Palm Coast Florida Real Estate 2008 – The Year in Review
Another year has passed. As far as the real estate market is concerned, it didn’t pass quietly in Palm Coast, Florida.
Palm Coast, Florida – January 2, 2009 – Happy New Year to all my readers. It’s time to review 2008 news affecting the real estate market in Palm Coast and Flagler County, Florida. I’ll also take a stab at some 2009 predictions.
Industrial Development
Since GoToby.com’s inception just over two years ago, I’ve harped on the need for economic development in Palm Coast and Flagler County. A 1999 study undertaken for Polk County determined that residential property cost our local governments $1.89 in services for every $1.00 in property tax income. Business property cost only eighteen cents for services for each $1.00 of tax revenue. In other words, businesses subsidize our residential tax base.
Less than 1% of Flagler County’s property tax base is classified as Industrial. But the situation has not been noticed until recently. For the first seven years of the decade, the growth in taxable value of residential property provided city and county government with tremendous revenue growth while, at the same time, allowing them to slightly reduce the millage rate. Homesteaded property owners were not affected by the tremendous increase in the cost of government. With declining assessed values, this will no longer be true. It is absolutely imperative that the gross imbalance in our property tax base between residential and commercial/industrial be corrected.
On this front, great strides were made in 2008. Both the Palm Coast City Council and the Flagler County Board of Commissioners gained new members. More importantly, both the city and county have new managers, both professionals. For the first time since Palm Coast became a city at the turn of the century, the two governments and Enterprise Flagler demonstrated a willingness and ability to work closely together to bring about a desired outcome.
Their greatest achievement was the retention of 1,000 existing jobs at the county’s largest employer, Palm Coast Data. As a result of cooperative local and state efforts, Palm Coast Data’s parent company decided not only to keep their present operation in Palm Coast, thus preserving 1,000 existing jobs, but also to undertake a $20,000,000 capital investment in new construction which will result in the local hiring of 700 new employees.
With the Palm Coast Data win fresh in everybody’s minds, the prospect of a call center operation to possibly be located in Bunnell is being pursued. Codenamed "Project Sprint," the recruiting project, if successful, will result in approximately 400 new jobs locally.
Funds were approved and a building permit issued for a new air traffic control tower at the Flagler County Airport. Coupled with some rezoning for light industrial use of property adjacent to the airport the tower project will enhance the economic development opportunities around the airport. The fact that county councilman Jim Darby chose not to run for reelection, removing his personal strangle hold on all airport related issues, will not hurt either.
Palm Coast Holdings began site development work for commercial and industrial property at the intersection of Matanzas Woods Pkwy and US1 as part of a large multi-use project; Palm Coast Park. The development will eventually straddle both sides of US1 from just north of Palm Coast Pkwy to Old Kings Road.
Centex Leaves Palm Coast
Centex decided to exit the Palm Coast market before finishing an approved condominium hotel and condominium project at the site of the former Palm Harbor Resort. They also had planned a major redesign of the Palm Harbor Golf Course. At the time of their decision to pull out, they had already closed the course, ripped out the irrigation system and torn down the clubhouse, angering owners of adjacent property.
Through an agreement with the City of Palm Coast, Centex "donated" the golf course to the city for use as a municipal golf course. Contracts were approved recently by the city for reconstruction of the course with few modifications to the original design. Work has commenced. The new version of the course should be open for play by Labor Day.
Meanwhile, Commercial Alliance Group (CAG) purchased the remaining unsold condominiums in the one building completed by Centex. CAG is actively and aggressively marketing these units at prices well below those originally announced by Centex. Centex has yet to find a buyer for the parcels already approved for a hotel and two additional condominium buildings. The Marina remains open.
Town Center
Things came out of the ground in Town Center in 2008. While running behind the anticipated development schedule as a result of the economic slowdown, Town Center continues moving forward.
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The Landings, anchored by a Super Target sports several other national chains.
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A residential community of ranch condominiums has begun with several units completed and available for occupancy.
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A huge medical building opened its doors near the hospital. An office building is nearing completion nearby as is an independent living facility.
