Tuesday, October 14, 2008

Fall Market Update

Of course our market is affected by the mortgage/financial crisis. The cheapest properties on the market in 2005 sold for $200,000. Some of these same properties are now available in the high $50’s. I have spoken with real estate professionals in other areas and some of them report almost no sales. Their sellers have only reduced 10%-20% and they feel they are giving it away. Our market has taken the huge reductions necessary to move properties. This has rapidly driven prices down 25 to 70% over the past three years. You’ll see some these tremendous reductions on my new Top 25.

From July 1st to October 5th of this year, 32 properties have sold and another 10 are currently under contract in the Mexico Beach Area. In comparison to the same time period in previous years: 43 sold in 07’, 33 in 06’, and only 53 at the top of the market in 2005. My point is that in spite of horrible news, people are buying. Port St. Joe Realty has been very fortunate and had 9 closings during this time. It takes guts to buy when the market is down and confidence low, but fundamentally this is the time to buy. It’s ironic how we are all comfortable paying more than the last guy in a good market and scared to pay less in a bad one.

My advice remains the same. There are too many opportunities on the horizon to purchase a marginal deal. Be patient with the market, understand you may have to offer on numerous properties, and you will find what you are looking for. Just remember, you are not the only one looking for these great deals. They will go fast once people know about them and you need to be ready to act.

There are deals too good to pass up. A single family home in a nice area sold for $87,000. It needed a lot of work, but that was solid. Especially considering that a non-mobile single family home has not sold for less than $175,000 in the last few years. Check out my maybe #1 pick. It’s a short/sale foreclosure that the buyers purchased for $825K. There is a rumor that their bank is willing to take in the low $400’s. Furthermore, check back for a development opportunity that should hit the market next week. It’s a 3 acre commercial/high density (18 units/acre) tract with huge development potential. An identical tract was purchased in 2006 for $1,600,000. This tract may hit the market under $450K. It would be a great one to buy and hold until the market recovers. We also placed 1 of our 4 offices on the market. This office/house is priced right and located in the peaceful Beacon Hill area better suited for residential use. We plan to move to a higher traffic location in Mexico Beach.

I watch the news and hear how tough loans are to obtain. However, the majority of people I am dealing with are not having that much trouble borrowing for primary or secondary homes. I have seen regular borrowers get 30 year mortgages in the 5.5% range lately. With 20% down on a $250,000 house, principal and interest payments would only be $1,135/month. That’s awesome. (I added a great new mortgage calculator to http://www.mexicobeachsales.com/) Lot and mobile home loans seem to be a little tougher to obtain and owner financing is remaining attractive to buyers. Three of my listings that recently sold offered owner financing and the sellers were able to charge an interest rate over 7%.

In hindsight, banks see that lots were a more speculative investment than homes. If the average single family home is down 30%, then the average lot is down 60%. More borrowers have stopped paying on lot loans. In these cases, the banks are way upside down on a non-income producing investment if they have to foreclose. I am working with 2 different couples right now looking for nice single family homes 2-3 blocks from the beach. There is one brand new competitively priced home in this area that hit the market last week. With an exception to it, they will be able to buy a lot and build exactly what they want for $25K-$75K less than they would spend if they purchased the best deal at listing price for an existing resale home. Normally the opposite is true.

Building costs (labor and materials) are down substantially and this is another variable that is making building such and attractive option. These factors and great customer service are two of the reasons that Big Fish Construction is continuing to build a number of new homes for their clients. Bo and Steve are easy and fun to work with. If you have any questions about building, give these guys a call and you may be pleasantly surprised at your options. Steve Newman 850-527-5117 or Bo Spring 850-527-0194.

In the midst of the banking failures, I am asked almost daily about the strength of the local banks. I don’t know the complete financial situation of any banks. I will share what I know and who I enjoy working with. To start with, you need to understand that banks sell a large portion of the loans they originate. Many of the bad loans are the “bad paper” you hear about in the news. I’m saying this to address the concerns that the local banks have all of the loans on foreclosed coastal properties. That’s not true. I also remember during 2005 that many people were using mortgage brokers who shopped hundreds of national programs. For example, the lot loans I remember most people using were from Royal Bank of Canada.

