Light at the End of the Tunnel for Palm Coast Housing Market

Inventory of homes for sale is down while the number of pending sales is rising.

January 23, 2008 – Palm Coast, FL – Where is the bottom of the real estate market and when will we get there? I won’t be able to tell you until after the fact, but there are some positive signs starting to show up. Probably the most significant is that the inventory of unsold homes, reported on MLS, has dropped while the number of pending sales is rising.

• The number of existing homes listed for sale is 2,285, down nearly 100 from the end of the year.
• Of 151 pending or contingent sales contracts, 92 occurred since the first of the year.
• 31(closed) sales were recorded since January 1.

The number of pending sales over the number sold (92-31 = 61) accounts for some of the decrease in inventory. The remainder is made up by sellers who either withdrew their listings or let them expire without renewing. In any case, it’s a healthy sign. It signals that prices have dropped to the point where some sellers are unwilling to sell. Only 41 percent of listed homes are owner occupied. The rest are vacant (47%) or occupied by a tenant (12%). The number of builder owned homes listed with MLS is also down. It will be necessary for this trend to continue if we are to reach a more normal market. At the current rate, this may happen by the end of this year.

So where (and when) is the bottom? We won’t know until four to six months after it happens. That’s because sales numbers are reported at closing, about two months after the sales contract is signed. So sales numbers we see today actually reflect the market as it existed in November, not today’s market. We can’t announce a bottom based on only one month either. One month does not make a trend. We have to wait at least a few months to make sure any shift is sustainable. In other words, if the bottom turns out to be January ’08, we won’t be sure until June or July.

What does this mean for buyers? If you wait for the bottom to reveal itself, you will be too late. What does this mean for property owners? If the median selling price for existing homes in Flagler County is down 30%, it does not mean that your home has decreased that much in value. It means that the homes that are selling in the current market are selling mostly in the below $200 range. That’s because a high percentage are “distressed” sales. Many distressed properties have not been well maintained, some for several months. Lack of air conditioning can cause mold problems. There may be insect infestations.  The property may have been ill treated by tenants or by owners knowing that the property was going into foreclosure. In other words, they are not representative of local properties in general.

The stock market appears to be weakening. Interest rates are down. 30-year fixed term mortgages are well below 6%. The appreciation possibilities for real estate over the next 3 – 6 years may be greater than alternative investments.   Real estate prices appear to be at, or near, the bottom. Spring, coinciding with the Parade of Homes, is typically the strongest selling season. With few exceptions, builders are not starting spec homes. As the current inventory becomes depleted, there may not be any new construction inventory available for several months. That should add up to an improved market.