This post originally appeared on PanamaBeachRealty.com’s blog. For more information about real estate in Panama City Beach, current market conditions, and other things happening in real estate locally, you should check it out.
Each month we hear stories about how the real estate market in Panama City Beach is bottoming. We are continually told that it is ready to bounce back at any time. How much longer are we going to listen to this while watching prices drop quarter after quarter? Potential buyers should not be focusing on the overall market. They should instead be looking at the specific condominiums they are interested in. On the whole, the real estate condominium market in Panama City Beach continues to fall. The average price per square foot of a 700 square foot or larger gulf front one-bedroom condo has dropped another $18 per square foot during the first quarter of 2011. These dropping rates do not indicate that the market, as a whole, is bottoming. A large number of floor plans and buildings across the beach are showing no signs whatsoever of bottoming.
Itís not all bad news though. Some buildings and floor plans have, in fact, exhibited clear signs of a bottom market. I will later illustrate an example of a condo bottoming. I will also provide a separate example of pricing occurrences in a common two-bedroom floor plan across many condominiums in Panama City Beach.
In terms of volume, purchasing rates are setting the stage for a solid year of sales. Condominium re-sales in Panama City Beach were up in January 2011, as compared to those in January 2010. In January 2011, 68 condos sold. In comparison, only 54 condos sold in January of the previous year. When looking at the purchase rate of real estate condominium re-sales in Panama City Beach for February, sales volumes once again exceeded that of the previous year. In February 2011, 69 condos sold, as compared to 60 the previous year. As you can see, the trend continued in March.
Downward Pressure on the Market
A cloud is currently hanging over the Panama City Beach real estate market for condominiums. The trifecta of short sales, foreclosures and damaged properties is making it difficult for certain floor plans to stabilize or increase in price. The obstacle lies in that they have all started feeding off of one another, regardless of the fact that many buyers are willing to pay higher prices. Letís use the following as an example:
Condo A has a good floor plan. Condo B in the same building has an identical floor plan. Condo B, however, has some serious issues with mold throughout the unit and is in need of a complete renovation. As a result, condo B rightly sells at 10-20% below the normal price. In addition, this particular floor plan also has a few short sales on the market. Traditionally, banks are not all that intelligent when it comes to short sales. All a bank typically looks for is any type of comparable sale that will allow them to sell at a particular price. They often fail to even send an appraiser to access the value of the property. They will often pay a nominal fee to have someone locate comps for that particular floor plan. So, we now have a comparable sale with condo B, which was consumed with mold and sold at a lower price. Additionally, we now have a foreclosure appear and price itself at or below the new short sale price and the mold infested condo. The units subsequently feed off of each other.
Even worse than this situation is the long list of short sales that will likely never close. While some agents are good at getting short sales through, many seem to have a horrible track record when it comes to short sales. The majority of these short sale properties will never make it to the closing table. These listings sit on the table forever, benefiting no one and putting a downward pressure on all similar units.
There are occasional exceptions to this however. Intermittently, you will see foreclosures and regular real estate sales at a 10-20% higher price than the lowest asking price.
The Most Common Two-bedroom Floor Plan on the Beach
Several buildings in Panama City Beach were constructed by a particular developer. The majority of these buildings contain almost identical 1146 square feet floor plans, with two bedrooms and two bathrooms. In contrast to some larger resort style condominiums, these condominiums do not include certain amenities, such as on-site check-in desks, theaters or convention centers. This particular developer took a simpler approach. Emerald Isle, Ocean Reef, Ocean Villa, Tropic Winds and Twin Palms were designed for simplicity and functionality. Ample space is provided for the number of units and allotted amenities in each building, demonstrating a well-proportioned balance in the use of space. The floor plan used in these buildings incorporates huge balconies, large gulf front pools, a sauna, steam room, a heated indoor pool, and plenty of parking.