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A new charter school was completed in record time just down the road on Town Center Pkwy.
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Work on a large multi-use commercial building at the lake’s edge in Town Center’s core has topped out at three stories.
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To everyone’s disappointment, the 14 theater Epic Movie complex construction has been delayed. The latest word is that construction will begin in February, but previous delays and the current economy cast a shadow on that prediction.
Commercial Development
Commercial construction was not limited to Town Center.
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Roma Court on Palm Coast Pkwy and City Walk on Cypress Point Pkwy were finally finished but in the midst of an extremely weak rental market. City Walk benefited from the move of the city offices there. Roma Court has one tenant in operation (Palm Coast Dialysis Center) and two restaurants in in the midst of their build out and will be open soon.
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Kohl’s began construction on Belle Terre at Palm Coast Parkway. A March opening is planned.
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Across the street from Kohl’s, the Albertson’s grocery store was purchased by Publix. It was reopened after a brief period of renovation work.
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Construction of an additional Publix plaza, named Beach Village, has begun at SR100 at Roberts Road. The new CVS Pharmacy on the opposite corner is complete. Opening is planned for March.
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The area has several new places for guests and travelers. We now sport a Fairfield Inn, Hilton Gardens Inn, Hampton Inn, and a remodeled Best Western. A Days Inn is on the way.
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The lack of a viable bond market delayed the project to widen Old Kings Road. Work should begin in January followed quickly by the start of a new Wal-Mart SuperCenter there.
Housing Market
2008 was the year for short sales and foreclosures. When lender-owned properties (from foreclosure) hit the market at the end of 2007, the median priced (half sold above and half below) dropped precipitously, from $190,000 in December ’07 to $161,500 in January ’08. Since, the median price has moved sideways, showing a little weakness in the past few months as lender-owned and short sales grabbed an increasing percentage of the market, finishing the year at $145,000. December short and lender owned sales represented nearly 2 of every 3 sales.
On the plus side, the number of homes selling is on the increase. The total number of existing single-family homes sold in Flagler County rose from 1253 in 2007 to 1268 in 2008. More important, the number of homes sold in the last nine months of 2008 was up 12.26% over the comparable 2007 period. The increase was 21% for the fourth quarter alone.
Throughout 2008, the inventory of homes for sale held steady within a narrow band between 1,900 and 1,950, down from nearly 2.600 in late ’06. On January 1, 2009 the inventory dropped another 100 units, reflecting the number of listings that expired at the end of the year. We will have to wait and see if that number climbs back to 1,900 plus again. I doubt it will. I believe many of these potential sellers will elect to keep their properties off the market rather than compete with short sale prices. A lower inventory is a positive for the market. In a supply and demand world, as long as there are transactions taking place, a reduced supply for whatever reason is a signal of a stronger market.
Developers
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WCI Communities, the developer of tower condos at Hammock Dunes filed for bankruptcy (Chapter 11 – reorganization). Meanwhile, sales are continuing at Hammock Dunes but at a lower price point. There has been some fallout from the bankruptcy filing, including an $85,000 check made payable by WCI to one of the Hammock Dunes condo associations which bounced.
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LandMar announced the postponement of the Matanzas Golf Course refurbishment, electing to keep the course closed pending an improvement in economic conditions. Matanzas is one of three local courses comprising The Grand Club. Needless to say, club members and those with homes overlooking the closed course are not happy.
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The Ginn Company has had a rough year. On the plus side, the spring PGA Champions Tour event at Hammock Beach was a success. Things began to unravel when Ginn defaulted on a $675 million loan. The default resulted in Ginn-owned properties within two of his communities, one in Naples and the other in Port St. Lucie, filing for bankruptcy (chapter 7 – liquidation) at year’s end. Laurelmor, a third community in North Carolina was sold to the developer of Reynolds Plantation. Flagler County Ginn properties have not been affected, but rumors persist about a possible hotel operator taking over Hammock Beach and Reunion (near Orlando). Residential construction in the Hammock Beach/Ocean Hammock area is surprisingly robust with several high end homes under construction as some have chosen not to participate in the current recession. But development of The Gardens on Roberts Rd. has been halted and the few sales within Yacht Harbor Village and The Conservatory are being driven by the short sale and foreclosure markets.
