An interesting thing about a prolonged down market, after three years everybody gets bored. Real estate agents have quit trying to convince the public that the bottom has been reached because every month they were proved wrong. Appraisers have been beaten up so bad for relaying the bad news; you can’t get one to admit he is an appraiser in public. Sellers have thrown in the towel. Buyers loiter about like hungry vultures. Welcome to the 2010 Panama City Beach condo market. For those who are still awake, the following is our summary of the local condo market as of the end of 2009. Unfortunately, it looks exactly like the end of 2008.
The following is an analysis of sales and re-sales from the 75 buildings contained in the condosaletrends.com data base. Developer sales not listed in the MLS were not included because we cannot confirm the existence of or lack of seller concessions.
Some good news was a 30% increase in sales when compared to 2008. However, foreclosures and short sales continue to be major restraints to price stability. Bank related sales accounted for 36% of the 49 sales during November and 58% of the 44 sales during December. A large majority of the bank related sales were in the newer, beach-side buildings.
The market trend line is illustrated below. It is structured to show a sale price trend measured in terms of the percentage sale price as of a particular date. The starting date used was January 1, 2009 so we could show the price trend for 2009 year to date. We chose units from a variety of beach side buildings of different ages and sizes that had a sufficient number of sales as to be statistically significant. All of the sales used in this analysis are from beach side buildings. There is no collusion of beach side properties and off-beach properties. The buildings include Boardwalk Beach, Calypso, Celadon, Emerald Isle, Grandview, Gulf Crest, Regency Towers, Seychelles, Splash, Sterling Reef, The Summit, and Treasure Island.
The sale price of each type of unit is only compared to the typical sale price of that particular type of unit as of January 1, 2009. As an example, a sale of an 846 SF, 1BR/2Ba unit located in the Celadon is only compared to sales of 846 SF, 1BR/2Ba Celadon units. A unit type with a January 1, 2009 market value of $400,000 is represented as 1 or 100%. An October 2009, $380,000 sale of that type of unit is depicted as .95 or 95% of the January 1, 2009 sale price. The chart contained in the following price trend analysis is a trend line of the trend lines of the sale prices of each type of unit from the 12 buildings. Foreclosure sale prices that were unrealistically low (mold problems for example) were not included. There were 101 sales used in the chart. The analysis does not try to skew the price trend in any direction. The data is just the data.
The data indicates that the typical beach side, Panama City Beach condo lost approximately 12 percent of its value during 2009. Of course there are exceptions, especially with units that were sold exclusively through the developer.
As in the past, there are several factors at play that will continue to put downward pressure on current market values.
- Financing a condo continues to be difficult for the average buyer.
- There are still a large number of owners who have a mortgage in excess of $100,000 more than the current market value of their condo. There is no evidence that the number of foreclosure and short sales will decline in the near term. This is especially true for buildings that were completed prior to mid 2006. As an example, assessor records indicate that 41% of current Treasure Island Resort (completed in 2005) owners paid $100,000 to $300,000 more than current market values.
- The supply of developer owned units that have not been sold exceeds the demand. Tropic Winds and Ocean Reef appear to be working through their excess inventory, however at the current sales rate it may take 12 months to sell out. Shores of Panama, Grand Panama, and Origin at Seahaven will most likely take longer.
The increased number of sales is about the only good news from 2009. So what’s in store for 2010? The new airport will have a positive effect on the number of rental nights for the area but a minimal effect on condo sale prices. Foreclosure and short sales will continue to put negative pressure on current market values. Financing second homes located in Panama City Beach condo buildings will continue to be difficult. The number of sales will most likely hold steady at 2009 rates. Panama City Beach condos will lose another 5% in value.
When will the market return to normal? Market participants have to accept a new normal. High loan-to-value loans with minimal income documentation will not be part of the new normal. Purchases based on price speculation will not be a part of the new normal. Sale prices established over the past three years will not be a part of the new normal. Sale prices for the new normal will be somewhat less than today’s prices. The number of sales for the new normal will be similar to 2009. The market at the end of 2010 will look more like the new normal than the market at the end of 2009.
For more information on individual buildings and units, visit http://www.condosaletrends.com.
7 thoughts on “2009 Year End Real Estate Market Summary and Analysis”
Thanks for your analysis Sam, and although the news isn’t all that good, everything you said seems reasonable and likely to unfold pretty much as you predict.
I think going forward purchases are going to have to focus on the cap rate when buying a property. (ie net rent/purchase price) similar to buying a dividend yielding stock. That way, any increase in value ends up being a bonus.
I think you are dead on with your comments. As a Top Producing Realtor on the Beach that is what I see in the market place. It is not over yet and will take some time to recover.
In my opinion, Mr. Portman’s assessment of the market seems pretty well grounded with what I am seeing on the front lines. However, 2 things concern me. Stating that “Panama City Beach condos will lose another 5% in value” seems a little bold considering that nobody in fact knows what the future holds…especially in a market that is going to see some significant changes in the coming year. I am further concerned by the fact that we are supposed to take information that is supposed to be grounded in fact and data and rely on this as truth when it is being presented in a bit of a sloppy manner…the excel graph is labeled for the year 2013.
I will be interested to peruse http://www.condosaletrends.com to see which sales were included and which were not, as opinion of value is still just that, opinion.
My thoughts on this report are more in line with those of Craig Duran. I’m not convinced we will see ongoing declines in prices except in the case of short sales and foreclosures. Because of the long wait to close on these units and the issue of multiple offers, I see buyers opting out of considering short sales in favor of transactions with a more predictable outcome. If this becomes a trend, prices on non-foreclosure/short sale properties could stabilize and perhaps even increase by year end.
Feeding into my optimism for sales in 2010 is the fact that as the opening date for the new airport gets nearer, I’m receiving more and more calls from new buyers interested in investing in the area – particularly those from the Nashville, TN area. My cup is half full.
History has shown Sam to be correct in his assessments over the last several years. Many of the naysayers describing his work as sloppy, unfounded and simply not realistic have disappeared from the landscape. Portfolios are not bursting at the seams as they were a short 5 years ago, causing the majority of buyers to seek financing that for the most part is simply not available to the bulk of these buyers. Retirement funds are mere shadows of their former bottom lines and health and energy costs continue to rise. This extends to foreign investors as well. And we haven’t even scratched the insurance, tax and association fee surface. As for me, I’ll continue to base my decisions on Sam and others like him that compile data and let it speak for itself. That’s what “real” real estate professionals do.
There are too many developers units still available and too many owners looking too bail. With banks not lending money to purchase these units and all so many cash buyers around I am afraid Sam’s report is accurate. Also to consider is the number of foreclosures is set to rise in 2010 and the number of American losing jobs continues in December (85,000).
I agree with much of what Sam states and believe the numbers and his analysis support his statements. Perhaps some do not realize that as long as short sales and foreclosures dominate a large portion of the market, short sales and foreclosures will have a bold impact on sales, including cash and conventional sales of any property, in assessing value to all condo properties.
Since any relief that property owners have seen has targeted primary residences, and the Florida condo market has seen little “relief,” our condo market will continue to see a decline in vaules as a result of more foreclosures and short sales. The second home market will continue to suffer as long as the labor market is unstable and unemployment is increasing. What that means is that for those buyers who have a cash flow, there are some great deals on Panama City Beach’s condos and will continue to be throughout 2010.