campus for UNF and Jacksonville University’s planned satellite campus for graduate studies in healthcare will dramatically change Flagler’s demographics and spawn increased economic development and accelerate the rebirth of Town Center. Brunswick is coming back to town with its Boston Whaler boat brand into the former Sea Ray plant, bringing several hundred new jobs.
Florida will continue to grow at a faster pace than the rest of the country and Flagler County will outpace most other Florida counties. To those who want Palm Coast to remain just as it was when they moved here, “Do not hold your breath.” That train has left the station. Hold onto your seatbelts.