Palm Coast Real Estate: Strong Demand at Current Prices but Stunted by Weak Credit and Appraisals
Most single family homes sold in any month since June ’06 – Highest total dollar sales volume for single-family homes since June ’08. 2nd 1/4 data is equally strong. Credit is key for real growth.
Palm Coast, FL – July 7, 2011 – The long-awaited housing market recovery is here; at least in Palm Coast and Flagler County, Florida. GoToby.com began reporting signs of strengthening in a May 5th newsletter. Then again in a June 1st story Palm Coast/Flagler Home and Condo Market is the ”Canary in the Coal Mine”. Supporting data continues to grow.
Good News
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There were more single-family Flagler County homes sold through MLS in June than in ANY month since June 2006.
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The number of homes sold during the second quarter hit a level not seen since the 2nd quarter of 2006.
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The total dollar value of June’s transactions exceeded all months since June 2008.
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The total dollar value of the 2nd quarter single-family home transactions reached a level not seen since the 2nd quarter of 2008.
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Days on Market (DOM) for the 2nd quarter was 107, the lowest since GoToby.com began tracking DOM in 2008.
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The inventory of unsold single-family homes for sale has dropped to 1,100, down by more than 100 in two months. Inventory was above 2,600 during the worst of the market slump.
Credit Availability
In spite of low home prices and historically low mortgage interest rates, potential buyers are having a difficult time getting financing. A full 50% of all single-family home sales were reported as cash transactions during the 2nd quarter.
Freddie Mac and Fannie Mae restrict mortgage loans for condominiums in developments where there are too many delinquent fees, excessive short term rentals, vacancies, or foreclosures. That market is essentially restricted to buyers with cash or with non-traditional financing sources. During the 2nd quarter, more than 80% of condo sales were cash transactions.
Credit availability is also affected by current appraisal methodology. Several home builders and real estate brokers say they are losing sales because comparables are too much affected by the sale price of distressed properties, even though statistics show that non-distressed properties are selling at a 50% premium over distressed properties. Even so, the local market trudges along.
Real Estate Market Analysis
Buyers and sellers tend to focus on prices. Naturally they are concerned with what their home is worth in the current market while buyers are concerned with what they will have to pay. But the real market is measured in the number of homes sold along with the total sales volume in dollars.
The charts below(MLS data) illustrate what I’m talking about. In the first chart, notice how the number of homes sold peaked in June 2005, well before median prices topped out (Dec/Jan 2006). In fact, by the time the median selling price peaked, the number of homes selling had already dropped 58%. It was not until June 2007 that the median price returned to its June 2005 level. By then, the number of homes selling monthly had dropped 67%.
The next chart shows the upward trend in unit sales since the low reached in January 2008. You can see the seasonality; yearly lows in mid winter and highs in late spring and early summer, but the trend is clear. When the number of units sold turns the corner, median price will follow. But median price lagged units sold by several months after the precipitous fall in ’05. I suspect median prices will lag much further following the gentle rise in sales volume underway since January 2008.
The next chart illustrates the relationship between the number of homes sold and total dollar sales volume. It shows clearly the January 2008 inflection point. Units sold led total sales volume during the down cycle. It is doing the same as both curves head in an upward direction again.
Absorption Rate
Absorption Rate is a mathematical measure of the relationship between supply and demand in the marketplace. It’s derived by dividing the total inventory of product (for sale) by the number of units sold in the previous month. The resulting number (absorption rate) represents the number of months it would take to sell the number of homes represented by the current inventory at the current price. It’s a strong indicator of current market conditions.
It’s generally believed that the absorption rate tells us if we are in a sellers’ market, a buyers’ market, or a normal market.
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Sellers’ Market – Rates 1-4
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Normal Market – Rates 5-6
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Buyers’ Market – Rates ≥ 7
The current absorption rate for Flagler County single-family homes is 6.8; not quite normal but below the threshold for a buyer’s market. But the absorption rate for homes selling for less than $200,000 is a mere 4.3. June’s median selling price was $119,000.
By comparison, the overall absorption rate for Flagler was 19.8 in August/September 2007. The under $200,000 absorption rate was 14.1 while the median selling price was $210,000.
| Community |
Under $200K |
$200K to $300K |
Over $300K |
Overall |
| Cypress Knolls |
4.8 |
20.0 |
|
7.1 |
| Indian Trails |
3.6 |
|
|
5.0 |
| Lehigh Woods |
4.5 |
|
|
5.0 |
| Matanzas Woods |
3.6 |
18.0 |
|
4.9 |
| Palm Harbor |
5.2 |
12.8 |
13.6 |
8.4 |
| Pine Grove |
4.1 |
12.0 |
|
4.5 |
| Pine Lakes |
4.6 |
14.0 |
|
5.2 |
| Quail Hollow |
6.0 |
|
|
6.3 |
| Seminole Woods |
4.3 |
|
|
4.8 |
| Grand Haven |
2.5 |
18.0 |
21.0 |
13.0 |
| Hammock Dunes |
17.0 |
17.3 |
||
| Ocean Hammock |
|
50.0 |
50.0 |
|
| Flagler County (all) |
4.3 |
14.7 |
23.6 |
6.8 |
Clearly, the local market is improving, though prices remain stubbornly low and improvements are concentrated in the under $200K market. When will prices begin to rise again? They will remain at or near current levels as long as buyers think that they can be very selective, passing on opportunities because they believe the supply of deals is continuous. They will begin to rise when buyers begin to feel the pressure of a shrinking inventory; when they begin to miss out on opportunities because they waited too long. I think that time will arrive soon. An easing of credit underwriting standards and normalization of appraisal methodology would be a great help.
I moved into a condominium at Tidelands on the Intracoastal in March after closing a short sale contract initiated in June 2010. There were only 3 closings in Tidelands during the first six months of 2010 and a total of 11 in the entire year. Through June this year, Tidelands has seen 25 transactions completed; 13 in the most recent two months. There are currently only 17 Tidelands condominiums listed for sale in MLS. One is lender-owned. Eleven are short sales. An additional 19 units are under pending or contingent sales contracts. All are either lender-owned or short sales.
Foreclosure increase
Re: July 14 News Journal
Toby, when reporting of foreclosures do they differentiate between homes and homesites? I think there are a number of spec homesites coming up for foreclosure and this is very different than primary resident forclosures.
Highest selling angencies
Is there a way to find out what agency/agent(S) have sold the most during the year 2011 in Flagler County? We will be putting our home on the market and will be wanting the top agent to handle the sale. Thank you.
Reply to Nanci
I report all foreclosures by simply totaling the number of lis pendens filed. The main media get their data from RealtyTrac, a California-based provider of data. I have no idea how they get their numbers. I’ve never been able to correlate my numbers to theirs.
Several industry experts feel that RealtyTrac overstates the numbers by counting all activity, including filing, notice of sale, and the sale itself.