Thursday, July 24, 2008
Mid Summer Market Report
Be sure to check out www.mexicobeachsales.com. After many requests, I have gone back to ranking the Top 25 deals on the Market. You can also click the “what’s selling?” button to see the last 50 properties that have sold in the Mexico Beach/ St. Joe Beach/Windmark Beach Area.
I think we had the largest crowd ever in Mexico Beach on The 4th of July. The beach looked great and the weather was perfect. Every motel room and vacation rental, including the many new units now on rental programs were rented. Most of these are also rented for the majority of July and lots of people are looking at property. The message I am trying to communicate this month is that there will be a low number of sales this year despite the increase in numbers of people looking to purchase. There are more people looking than in 2006 or 2007.
Closings comparisons for May 1st to July 12th from 2003 to 2008.
Mexico Beach Area
Currently Under Contract 15: http://rafsg.net/RAFSGReports/listings.asp?ID=1206152034
Number of Properties on the Market: 528
Number of Closings
5/1/08-7/12/08 24: http://rafsg.net/RAFSGReports/listings.asp?ID=1206152047
5/1/07-7/12/07 36: http://rafsg.net/RAFSGReports/listings.asp?ID=1206152046
5/1/06-7/12/06 20: http://rafsg.net/RAFSGReports/listings.asp?ID=1206152041
5/1/05-7/12/05 52: http://rafsg.net/RAFSGReports/listings.asp?ID=1206152040
Cape San Blas
Currently Under Contract 4: http://rafsg.net/RAFSGReports/listings.asp?ID=1206152031
Number of Properties on the Market: 481
Number of Closings
5/1/08-7/12/08 10 http://rafsg.net/RAFSGReports/listings.asp?ID=1206152048
5/1/07-7/12/07 17 http://rafsg.net/RAFSGReports/listings.asp?ID=1206152045
5/1/06-7/12/06 8: http://rafsg.net/RAFSGReports/listings.asp?ID=1206149180
5/1/05-7/12/05 72: http://rafsg.net/RAFSGReports/listings.asp?ID=1206152039
Port St. Joe
Currently Under Contract 8: http://rafsg.net/RAFSGReports/listings.asp?ID=1206152030
Number of Properties on the Market: 213
Number of Closings
5/1/08-7/12/08 4 http://rafsg.net/RAFSGReports/listings.asp?ID=1206152049
5/1/07-7/12/07 10 http://rafsg.net/RAFSGReports/listings.asp?ID=1206152044
5/1/06-7/12/06 14: http://rafsg.net/RAFSGReports/listings.asp?ID=1206152043
5/1/05-7/12/05 37: http://rafsg.net/RAFSGReports/listings.asp?ID=1206152036
Here’s my simple theory on the current market and explanation as to why there are so few properties selling this season. To get a feeling for the market, put yourself in the shoes of a prospective buyer. You love the beach and want a place to enjoy. You understand this is a big investment and prices have been falling since the summer of 2005. You and every other buyer want to make sure you get the best deal in the last 5 years. You are an educated buyer and know that the last property like the one you are looking for sold for $200,000 three months ago. 9 out of 10 buyers in this market have a mindset that they are not buying unless they can get a better deal than the last guy. Even though this $200,000 property was worth $400,000 3 years ago, your thinking is to not pay more than $175,000. The bottom line is that these potential buyers are hesitant to buy. They only purchase if they feel like they are getting a great deal.
This has been the mindset of buyers since the market started coming down in 2005. The market is running out of sellers that can afford to sell for less. While I do not think that we are at the bottom of the market, this is a good sign that we are getting closer to the bottom. With so many properties on the market, there will be a few sellers that have to sell quickly. Individuals forced to sell for whatever they can get quickly and banks that have to sell foreclosed properties will continue to result in low sale prices. There are not many of these stand out deals. Do not pass them up if they are what you’re looking for.
Earlier this year there were 8 Gulf-side townhouses that stood out from the other similar properties as solid deals. There were multiple buyers sitting back waiting on them to reduce more. Once one of them went under contract all 8 of them sold within 2 ½ months. The result is not that people have paid more; rather not one unit like these 8 has sold since May. There are 4 other similar units that are short sales that have been under contract for a while. These short sales often take a few months to get the terms worked out with the banks. (Short sales are sales where the seller is trying to get the bank to allow him to sell for less than is owed on the mortgage) There is a similar situation to the townhouses right now with a number of single family homes with asking prices from the $180’s to $400’s. http://rafsg.net/RAFSGReports/listings.asp?ID=1206150826 A few of these listings are getting shown 4 and 5 times a week. That is a ton of activity.