Sure, all of the local banks have their share of bad loans. Vision Bank has a solid community presence. I regularly work with and highly recommend Jim Norton, Johanna White, Kyle Adkison, and Karen Fontaine as top notch bankers. Vision is owned by the conservative Park National Corp out of Ohio. Their stock (PRK) is trading at $77/share as I write this and they have over a BILLION dollar market cap. The other banker that I enjoy working with is Sam Tyus at Superior. Superior operates in the Southeast and they have a good common sense approach at the local level. They are also publicly traded. (SUPR).

Discussions abound whether the volatility and losses in the stock market and banking concerns help or hurt real estate. One side of the argument is that as people lose money in the stock market, they have less to spend on real estate. The other side to the argument is that as the stock market struggles, people move money into real estate for a safer investment. There are properties selling for a low as $.30 on the dollar that are generating solid returns from rental income. There are listings that are safely grossing 8-10% of their purchase prices in yearly rental income. 24 out of the 83 buyers in the Mexico Beach Area this year have paid cash. After the owners take advantage of the expenses and depreciation allowed as income tax deductions, the properties are yielding an effective return over 10% in some situations. That sure beats 3.5% in a bank and seems less risky than the stock market in times of financial uncertainty. Check out a few of the potential high income properties currently on the market.

I’m not sure anybody has all of the answers right now. I can tell you that this fall has been absolutely beautiful. I hope you have been able to come and enjoy this wonderful place that I’m lucky enough to call home. We don’t have a traffic light and the only crowds this time of year are seagulls and seashells. I don’t think you can find a more relaxing place. If you need an excuse to visit, the Art and Wine Festival is October 18th.

Below are links to see the closings for other areas that have occurred since July 1st. The Mexico Beach Area remained the most popular choice with buyers and had almost twice the number of closings compared to all of the other areas.
Cape San Blas 18: http://rafsg.net/RAFSGReports/listings.asp?ID=1206172106
Carrabelle 16: http://rafsg.net/RAFSGReports/listings.asp?ID=1206172110
Port St. Joe 10: http://rafsg.net/RAFSGReports/listings.asp?ID=1206172107
St. George Island 10: http://rafsg.net/RAFSGReports/listings.asp?ID=1206172108
Apalachicola 8: http://rafsg.net/RAFSGReports/listings.asp?ID=1206172109
North Gulf County 7: http://rafsg.net/RAFSGReports/listings.asp?ID=1206172111

Take Care,

Wednesday, October 01, 2008

Sacred Heart Hospital Update

September 12, 2008 850-969-1319

Construction Proceeding on Target for New Hospital
In Port St. Joe

Construction is continuing on the new $35 million Sacred Heart Hospital being built along Highway 98 in Port St. Joe. The new hospital and adjacent medical office building will bring quality healthcare to Gulf and Franklin counties and will provide as many as 150 new jobs.
"The construction is progressing nicely, and we have been fortunate not to be impacted by any inclement weather, which could delay the project. We are still on target to open the hospital in the fall of 2009,” said Brian Matson, vice president of strategic planning for Sacred Heart Health System.
Work on the foundation and excavation of retention ponds on the 27-acre site is now complete. Installation of underground electrical and plumbing infrastructures is underway, and vertical construction of the building is slated to begin the first week in October. Construction of the adjacent medical office building is anticipated to begin in the next 60 days, and is scheduled to open with the new hospital.
“Offering a medical office building on the hospital campus will provide patients convenient access both to physicians and any required diagnostic services,” said Peter Heckathorn, executive vice president, Sacred Heart Health System.
Sacred Heart has provided radiology services in local area for more than a year and recently began offering rehabilitation services in both the Port St. Joe and Beacon Hill communities. "Sacred Heart is pleased to show our commitment to the local community by offering these services in advance of our hospital opening," said Sidney Scarborough, vice president of ambulatory care, Sacred Heart Heath System. "Response to the rehab clinics and radiology services has been encouraging, and the physicians have been extremely supportive." The new Sacred Heart Hospital will provide residents of Gulf and Franklin counties with healthcare facilities that include:
A community hospital with private rooms, an 24-hour emergency department and operating rooms
A full complement of diagnostic and laboratory services
A medical office building with space for primary care and specialty physicians, as well as various outpatient services
A helipad to be used by Sacred Heart's AirHeart helicopter, providing rapid transport for trauma patients and other critically-ill patients
For more information about Sacred Heart Health System, visit www.sacred-heart.org.