Palm Coast Real Estate Newsletter – March 2008 – Don’t Listen Too Closely to Media Reports

There are continuing signs that the Palm Coast single family home market has reached bottom in spite of media predictions to the contrary. Lots at Ginn’s Conservatory are finding a market level.

March 9, 2008 – Palm Coast, FL – I’m a glass half full person, but not too long ago, the only positive news I could find was that Toll Brothers quarterly loss was not as large as analysts had predicted. Not very powerful, but someone has to counter the aggressively negative media. The Palm Coast, FL real estate market, for single family homes at least, is signaling that the bottom may be here now.

The national media, including Bloomberg and Reuters, recently trumpeted news that the sale of single family homes reached an all time low in January according to statistics provided by the National Association of Realtors® (NAR). The source (the real estate trade association) added credibility to the report. But what was not reported was the fact that the index quoted is only one of several that NAR compiles. This one was created in 1999. A nine-year low is hardly an "all time low." By any of the association’s long term indices, the market remains above any level prior to 1998.

The housing market is basically a supply/demand market. At a given price level, an increase in demand will spur sales. Minus an increase in demand, a decrease in price will accomplish the same thing. The bubble burst when unsustainable prices met with a quickly declining buyer base (demand). Essentially, the speculative investor, that comprised a significant percentage of the demand side as the market rose, suddenly found that the music had stopped and there were no chairs (buyers) to be found. They rushed in mass from the buyer side to the seller side, flooding the market with unsold inventory (supply) while, at the same time, reducing the buyer pool (demand).

Since December ’06, the median selling price for a single family home in Flagler County dropped from a high of $259.9K in December 2005 to a low of $161.5K in January ’08. The most recent $30K drop in median selling price coincided with the entry of several foreclosed properties onto the market (supply). Twenty percent of January and February sales were bank owned properties. The healthy increase in sales contracts over the same period signals that the present market pricing is attractive to buyers. At the same time, many discretionary sellers (those who do not have to sell soon) rejected the level of current market pricing and withdrew from the market, decreasing the inventory of unsold homes (supply). Without the entry of foreclosures, this level may not have been "discovered" for several months.

I see signs of stabilization in the local market (all real estate markets are local).

• 103 single family home sales closed in February, the highest number since August ’07
• 154 sales contracts for single family homes were signed in February, the most since March ’06
• The attrition rate for Flagler homes under $200K dropped from 16.6 in the fourth quarter of 2007 to 9.9 in February
• The Flagler Home Builders Parade of Homes has turned out record crowds
• The median selling price in Flagler County is well below both the Florida and national average. Flagler County is where I95 is at its closest proximity to the Atlantic coast anywhere on the east coast

In an ongoing saga, lots in the Conservatory are finding a market level. A short sale of a $99,000 preserve frontage lot attracted many buyers and an offer (the bank did not accept the offer) while another preserve lot (bank owned) offered at $139.9K has yet to attract a buyer. That represents a high/low bracket (e.g.$99K is low enough to attract buyers but $139.9 may not be).

Again, the drop in pricing was precipitated by the entry of foreclosed inventory. Most of the Conservatory lots were financed with 3-year ARM or balloon mortgages set to trigger this spring. There are currently eight bank owned lots with another 30-some in the foreclosure process, soon to enter inventory. The market for non-golf course and non-lake frontage lots has been established by the low/high bracket of $99K (heavy buyer interest) to $139.9K (buyers still waiting on the sidelines). The Ginn Champions Tour event at the Ocean Course and the Conservatory Clubhouse opening are both scheduled for late March. The PGA Fall Tour is announced for the Tom Watson designed Conservatory Course later this year.

This is a great time for buyers to pounce on a building lot at the Conservatory. Remember, Conservatory lots originally sold at the market peak for $329.9K to $529.9K. Many lots come with Hammock Beach Club memberships or full golf memberships for $20,000 (a $60,000 value).

This should be an active year. Sellers won’t like the prices, but still an active year. If you need help understanding options, call me at (386) 931-7124.