I think once one of these goes under contract that at least 4 or 5 of them will sell before summer is over. There are a few townhouses that have started to see activity after reducing their prices as well. One of the eight units that was purchased earlier this year for a very good price was put back on the market with a new asking price over $100,000 more than was paid a few months ago. It went under contract while I was writing this report. Not many people know the market well enough to successfully flip property. The key to being successful is to purchase it for such a good deal that you can resell it for a great deal to the next guy and still make a profit. (Minutes before I sent this the $125K lot in the next paragraph looks like it went under contract for considerably more than the buyer paid a few weeks ago)
It’s ironic with so many more sellers than buyers that buyers are starting to become frustrated because they can’t find what they consider a super deal. I could probably sell 10 of the beachside lots looking down the canal that had an asking price of $375K and sold for $125K. That’s the kind of deals people are looking for but now they can’t find anything comparable under $215K. With the $125K lot in the back of their minds, the other lots on the market seem overpriced and the result is no sales. There was a lot in St. Joe Beach just reduced from $385K to $200K. It sits right across from the beach with unobstructed views and I know that there were 3 offers submitted within 24 hours of it being reduced. Similar lots to this one start at $350K. I truly believe that the buyer will be getting a great deal. http://rafsg.net/RAFSGReports/listings.asp?ID=1206152035
The negative side to this is that it makes every other similar lot look severely overpriced. The result will again be very few sales. There will be 10 people that want a lot like this for $200K, but these lots sold for $600-$700K three years ago. There aren’t many sellers that can afford to sell that low. I don’t know if you consider it helping or hurting the overall market, but that’s how these very good deals reduce the number properties that sell. If the current rate of sales continues, I estimate that less than 1 out of 9 properties on the market will sell this year.
We have not been exempt from the foreclosures and it has forced banks into raising their lending requirements. This makes it harder and harder for people that want to buy to get loans. This has started leading to more sellers offering owner financing. It’s not as easy and clean as a quick close, but it seems to be a win/win in many situations for the buyer and seller. I was not involved in 1 owner financing transaction from 2005-2007 and I heard of very few. I was involved in one earlier this year and I am currently in negotiations with 2 other sellers that have attracted buyers by offering owner financing. Owner financing looks like a trend that will become more common. I am now advising sellers to at least consider offering this to attract buyers.
I have no doubt that properties purchased between 2004 and 2006 will continue to be foreclosed on through this year and into 2009. Port St. Joe Realty is very connected with local banks and has national connections as well that enable us to quickly get information about foreclosures to our clients. The majority of banks are continuing to ask more for their foreclosed inventory than they can sell for in the current market. However, there have been 6 or 7 foreclosed properties have been great deals this year and sold in a matter of days. Our 4 offices continue to perform well despite the market conditions. This link will show you some of our recent sales including 3 properties that we currently have under contract. http://rafsg.net/RAFSGReports/listings.asp?ID=1206149385
I often get calls from people asking me to refer them to attorneys and appraisers. I’d like to tell you about 2 friends that have recently opened their own businesses. Jeremy Novak has experience as a Realtor and in property management. He has recently opened his own law firm in Port St. Joe located next to our Port St. Joe Realty office on 7th Street. Jeremy offers great personal service for real estate closings and other legal matters. Matt Terry has recently started The Appraisal Group of North Florida and can help with any of your appraisal needs. Another trustworthy appraiser is Greg Norris. Jeremy Novak: 850-527-9121, Matt Terry: 850-227-6478, Greg Norris: 850-596-6505.
Total 2008 Sales:
Mexico Beach 54 (43 Residences and 11 Vacant Lots)
43 Residences http://rafsg.net/RAFSGReports/listings.asp?ID=1206152057
11 Vacant lots http://rafsg.net/RAFSGReports/listings.asp?ID=1206152058
Port St. Joe 13: http://rafsg.net/RAFSGReports/listings.asp?ID=1206152055
Cape San Blas: 35 http://rafsg.net/RAFSGReports/listings.asp?ID=1206152056
Carrabelle: 41: http://rafsg.net/RAFSGReports/listings.asp?ID=1206152050
St. George Island: 39: http://rafsg.net/RAFSGReports/listings.asp?ID=1206152051
Apalachicola 21: http://rafsg.net/RAFSGReports/listings.asp?ID=1206152052
North Gulf County 12: http://rafsg.net/RAFSGReports/listings.asp?ID=1206152054
Eastpoint: 13 http://rafsg.net/RAFSGReports/listings.asp?ID=1206152053