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PALM COAST, FL – September 7 – For the 21.5 years I’ve lived in Palm Coast, every successful politician has been elected, in part, on their stance for economic development and job creation. Finally, with MedNex, Jacksonville University, Advent Health’s new hospital, the Flagler Health Plus new medical center, and planned new hospital, we have great news on the employment and average wage level fronts.
Our population, like that in the rest of Florida and in other low-tax, low covid death rate states, and in low-crime or low-riot states is exploding. We have yet to see the 2020 census details to verify how many people are coming here but there are several undeniable indicators that a wave of new residents is upon us.
But where are all of these transplants, retirees, workers, and students going to live?
The median selling price for an MLS-listed Flagler County single-family home in August was $320,000, 19.4% above August 2020. Half of the 247 sold homes went under contract within 11 days from the listing date. Year to date, the median selling price is up 18.0%
There are fewer homes listed for sale (323) than are under contract (591). Only 0.6% of Flagler’s housing stock is available for sale!
Flagler’s apartment communities are essentially at full capacity with waiting lists. Tuscan Reserve was fully booked within a few months and has a long waiting list. The newly constructed market-rate luxury apartment complex was just sold. The $32,750,000 transaction closed on August 31.
Duplex and single-family home rentals are similarly constrained. Rent rates are rising with home prices.
Vacant short-sale and foreclosure homes absorbed population growth during the depth of the Great Recession, but they are long gone. MLS has reported only 12 distressed YTD sales, none since April. We are at full capacity, relying solely on new construction to fill the void. But builders cannot build fast enough, and their spec homes are generally under contract well before completion.
Builders are confronted with several constraints. They face shortages of skilled construction labor, rising materials costs, and extended supply chain delays. More importantly, they are running out of available buildable lots.
One year ago, DR Horton, Holiday Builders, Adams Homes, and Maronda Homes, purchased several ready to build lots in Sawmill Creek. Within 10 months, DR Horton was sold out and bought the remaining phases of the Sawmill development. The other three builders bought out the remainder of the lots in phase I. DR Horton has not pulled a permit in Grand Reserve for two months because they have run out of ready to build lots there.
The pressure to maintain construction rates has driven the price of infill Palm Coast lots to $56,000, up 126.3% in one year and equaling prices recently paid for ready to build lots in new developments which, unlike infill lots, have curbs and gutters, buried utilities, streetlights, sidewalks, and amenity centers.
Two different decades
Flagler County was the poster child for the housing bubble. Beginning the decade with fewer than 50,000 residents, the county’s population nearly doubled to 96,065 by 2010. Most of the growth was during the 2002 to 2007 years when the county experienced an average annual migration of 5,728 new residents. The highest growth rates were seen between 2004-2006 when the average annual population increase was 6,710. The county’s population in 2005 was 75,420.
By contrast, the population growth during the second decade was more measured, growing only 21.5% over the 10-year period. The county’s population as of July 1, 2020, was estimated by the US Census Bureau to be 118,451. The average yearly population growth through the second decade was 2,239. The peak yearly growth was only 3,075.
One strong indicator of our current and future growth is the number of building permits issued. During the first decade which started out with a county population of 49,832, Flagler saw a total of 20,987 building permits issued for residential housing, including 3,432 multi-family units. Permits peaked in 2004 with 5,207 housing units permitted.
During the second decade, which began with nearly 96,000 county residents, only 8,593 residential housing units were permitted. Compare this to the 9,511 issued during the two-year period of 2004-2005. The peak year of the second decade was 2020 with 1,859 permits. Only 625 of the second decade’s permits were for multi-family units, all apartments. There have been no new condominium permits issued since 2007.
The first decade’s construction boom was fueled by unbridled speculation driven by insanely easy credit. Spec homes were started in anticipation of ever-increasing buyer demand from non-end user buyers rather than underlying population growth.
Today’s market dynamics are vastly different. Demand is real. People are really moving here in droves. Buyers are end users, either as permanent residents, second home buyers, or as rental property investors. While mortgage interest rates remain near historic lows, credit standards are relatively strict. Even new homebuyers have equity via required down payments. Price appreciation has swelled other homeowners’ equity. An equity cushion shields homeowners from becoming upside down on their mortgage due to minor declines in the housing market.
