July Real Estate Newsletter: Most Palm Coast Homes Sold Since October 2005

Palm Coast and Flagler County home prices are headed higher with fewer distressed properties available. All signs point to a continuing recovery with plenty of upside potential.

Palm Coast, FL – August 9, 2013 – More single-family homes sales were closed through MLS in Flagler County during July than in any month since October 2005. Home prices are rising too. July’s median selling price was the highest since October 2008. A preliminary tally shows that 217 homes were closed during July at a median price of $155,000.

All signs point to a continuing recovery with plenty of upside potential. However this is a long way from a normal market. In many ways, we are in uncharted waters, especially locally.

For instance. the percentage of sales involving distressed properties has dropped from 49% for all of 2012 to 35.5% in July. But this is still significantly above national levels which, in turn, are well above historic levels. But only 12.9% of the current inventory is depressed. The market is quickly absorbing distressed properties as they appear on the market.

Distressed were a drag on July housing prices:

  • Short sale median price – $125,000
  • Lender-owned (REO) median price – $132,828
  • Non-distressed median price – $171,000

The percentage of local home sales for cash has declined only slightly; from 52.8% for all of 2012 to 48.3% in July. These levels too are well above national results which are well above historic levels. Cash sales usually indicate a high level of investor buying and/or overly strict mortgage underwriting standards.

The inventory of single-family Flagler homes listed for sale in MLS is currently 790. At July’s sales rate, this represents only 3.64 months of supply. Clearly we are in a seller’s market. Residential builders have pulled more permits in 2013 to date than in all of 2012. But commercial building permits are nearly non-existent. Commercial demand follows rooftops. We are still absorbing the commercial inventory built during the bubble.

Let’s put the boom bust cycle into perspective. The peak of the local housing market as measured by the number of homes sold was June 2005, when 338 homes were sold. In January 2008, only 51 homes were sold, an 84.9% decline. We have rebounded to 217 homes sold in July 2013. But that’s still 35.8% below the 2005 peak.

When sales literally fell off the cliff after June 2005 (a 64.8% decline in eight months), momentum continued to drive median selling prices from $214,450 in June 2005 to $259,900 in December 2005 and February 2006. That is to say that the median selling price rose 21.2% after demand disappeared. Prices dropped slowly thereafter, finally reaching bottom at $106,000 in January 2012. They are rebounding nicely. July’s median price of $155,000 is 46.2% above the bottom, but still 40.4% below the peak.

Aggregate sales (the total value of all sales) of Flagler single-family homes peaked in June 2005 at $88.2 million. It hit bottom at $10.3 million in January 2008 after an 88.3% decline. The real estate sales industry’s revenue is commission driven, essentially 6% of the gross sale amount. Flagler County’s real estate practitioners, as a group, suffered an 88.3% decline in revenue. July’s aggregate sales were $38.8 million; climbing steadily, but still 56% below the market’s top eight years ago.

Many were irrevocably harmed during the deepest and longest recession in my lifetime (I’m 70). Others are profiting by taking advantage of the cyclic nature of real estate. Investors were a main component of the housing bubble. They are also an important component of the recovery. But the two groups of investors have little in common but a hope for financial gain.

Bubble investors were largely speculators who borrowed 80% to 100% of the purchase price, planning to add no value to the property. They were simply going to resell the property at a profit to the person waiting behind them in line. A drop in value quickly put them underwater, unable to unload their property or their mortgage payments.

Today’s investor is much different. Typically, they pay cash for distressed properties then improve them (add value) to make them saleable. Common improvements are new tile, new carpet, fresh paint and granite countertops; also paid for with cash. Blighted properties are upgraded, and then purchased by new owners who will likely be good stewards of the property. The investors gain but so too does the neighborhood and the community.

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