Since these buildings contain a large number of units with almost identical floor plans, this plan serves as a good representation of the cloud that is currently hanging over the real estate market in Panama City Beach. In my opinion, this particular floor plan should have already bottomed. However, it is struggling to find its bottom as a downward pressure is put on the market. An active absorption rate of 200-220k exists for this plan if sellers would just wait for it instead of selling at a lower price. Brand new condominiums, such as Ocean Reef and Tropic Winds, are bringing in even greater amounts because buyers are happy to pay higher premiums for brand new condos.
En Soleil 3-bedroom Condos
As previously promised, here is an example of a floor plan that looks to have found its bottom in 2009-2010. If you arenít familiar with the building however, the charts can be deceiving. For someone who is unfamiliar with the building, it may appear that the bottom of the market for this floor plan was the $509,000 sale. I have a slightly different viewpoint however. En Soleil contains two separate towers with three units per floor. Each of these end units has an identical 2300+ square foot floor plan. The individual owners in this building tend to be a bit on the discriminatory side. While you would be hard pressed to find a bad condominium in these two towers, there is a significant difference in the units. The lower floor end units looking away from the property overlook a roughly two story condominium on both the east and the west side. As a result, a small number of these units partially overlook the roof of the buildings. In a condominium like this, you are likely to witness a significant price difference between a lower floor end unit looking out from the property and an interior lower floor end unit. The $509,000 sale was a lower floor end unit, while the other sales just before and after it were interior end units. I would personally argue that a relative bottom was actually achieved for this particular floor plan in 2009.
What is a Good Indication of a Floor Plan Bottoming?
If a floor plan is seeing a normal absorption rate at a particular price point, it is a good indication that it is starting to bottom. Keep in mind that buying at the lowest price doesnít necessarily mean that you got a really great deal. If you paid 180k for a two-bedroom foreclosure and someone else paid 205k for the identical floor plan with window treatments, great furnishings and flat screen TVs throughout, you definitely got taken. To comparably furnish your unit, you will need to shell out an additional 30-35k, as well as a significant amount of time and hassle to do it yourself. Additionally, if you paid 170k for the same floor plan with mold damage, you really got the short end of the stick. I would personally recommend that potential buyers find the building and floor plan that best fits their needs and wants and then take a close look to see if buying makes sense. They should take into account the condition of the unit, the view compared to other units in that building, the difference between a furnished and unfurnished unit, and the time and effort it will take to get that unit to the desired condition.
* All sales data taken from Bay County Association of Realtors
5 thoughts on “Market Update – Recovery? What Recovery?”
There is great information in this article however to temper with some optimism….. as a sales person I agree that although prices are not rising the level of inventory has gone down. I have buyers but am not able to find what they want in their price range at this time. I guess the reason for that is that the lower units are not as readily available as the units on the higher floors.
As stated you really have to look at our market by condo rather than the whole market and an additional take on that is from east to west as well. IF you want to be far west ( west of 79) then you really do not have too many to choose from.
I am not a stats person so I am not the best woman to analyze but for me all I know is that people are still super exited about all the good deals as compared from years ago and they are having a big time finding a vacation spot they can afford for their family.
Let the good times roll!!!
Again, thankful for your take on the market and as usual I learned something. Gosh I love this job.
I’ll have what she’s drinking!!
I think it is irresponsible of you to title the article as you did, then proceed to explain why the title is incorrect. You should have titled it “The recovery is in the details!”
I have buyers trying to compare foreclosed condo sales (no appliances or furniture) with fully furnished units for sale. They are miffed because they think the seller is overpriced!
It’s a good article; I just hope buyers, sellers, and agents will learn to compare apples to apples…
Great article. Good in depth digging. Thanks for displaying the facts and keeping us informed, Jason.
We bought our place for the long term so I don’t get too excited about when a turn around is going to come, but I’m pretty sure it will given the beauty of this area. Hell, if anything I’d probably buy another unit if I could swing it, especially considering I’m from Canada and this is one of the few times our dollar is above par.