Palm Coast/Flagler December Real Estate Newsletter – 2008

Financial market crisis begins to affect housing sales.

Palm Coast, Florida – December 2, 2008 – I received an email recently from a friend caught in the backwash of the latest financial meltdown. The friend told me that the current crisis was worse than a divorce – half their net worth gone and they still had a spouse. The disorder in the financial markets has had an effect on Palm Coast, Florida’s real estate market too. The number of homes sold is up from a year ago, but median prices are down. In fact, the under $200 thousand market is the only sector showing strength.
 
The number of existing single-family homes sold in Flagler County, FL has exceeded the number sold last year in both the second and third quarter this year. We are on track to exceed 2007’s fourth quarter unit sales as well. (We need only 61 units to sell in December to achieve this.) But these numbers can be deceiving. The gain comes primarily from lender-owned (from foreclosure) and short sales, most of which are at the bottom segment of the market.
 
The up side is that a ready market exists for these bargains. But for the first time this year, the median selling price (half above and half below) for Flagler County homes dropped below $160 thousand. Since January, the median price has stayed in a narrow range between $160 thousand and $170 thousand. In November, it fell to $153.2 thousand. The fourth quarter is traditionally the slowest. I see no reason for this year’s final quarter to be different. Given the disruption of the financial markets in general and the mortgage market in particular, I’m surprised the sales volume held up as well as it did.
 
The most dramatic shift evidenced was the slowdown in sales at the high end. As a percentage of sales, segments of the market over $200 thousand have decreased significantly over the past eight quarters. In fact, all segments above $200 thousand show declines in unit sales over comparable 2007 quarters. The overall gain in unit sales is attributed solely to the under $200 thousand market.
 

Single Family Homes Sold in Flagler Co. by Price Bracket

Quarter

Under $200K

$200-299K

$300-499K

Over $500K

Total

2007          

1/4

120

147

57

32

356

2/4

143

137

47

20

347

3/4

130

105

47

24

306

4/4

133

65

33

14

245

2008          

1/4

179

45

20

10

254

2/4

241

89

37

17

384

3/4

230

67

29

12

338

Oct, Nov

141

27

9

4

181

 
 
Percentage of Homes Sold by Segment
Quarter Under $200K $200-299K $300-499K Over $500K
2007        

1/4

33.7%

41.3%

16.0%

9.0%

2/4

41.2%

39.5%

13.5%

5.8%

3/4

42.5%

34.3%

15.4%

7.8%

4/4

54.3%

26.5%

13.5%

5.7%

2008        

1/4

70.5%

17.7%

7.9%

3.9%

2/4

62.8%

23.2%

9.6%

4.4%

3/4

68.0%

19.8%

8.6%

3.6%

Oct, Nov

77.9%

14.9%

5.0%

2.2%

 
 
The absorption rate remains relatively healthy for homes under $200 thousand but stubbornly anemic for higher priced homes (see last month’s newsletter). I conclude that discretionary buyers are still waiting on the sidelines to see what happens in the future. Many are licking their stock market wounds. Meanwhile, savvy investors are picking up bargains. Flagler’s median price remains below Florida’s median price and below the national median price. And it’s warm and the sun shines here. A local Realtor mentioned that one of their agents recently represented a visitor from "up north." They were only visiting and had no intention of buying but simply could not believe the low prices. They now own a home in Palm Coast.
 
News from the GINNdom has been scarce lately. That’s news as opposed to rumors. If Ginn rumors had calories, I’d be 200 pounds heavier. The most prevalent is that Wyndham Hotels had purchased Hammock Beach. I’ve heard no credible evidence that this is in the works, but wouldn’t "Wyndham buys the GINNdom" make a great headline? The rumors of Credit Suisse taking over Tesoro and Quail West while Ginn keeps Laurelmor and Sur Mer remain strong from credible sources.
 
Across the Ginn communities, there is a transition from developer dominated Property Owners Association (POA) boards to owner-controlled boards. Initial indications are that the transition will help bring association expenses more into line with expected revenue. At least in some cases, it means that Ginn subsidiaries (Ginn Security and Ginn Property Management) will be replaced by more competitive bidders. People close to the process tell me that the Ginn organization is working with, rather than against, POA efforts.
 
Ginn still needs to address the issue of property re-sales. His promise to do something has shown no tangible results. Until the Credit Suisse issue is resolved and the result made public, the selling environment in all Ginn communities will suffer, even in those (in Flagler County) that are not under the defaulted lien.
 
As reported in November (story), the financial market turmoil has caused several projects to be delayed:
  • Epic Theater has postponed construction until February
  • CVS will not open their new store on the corner of John Anderson and SR 100 until March
  • Wal-Mart notified the city that they have moved the planned opening of a new SuperCenter on Old King Road from 2009 to 2010.
  • Difficulty obtaining bonding has delayed the commencement of construction on the Old Kings Road 4-laning project.
I still believe that the single-family residential market will continue to move sideways until spring, which is typically the prime selling season. Palm Coast lots have pretty much bottomed out in price. The high end real estate will still have to work through a number of distressed properties before prices stabilize. I expect that to happen over the next 12 months.
5 replies
  1. vsarmie
    vsarmie says:

    Unsure

    Dear Toby,

    As you pointed out, present single family home sales seems to be up from last year, but the average selling prices were down. Doesn’t this demonstrates the fact that the Palm Coast area is still a desirable place to live in? Whereas the dip in prices only reflects the real property values, and not the inflated ones?

    I think these inflated values are instrumental, plus the connivance with unscrupulous lenders and are the ones that helped triggered our present economic woes?

  2. John
    John says:

    Home Values

    I don’t understand the prices on salt water canal (waterfront) lots. There are no more and I still think people want to have the view and access. When you look around other areas such as Virginia, South Florida, the Carolina’s, you won’t find any salt water properties at the prices we see her. Why, who would want to live colder climants, crowded area’s when you could move here?

  3. Jim Sheehan
    Jim Sheehan says:

    Salt Water Canal Lots

    John, part of the problem here with the salt water canal lots is the proximity to the ocean. Once you get out to the intercoastal waterway, you have to travel a good distance North (St. Augustine) or South (Daytona) to get out to the ocean. Full disclosure: I bought a tip lot at the peak of the real estate market (early ’05) because it seemed like a bargain compared to the prices in Ft. Lauderdale and the Carolinas.

  4. mike m
    mike m says:

    ginn Tesoro

    Toby,

    As an owner of 2 lots in Tesoro preserve, I just received a Chapter 7 Bankruptcy notice for the Tesoro Club.
    I would think that the only hope for this community now is someone like Trump to sweep in and buy it for 30 cents on the dollar. maybe as property owners we would have some chance to get out of this.
    What is your take on this Toby?

    Thanks

    Mike

  5. Toby
    Toby says:

    Reply to vsarmie

    No doubt, Palm Coast is a very desirable place to live. The combination of proximity to the ocean, great schools, low population density, and great climate will continue to draw new residents.

    Prices are down for two reasons; first, previous prices were inflated beyond true value by speculation. Second, the current market is dominated by distressed properties. I believe the true intrinsic value of local real estate is somewhere in between. Once the distressed property has worked its way through the system, the true value of property will become apparent.

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