Palm Coast, Flagler Real Estate Gains Strength
If real estate had a beta index to measure volatility , Palm Coast’s beta would be high. And Palm Coast housing prices peaked sooner and reached bottom earlier than the rest of the market.
Palm Coast, FL – June 21, 2008 – The volatile real estate market in Palm Coast and Flagler County, Florida has been driven by population growth. Flagler was the second fastest growing county in the country from 2000 to 2007 and Palm Coast the fastest growing small city. The population surge created a huge imbalance in the real estate market. The initial housing shortage quickly transformed into increasing prices and housing starts, followed by rampant speculation and over building, resulting in over supply and collapse.
GoToby.com closely tracks Palm Coast lot sales. Unlike many surrounding planned developments, these were platted when Palm Coast was first laid out by ITT in 1969. With roads and utilities already in place, they were ready to be built upon. Their number (of the original 45,000, 10,000 are still vacant) and uniformity (most are 10,000 SF) made them a commodity, thus more susceptible to market fluctuations. In 2000, these lots traded at prices between $5,000 and $15,000. The median selling price rose steeply to $77,000 in late 2005. They’ve since settled down to a realistic median selling price of $30,000.
Our housing market rose more quickly, it rose more steeply, and it peaked sooner than the market in general. Now it’s acting like a leading indicator of recovery. Palm Coast’s single-family residential housing market already shows strength while other areas of the country expect their slump to continue for months. Since the end of 2007, Palm Coast’s inventory of unsold homes declined nearly 20%. The number of pending sales more than doubled. For the first time since 2005, the number of quarterly home sales (340 to date) is ahead of last year’s 308 for the same period.
The equities market measures the volatility of a stock with its beta index. More volatile stocks have a higher beta. The south and west have the greatest population gains over the past decade. To a greater extent, they have experienced the extremes (beta) of the housing bubble and collapse more than the rest of the country; quickly rising prices, sudden declines, foreclosures, and higher incidence of fraud.
Baby boomer demographics signal that Florida will continue to be a favored second home and retirement destination for that generation. CAVE people (Citizens Against Virtually Everything) would like to believe that this wave can be stopped. It cannot. Restricting supply in the face of increasing demand simply causes prices (and taxes) to rise. Even now, several large scale Flagler County developments are in the planning stages to accommodate new arrivals expected over the next 20 years. Some are already entitled, needing only final permits to move forward. The City of Palm Coast is attempting to take control by annexing (at owners’ request) three large tracts west of the present city limits.
It’s less likely that we will lead the nation in growth again. It will be harder to double from 100,000 than from 50,000. I expect our market to continue sideways (prices stay the same) as we work through the incoming foreclosure properties. When the number of homes for sale shrinks to about 1,500, I expect to see prices creeping up again, because there is no new inventory from builders coming on-line. But don’t hope for another steep increase soon. Bank owned (foreclosed) properties drove the most recent price decline. Lenders’ aggressive pricing chased all but distressed sellers out of the market contributing to the decline in inventory. Once selling prices return to pre-foreclosure levels (median selling price about $190,000 to $210,000), more sellers will show up. The entry into the market of previously latent sellers will hold the market steady while builders decide to start spec homes. Balance will be momentary as the incoming wave of boomers descends upon us.
With Palm Coast situated as the most affordable and least developed warm climate coastal market on the east coast, it’s likely that more cycles are in Palm Coast’s future, with each cycle being above the previous one.
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