No more Leisurely Home Shopping as Palm Coast Market Shifts into a New Phase
Buyers can ill afford to shop at a leisurely pace expecting that the homes they look at today will still be available in a month or two.
Palm Coast, FL – April 5, 2013 – Palm Coast’s housing market is entering a new phase, one where buyers can ill afford to shop at a leisurely pace expecting that the homes they look at today will still be available in a month or two. The number of homes sold is down slightly from a year ago, but prices and total sales are rising. The number of distressed properties available for sale is shrinking, drying up the feeding beds for bottom fishers.
MLS registered 449 Flagler County homes sold during the first quarter of 2013, down slightly from the 456 sold during the same period last year. But the value of the 2013 sales was $73.9 million, up 9% from one year ago. The median price for the quarter was $131,000, up 13.9% over the same period.
Of 844 single-family Flagler County homes currently listed for sale on MLS, only 62 are listed as short-sales and another 55 as lender-owned (REO). This compares to several hundred distressed properties not too many months ago.
Some market segments are showing dramatic signs of recovery. Grand Haven, which once had more than 160 homes available, has only 37 now; nearly equaling the 33 that are under either a pending or contingent contract. Such a situation is unheard of since the height of the bubble when Grand Haven had both 28 homes for sale and 28 homes under contract.
Until recently, the Palm Coast and Flagler County housing market followed a pattern of increasing sales, declining inventories and stagnant pricing. This pattern has no precedent in history because the underlying market conditions had never existed before. What makes the recent housing market so unusual?
From January 2006 to January 2012, local home prices dropped at least 50%. Flagler County and Palm Coast were just coming off two years as the highest growth county/city in the nation. That growth brought with it a surge in new home construction at prices inflated by the rising housing bubble and its lax lending standards. The result was a lopsided proportion of over-priced homes. That’s why our market became the poster child of the real estate bubble. That’s why the Washington Post chose to feature Palm Coast in a Sunday June 6, 2011 front page article.
Homeowners facing negative equity had few options. Those with sufficient income or cash reserves maintained their credit rating by continuing to make mortgage payments on a declining-value asset. Those who sold their underwater home brought a check to the closing table to cover the negative equity.
Foreclosure, short sale, bankruptcy or deed-in-lieu remained as the only options for those with no reserves. The result was a flood of distressed sales (bank-owned properties and short sales). Even as the number of homes sold increased from 2008, distressed properties continued to depress prices and affect appraisal comps. Meanwhile lenders’ over-corrected underwriting standards and appraisal guidelines made borrowing more difficult while the number of underwater owners limited the buyer pool.
But a new pattern is emerging. Distresses sales are declining overall. While bank-owned sales have remained relatively steady, short sales are down. The percentage of sales for cash is on the rise, driven by investors. Investors prefer quick closing lender-owned sales to the uncertainty and delays inherent in short sales.
|
Year
|
Homes sold
|
Short Sales
|
Lender-owned
|
Depressed
|
Cash
|
|
2010
|
1439
|
37.5%
|
16.2%
|
53.6%
|
47.0%
|
|
2011
|
1633
|
29.1%
|
23.7%
|
52.8%
|
53.0%
|
|
2012
|
2027
|
24.7%
|
23.9%
|
48.6%
|
52.9%
|
|
2013 to date
|
473
|
19.2%
|
21.4%
|
40.6%
|
56.7%
|
Source: Flagler MLS
Today’s investors differ from the speculator/investors that fed the bubble. They are using cash rather than easy credit. They have a defined plan with an exit strategy. Most are picking up carefully researched bargains from among the distressed housing inventory. Then they rehab the homes as needed with new appliances, fresh paint, new flooring, upgraded cabinets or fresh landscaping.
Investors are playing an integral and vital role in the local housing recovery by replacing rundown low-priced comp-depressing eyesores with good clean inventory, raising the value of the target property as well as the value of surrounding homes.
But investors and other buyers who are seeking bargains must be prepared to move quickly. The average days on market for REO homes remains well below that of non-distressed and short sales. Through this year’s first quarter, REOs are selling at an average of 97.7 of list price indicating the level of competition in that market segment.
Baring a broad economic crisis, I look for substantial price appreciation through the rest of the year.
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