Tuesday, February 10, 2009

2008 Market Recap and Good Start to 2009

I planned to send out a detailed 2008 report last month. Fortunately, I’ve been surprisingly busy showing property and helping buyers and sellers negotiate deals. I have 8 properties currently under contract! There are a lot of people looking at property and making offers. There were as many Realtors showing property last weekend as there usually are during a typical weekend in July. I’ve already shown close to the number of people property in the last 3 months that I did the rest of last year. I think it’s a combination of the big price reductions and foreclosures hitting the market that is causing the increased buyer activity. The sellers are also realizing that they must compete with the foreclosures, and they are starting to take lower offers than they would have even a few months ago. The properties getting the most attention are the seriously discounted vacant lots and residences that have good rental potential. Not all of the people purchasing these properties with good rental potential are planning to rent them. It’s often just knowing that these properties could rent well if they need to be rented that’s helping them sell.

Port St. Joe Realty is starting the year off very well, and one of my favorite weekends is coming up next weekend. The Mexico Beach Gumbo Festival being held on February 14th is always a lot of fun. I can’t take any of the credit for Port St. Joe Realty being the defending champion in the amateur division. I don’t know if we will be able to enter a team this year because everyone is so busy. I’m showing property to a different potential buyer the day before, day of, and possibly the day after the Gumbo Festival. The El Governor is offering rooms for $50/night that weekend and you need to hurry to make your reservation as they are almost completely booked: http://www.elgovernormotel.net/ Another great lodging offer for that weekend is the discovery packages that Windmark Beach is offering. http://windmarkbeach.com/specialOffer.htm

In 2008, there were more sales than most people realize, especially in the Mexico Beach/St. Joe Beach/Windmark Market. It looked like sellers were done reducing and then came the unforeseen number foreclosures hitting the market. I was looking back over an old newsletter that I sent out at the end 2006, and I was still not aware of a foreclosure in the Mexico Beach Area at that time. Now there are enough foreclosures and short sales that their sales prices are setting the market. (Short sales are much different and often misleading, more on that later) For the most part, the banks are pricing foreclosures aggressively, and they are selling relatively quickly. This process isn’t entirely negative and is actually helping the local economy in a way. For example, in one community there were 2 spec houses that were foreclosed on. Now, these homes are occupied by happy new owners who are spending money and paying taxes in the local economy. I recently listed a 3rd foreclosure, and it’s the best deal yet in the Sea-grass Community. Most of the people buying the lots that have been foreclosed on are planning to build on them in the near future and that will also help the local economy.

2008 Sales Totals on MLS
(Our MLS Service only Shows 50 properties per link, the most recent 50 are displayed)
Mexico Beach Area: 105 Sales (72 Residences and 32 Vacant Lots)
Port St. Joe Area: 27 Sales (18 Residences, 6 Vacant lots, and 3 Commercial Properties)
Cape San Blas/Indian Pass: 59 Sales (40 Residences and 19 Vacant Lots)
St. George Island: 55 Sales (45 Residences and 10 Vacant Lots)

Not all sales are foreclosures or short-sales and some sellers are offering better prices than the banks. I have 3 bank owned properties under contract, 1 short sale, and 4 “regular” properties under contract. All types of properties are not being foreclosed on as well. For example, I have still not seen a single family gulf front home or vacant lot foreclosed on in Mexico Beach or St. Joe Beach. (The first possible foreclosure of this type may be in the auction mentioned below) I know of around 15 potential gulf front single family home buyers between my clients and buyers that other Realtors are working with. They all know the best deals are 2 homes built in the 90’s that are at $749K and $750K. Both of these homes could be very nice and just need the standard updating a beach house built 10 years ago typically needs. (Replace the infamous green carpet, paint, etc) Because of foreclosures bringing prices down on Cape San Blas, it is the first time I am aware of that you could now actually get a better deal on a new Gulf front home on Cape San Blas for less than the Mexico Beach Area.

“I am not comfortable buying on the Cape because of flood zone issues”. I have heard that 1000 times and completely understand. Here’s a cheat sheet for the Cape. The best flood zone for the Cape, Mexico Beach, or anywhere in Florida is “X”. If you are not in zone “X” on Cape San Blas, you will be required to carry private flood insurance if you have a mortgage on a home, which is usually pretty expensive. Private flood insurance for a nice gulf front home on the Cape can easily be $10,000-$20,000. That’s a whole lot extra vs. $0 for a home in the “X” Flood zone. The private flood insurance is not required on vacant lots and I’m afraid a lot of people did not realize the huge difference when they bought lots in flood zones. When they tried to resale to end users, these people found out what a discount it takes to sell a lot in a flood zone and many of these are in foreclosure. The last gulf front lots in the “X” flood zone sold a few months ago for $550K and $575K. These sold at the top of the market for as high as $1,600,000. There was an “X” flood zone just listed for $399K. With the cost of building as low as it is, you could have an incredible gulf front house with $100K/year rental potential for around $700K. The best deal by far for a gulf front home in a flood zone is this one at $599K which actually has reasonably priced flood insurance.