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Locally owned SeaGate Homes weathered the downturn well, taking advantage of some buying opportunities. They acquired over 100 Palm Coast lots at bargain prices from cash strapped developers. SeaGate has now begun building a limited number of spec homes aimed at the under $150,000 market. I’ve been told that ICI Homes also weathered the market downturn and is poised to make some positive moves soon.
The future
I expect to see continuing strength in the under $200,000 housing market. Residential building permits issued in Flagler County during 2008 were at their lowest number since HUD began tracking in the early 1980s. In the absence of new starts of spec homes by most builders, the inventory of available homes will continue to shrink, ultimately bringing about a rise in prices.
Unfortunately, the bottom of the market for more expensive homes has yet to be tested by short sales and foreclosures. 2009 will have more foreclosures and short sales in the upper price range (homes and condos) as some affluent owners run out of reserves or tire of holding non-performing assets. I don’t expect the number of foreclosures or short sales to be nearly as large as in the under $200K segment. I also expect the troubled properties to move through the market rather quickly, partly because they will be fewer in number and partly because the lenders are getting quite adept at handling distresses sales efficiently.
Do not be surprised by increasing reports of real estate and mortgage fraud investigations. Fraud was a major contributor to the speculative price increases a few years ago. But because these investigations are so complex and paper trail intensive, they take a long time to complete and are difficult to prosecute. Like speeding motorists, many white collar criminals will not likely be caught.
Local governments will be pressed for cash. Because they can increase revenue in ways unavailable to ordinary citizens – by raising taxes – they will not likely tighten their belts as much as those who voted them into office. Politicians will be reluctant to raise taxes, so look for more subtle ways to increase revenue. They will be called fees instead, but they will simply be taxes under a different name.
Bobby Ginn’s long standing relationship with financial partner Lubert-Adler will continue to unravel, not necessarily to the detriment of owners of property in Ginn communities or the Palm Coast area. For instance, the recent purchaser of Ginn’s Laurelmor project near Boone, NC is probably in a better position to move that project forward than the present Ginn Company, which is struggling with cash flow issues and legal challenges.
GoToby.com, where the number of visitors grew nearly 200% through the year thanks to loyal readers like you, will continue to grow. Watch for the announcement of GoToby.com Realty. GoToby.com Realty will operate as a "referral only" agency, helping GoToby.com readers link up with qualified real estate professionals. The move will minimize brand confusion and capitalize on the growing strength of the GoToby.com brand.
Homestead is for lower taxes
The property taxes are by law reduced for those that own and live in properties as primary residence. The business properties pay more because they are income generating. The people that have the homestead exemptions pay the taxes for the business by purchasing goods and services. The cost for services are higher for people than business as people need services that business don’t. If business don’t make a profit, they close down, people can’t do that,theykeep going and ask for help in the form of services. The tax exemptions for business properties is intended to help get themstarted, assuming they won’t make profits for the time the exemption is in place. During that time the people with the homestead exemptions are paying the cost of the business exemption. The people with the homestead exemptions are the majority and vote, giving them the power. Democracy is the majority rule.
Roma Court
Oh, Toby, Toby, Toby.
Roma Court is NOT empty. Right now the Palm Coast Dialysis Center is in operation. King Palace Chinese take out is in the middle of buildout. Red Sphere, a 3200 sq ft Japanese steakhouse, sushi and sake restaurant is almost complete with their buildout and should be open in Feb. They are doing a beautiful job making an awsome atmosphere for relaxing and having excellent food. ACI (one of Palm Coast’s larger employers with over 60 employees and looking to expand) signed a lease for 9 units (roughly 14K sq ft) and will begin their buildout this month. So, empty? No.
In addition, we have had numerous Realtors® showing the property and I have had two direct inquiries just this past week.
It’s a great place for business on the west side, right smack in the middle of all the office condos, the fire department and others. Great for retail, restaurants, office or medical.
Bring some clients over. 🙂 It’s not as bleak as you think.
Happy New Year to you!