June: Most homes sold, highest dollar volume, highest median price since the housing bubble. For Sale inventory at its lowest level since GoToby began tracking it. Pending Sales rate up 61.5%
PALM COAST, Fl – July 6, 2020 – The jury may still be out on whether the nation’s economic recovery will be V-shaped, U-shaped, or L-shaped but the results are in for the Flagler County/Palm Coast real estate market. The recovery is not only decidedly V-shaped, but it is also robustly so.
I write this with multiple co-morbidities on my 77th birthday. (“Co-morbidities” is my second favorite euphemism; the first being “when your will matures.”) I’m still worried about the Covid-19 virus, but I’m certainly not worried about our real estate market. Even as the virus continues to restrict our mobility, the single-family housing market is on a roll.
Flagler MLS reports 263 single-family Flagler County homes sold (closed) in June 2020. That number will increase slightly as additional June home sales are belatedly reported over the next few weeks. June sales represent the greatest number of homes sold monthly since the local housing bubble peaked in the summer of 2005, fifteen years ago. The pandemic, while still with us, caused only a blip on the housing market radar.
Take note of the data represented in the following graphs. At the onset of the pandemic and accompanying quarantine, prospective buyers and sellers reacted quickly. Unwilling to have strangers come through their homes, some sellers took their homes off the market while others delayed listing until things felt safer. Some prospective buyers also hunkered down but remained active “on-line.”
For about six weeks in late March and April, the reduction in traditional sales activity (open houses, on-site showings) led to a decline in new pending contracts. Within the sales cycle, “pending” represents a bi-lateral contract, where both buyer and seller agree on price and terms. The sale, or closing, typically follows one to two months later.
Meanwhile, closings during this same period, kept pace with pre-pandemic levels because they represented pre-pandemic contract signings. Sold homes (closings) declined during April and May, reflecting the weeks earlier drop in pending contracts. But the V-shaped recovery in pending sales is reflected weeks later by the V-shaped recovery in home sales.
The housing bubble of 15 years ago was driven by rampant speculation, not by demand from end-users. It was fueled with easy money and 100% loans. Today’s pandemic-driven hiccup bears no resemblance to the great recession. The housing market was legitimately strong at the beginning of this year. Today’s buyers are end-users, not speculators. While mortgage interest rates are at all-time lows, lending standards remain much more stringent. Current home sales typically have a higher down payment.
Even as Covid-19 continues to cast a shadow over our economy, Flagler County’s housing market is booming. Why? There are several reasons.
Tax Law Changes
After two years, the Trump tax bill continues to incentivize middle and high wealth northerners to move to lower-tax states like Florida and Texas. Florida’s tax advantages remained a strong component in the vibrant pre-pandemic housing market here.
While Covid-19 continues to affect many states, and Florida is seeing a rising rate in infections, high hospitalization and death rate hot spots are most evident in the northeast (Connecticut, New York, and New Jersey) and northern mid-west (Detroit and Chicago). Recent
Most of the recent destructive rioting (non-peaceful demonstrations) has occurred in many of the same locations identified as Covid-19 hospitalization and death hot spots. The pandemic and civil disobedience combine to cause many fearful northerners to face their mortality. Many are and will continue to decide to relocate, move their businesses, or retire to the south.
Work from Home
The pandemic forced many companies and their employees to experiment with working from home. The unexpected success of the experiment is resulting in both employers and employees to consider making the temporary solution permanent. To the extent that working from home becomes a way of life, suburban locations, particularly those with great weather and lifestyles, will benefit.
Low Inventory of Housing Stock for Sale
The housing bust that began 15 years ago was characterized by a glut of unsold inventory. Not so today. The For Sale inventory (Flagler MLS) today stands at 636 homes, the first time below 700 and the lowest level since GoToby.com has been tracking this metric. Prior to the pandemic, inventory ranged between 825 and 925.
The effect on buyers of a low inventory is much more important than the reason for the shortage. Buyers do not care why fewer homes are on the market. They only care that there are fewer homes from which to choose, prompting a sense of urgency, bidding wars and rising prices.
Lack of Building Lot Speculation
Palm Coast lots, those 10,000 square foot lots originally platted by ITT, are the closest thing to a commodity in our market. During the frenzy of 15 years ago, Palm Coast lot prices were driven by speculators, including many builders, to nearly $80,000 each. In today’s market, PC lot prices remain near $20,000.
High Equity in Existing Homes
When the housing bubble burst 15 years ago, a high percentage of “zero percent down” buyers with no equity found themselves suddenly underwater. Many remained frozen in place for years because they did not have the financial wherewithal to pay off the mortgage amount if they sold their home.
Today's potential buyers have accumulated years of equity in their homes, compounded by several years of rising values. This provides buyers with many more options, including second homes, and increases their mobility.
Robust Equities Markets
The stock market has been rising for several years, especially in the last three. While the markets plummeted at the onset of the pandemic, it has shown resilience and recovered nicely. The U.S. population has gained trillions in personal net worth, giving them more housing options. In addition, real estate is viewed by many as a preferred investment to equities at this time. There simply is not enough housing stock to satisfy current or future demand.
Nestled between South Florida and North Florida weather patterns, Flagler County has a modest but manageable seasonal influx of snowbirds. Unlike South Florida, Flagler has enough permanent residents to support its service, healthcare, and hospitality industries at a level sufficient to serve seasonal residents too.
Winter temperatures are more moderate than north Florida or southern Georgia, often by five to ten degrees. As my father used to say, “People don’t like the temperature to be less than their age.”
The real estate industry has been pushed to accept new technology to allow doing everything "from a distance," from virtual showings to electronic signatures and even virtual notarizations.
New Residential Construction
New residential construction has not skipped a beat this year. Through the first six months of 2020:
- 681 permits were issued for single-family homes, up 21.2% from one year ago
- 108 multi-family units were permitted, up 22.7%
- 60 duplexes (120 residential units) were permitted, up 71.4%
The Biggest News Yet
Governor DeSantis has approved state funds for MedNex, the regional Public/Private Medical Nexus to by built-in Town Center, where multiple medical specialties will be trained. It is projected that these specialists will earn an average annual salary of $76,000. More on MedNex in an upcoming article.