There haven’t been as many foreclosures in the Mexico Beach Area as there have been on Cape San Blas. When comparing apples to apples the best we can, the Cape market was higher than the MB market and now it’s a little lower because of the foreclosures being priced for quick sales. There have been and are a few of the really good deals on Cape San Blas. These really good deals are what buyers are looking for and consequently I’m spending more and more time on the Cape. The beach re-nourishment project is complete and the beach ranked # 1 in America by Dr. Beach in 2002 has some positive momentum going into spring. Check out these pictures of the beautiful beach taken from the $399K lot. This link will show a cool video of Cape San Blas and Gulf County. I am working on a new Cape San Blas search website that I hope is complete by next month.

Now back to Mexico Beach. There are a lot of people looking for the “deals” in the Mexico Beach area. Two of my listings went under contract last week, and another is being shown regularly after taking a big price reduction. This home originally listed at $649K is now listed at $299,000! This bank owned lot listed for $179,000 was purchased in November of 2004 for $460,000. Casuna lots were originally released prior to the boom for $50K and quickly went up over the next 4 years to over $200K. Now you can buy one again for $50K.

Financing terms are varying substantially for homes vs. vacant lots. Buyers are finding lenders eager to lend on personal and second homes and are finding solid 30-year fixed mortgages with 10% down in the 5% interest range. Finding financing for vacant lots is much harder to obtain and I am seeing strong borrowers having difficulty finding anyone requiring less than 35% down! If you know of someone offering better terms on lot loans, please let me know. It’s driving me crazy how much easier it is for someone to borrow $350K for a home than it is for the same person to try and get $100K for a lot. There are some exceptions that make lending on lots less stringent if the borrower plans to start building within the next 6-12 months. It’s far different from a few years ago when you could “state” your income and receive 100% interest only financing on vacant lots.

What is the difference between a short sale and a foreclosure? There is a huge difference. A short sale is when someone is trying to sell for less than they owe, and they are trying to get the bank to forgive the difference. These can be very frustrating to deal with and often take months to get some kind of an answer from the lender, which is often “no”. Many times the sellers need an offer before the lender will negotiate so they reduce the price until they get an offer. This price is usually not yet approved by the lender and often buyers will make full price offers that the banks won’t accept. This is very frustrating for buyers and myself. A buyer that’s only here once every three months will come down and focus on a property and then leave and make a full price offer and be told no. There are great deals occasionally on short sales, but it’s a process that needs to be understood.

Bank Owned Foreclosures are a totally different story. I enjoy working with both the banks and the buyers on purchasing foreclosures. Once the bank has foreclosed on a property, they are in 100% control of the property. For example, a bank in New York is not in the business of owning a lot in St. Joe Beach. Once they are in possession, they then assign it to an asset manager that usually assigns it to an Realtor that is told to price it aggressively enough to sell it within 90 days. The whole process is handled by professionals with the job of getting the property sold quickly. It is usually much easier to purchase a foreclosure than a short sale.

Windmark Beach and The St. Joe Company are being forced to make some tough decisions. I don’t know when that community will finally take off and start getting “rooftops” as they like to say. What is certain is that they have built an incredible development that will one day be the most prestigious community in this area. Keep an eye on their progress and you should drive through there if you haven’t done so in a while to see all of their improvements and additions. I like the leadership of Joe Rentfro. He and the other customer-oriented employees like Kristy Grove have that community going in the right direction. They are now offering a price guarantee on lots that’s pretty interesting. Phase I is active with foreclosures, but St. Joe controls over 99% of the inventory in phase 2 and there hasn’t been a foreclosure in phase 2. Their momentum will temporarily be slowed down if Brennan’s Restaurant does not reopen in the spring. I hope they are able to resolve that and/or find a better solution for the community at least by this summer. They have opened a first class gym in Windmark and I believe that a new women’s clothing store called “The Fuss” will be opening later this year.

Another exciting date could be auction of Toucan’s Restaurant being held on March 12th. I am skeptical of these auctions because no property has actually sold at the last 4 that I have attended, but who knows, this may be the one where you get a great deal. There are neighboring property owners adding their property to the auction including a very nice gulf front home. Here’s a link with more info: http://www.roebuckauctions.com/

Take Care,