MedNex and Jacksonville University have begun their first cohorts of students. Both schools experienced huge demand for their new programs, filling initial classes almost immediately. Both have waiting lists. Daytona State College’s new nursing program is off to a great start as well. None of these growth drivers is transient. They are long term and sustainable.
Wisdom does not always come with age. Sometimes age comes alone. Either way, age is inevitable. Florida’s population growth, like age, is also inevitable. So too is the growth in government spending. Government spending will always grow at a rate that exceeds the rate of inflation. We need to learn to live with it. We don’t have a choice. Without new construction each year, existing residential property taxpayers will be left to shoulder the brunt of rising government costs.
The market speaks, builders listen
New residential construction is helping to mitigate our affordable housing problem. Not all homebuilders participate in the local MLS system. Custom builders certainly do not since their builds are under contract from the start. But many production builders do. They are infill (scattered lot) builders and those who build in new communities such as Grand Reserve and Sawmill Creek.
The local MLS has created a listing category called “Under Construction Residential.” These listings and sales can be tracked separately from the rest of the listings which are assumed to be “existing home inventory.” An examination of the metrics of the two categories is enlightening.
YTD, 447 Flagler County MLS single-family home sales have been categorized as Under Construction Residential. For these homes, the median price was $256,361. The remaining 1,936 home sales are presumably existing homes. The median price for the existing homes was $312,250. The median price per square foot was $143.73/SF and $167.39/SF respectively. The difference can be attributed to the efficiency of production building and, to some extent, to smaller lot sizes and to the smaller median footprint of production homes: 1,804 SF vs 1.951 SF.
It’s not how dense you make it. It’s how you make it dense.
Flagler County and its cities need to embrace growth in a positive way. The alternative is stagnation and increasing residential real estate taxes. So often we hear residents complain that Flagler County and Palm Coast are becoming, or have already become, something entirely different than the place ITT envisioned. Something different than the “place I bought into when I move here (fill in the blank) years ago.”
That is true. Ironically not in the way these people think. As a recent article in the Palm Coast Observer points out:
Clearly, our housing stock is imbalanced. So too is the concept that density is bad. Sprawl is expensive from a public service standpoint. A soon-to-be-presented master-planned community in Palm Coast will include the connection of two arterial roads in Palm Coast. The result will be that only one fire station will need to be built in the near future rather than two, saving not only the cost of construction but also the ongoing costs of manning and maintaining the second facility.
New roads, with curbs, gutters, and integrated stormwater management cost over $1,100 per linear foot, regardless of whether the lot frontage is 45’, 60’, 80’, or if the current zoning restricts density to one unit per acre. Clustering density is environmentally sound. We have an option of absorbing the upcoming population growth while preserving greenspace, existing nature habitats, and our agricultural industry in the west county.
Current Palm Coast Zoning restricts multifamily density to 12 units per acre. Greater density would allow developers to create communities with a broader range of amenities and on-site management. The city should embrace both multifamily development and increased density. They should also review the land development code to consider the following:
At the current rate of new building permit issuance and US Census Bureau data on the local ratio of households to residential dwelling units and the number of residents per household, Flagler County is poised to gain more than 7,500 new residents per year. Based on the current growth in permitting activity, this population rate is destined to increase. We need to be ready.
I'm a licensed Florida commercial REALTOR® affiliated with Grand Living Commercial Realty in Palm Coast, Fla. As a real estate consultant to developers/builders, homebuyers, and sellers, and as a journalist, I have years of experience and a treasure trove of relevant data and local institutional knowledge.
Call me at (386) 931-7124 or email me at Toby@GoToby.com.
Listen to my radio show, Real Estate Matters, every Saturday morning right after the 11:00 A.M. news break on WNZF News Radio at 1550 AM or 94.9 FM. Download the Flagler Radio App from the App Store so you can listen to Real Estate Matters from anywhere in the world.