Fed Ready to Cut Rates Again

Ben Bernanke

With oil prices hitting record highs ($100.88) and the dollar falling to $1.51 for 1 Euro, the Federal Reserve is talking about interest rate cuts again. Many are predicting a .5% cut again with the term stagflation resurfacing in economic conversations.

According to Wikipedia, stagflation is a “term used to describe a period of inflation combined with stagnation (that is, slow economic growth and rising unemployment, possibly including recession). This term first came to be recognized in the 70’s.

Click the “more” link below for the rest of the post and a video.

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Bill to allow judges to lower mortgage amount instead of foreclosure

In an effort to reduce the number of foreclosures this year and next year by an estimated 600,000+ households, there are two bills before Congress that would grand “judges the authority to reduce mortgage debt.”

The two bills only apply to borrowers that live in their homes and have either subprime mortgages or other non-traditional mortgages, such as interest-only loans.

“It is one of many efforts by government and consumer groups to encourage lenders and mortgage servicers to restructure loans to more affordable terms for home owners in danger of default.”

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Panama City 3rd best in existing home sales

Panama City shows 3rd Best in Existing Home Sales, 4th Best in Existing Condo Sales Statewide
Florida Association of REALTORS® (FAR) releases 2007 4th Quarter home/condo resales data
Panama City, Florida, February 18, 2008
Panama City Real Estate Market continues to place well statewide

Florida Association of REALTORS® (FAR) has released sales data for Q4 2007 existing condos and homes, and Panama City continues to stay among those least-affected by the current real estate market conditions.

Statewide, sales of existing condos declined 27 percent (7,923 units closed for Q4 2007 compared to 10,820 for Q4 2006). In contrast Panama City showed a decrease of only 10 percent (81 existing condo units closed in Q4 2007 compared to 90 closings in Q4 2006) for the fourth best showing in the state, tied with Ft. Pierce-Port St. Lucie and surpassed only by Fort Walton, Sarasota and Marco Island.

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Panama City doing better than most of Florida

Using Quarter 3 numbers in 2006 and 2007, Panama City is doing better than most of the rest of the State of Florida. The average percent change in sales numbers for the whole state is -29% with the greatest change being in Ocala with a whopping -53% and the smallest change in Sarasota at -5%. Panama City came in third for smallest percentage change between Quarter 3 2006 and Quarter 3 2007 at-7% with second place (Naples) only having 77 sales in Q3 2007 and 83 sales in Q3 2006.

I’m not alone when I say our area saw the effect of the downturn before most other places and I think our area is seeing a turn-around sooner than most other places. I think we are on the backside of this market plunge and while things may get slightly worse between now and who-knows-when, I think we will see some improvement between now and this time next year.

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The Top Ten Reasons It's a Great Time to Buy Real Estate

BrokerAgentNews.com released a good article about the top ten reasons to buy real estate now. The author references specifically Maricopa County a couple of times, but the reasons are still applicable everywhere.

The article talks about how there is plenty of inventory providing a great selection to buyers. A couple of years ago, buyers often had to wait in lines, lists and “play games” just to be considered as a possible buyer. Now, if you can dream it, you can probably find it, and at an affordable price.

I remember in the frenzy the bidding wars that were everywhere. I remember I had this one set of adjoining lots that the buyers and sellers went back and forth on for weeks until the final sold price was 10% above the listing price. Often if you wanted your contract to be considered, you had to give up your right for inspection/due diligence period and offer cash with no other contingencies. Today, buyers are often afforded the time they need to make a good decision and given many opportunities to be sure the home will be right for them.

Now is a great time to buy, pricing is getting affordable, financing is becoming more realistic (not so many misleading adjustable products available) and there is a great selection that allows you to find what is right for you.

I’ve been watching the condo market pretty closely for the last couple of weeks and have noticed that several have gone under contract and many have sold. I don’t know that prices are really coming down too much more and if you have the money and staying power, you should be buying right now.

Click here for the full article.

St. Joe among top stock picks in Fortune Magazine

I hope everyone had a Merry Christmas, and I wish all a Happy New Year next week. I will send out the regular newsletter this evening.

In an article published in Fortune Magazine December 14th, St. Joe was among Fortune’s top stock picks for 2008. At the time the article was written, Joe stock was trading at $28, now it is $34.19. It once traded for more than $80 a share in 2005. With St. Joe owning 710,000 acres, with more than 300,000 acres situated within 10 miles of the coast, analysts speculate that their land holdings average at $3,700 per acre, minimum totaling $2.6 billion.

Read the entire article here.

For St. Joe’s stock activity, click here.

5 Year Home Price Projections – Positive or Negative?

This month in Fortune Magazine there was a great article speaking into the current condition of the real estate market, what happened to start the boom, what happened as the boom became less boomy, and how it is affecting people now.

In a previous post I talked about how in the beginning when money was easy to get and real estate was cheap, there was way more demand for the supply; this started the boom (or more, frenzy). As people saw their friends and neighbors selling property for more and quicker AND after bidding wars, the frenzy grew. “Buy now, buy everything, double the price and sell tomorrow!” Well, everyone I knew in the “biz” agreed that that couldn’t last forever, but had no idea when it would settle down. Just when you thought an unbeatable record was set, it was broken as well.

Fast foward to today. Taxes and insurance is up, interest rates are up from a couple of years ago and the subprime mortgage market has just recently gone through a meltdown. Real estate is not as easy to purchase as it once was, so the demand is down. Develpers couldn’t slow their building train down quick enough so new home inventories are way up. Property owners have mortgages payments they can’t afford because they bought a little too much home with low teaser rates and high hopes that the future appreciation would bring profits to make the risk worth taking.

Fortune Magazine’s Shawn Tully couldn’t have picked a better time for this story. He discusses that through calaboration with Moody’s Economy.com they were able to project the 5 year outcome of our current real estate market conditions based on history of average annual rent increases, annual property value increases and their correlation with each other.

He explains that there has always been a direct correlation between property values and the average rental rate for similar properties. This makes sense, right? Why would you purchase a home when it costs substantially less to rent? The prospect of future appreciation is not reasonable right now. Sure it is nice to own your own home. If you want to move a tree in the front yard, or if you want to update the inside, you don’t have to ask permission. But is it ‘pay twice as much a month’ worth it?

According to their findings, they estimate an average fall in prices nationwide over the next 5 years to be around 28%. Of course, not all markets will see a decrease. Areas like Dallas and Houston (1.3%), Detroit (6.9%), Indianapolis (7.3%) and Cleveland (9.6%) never really got a taste of the boom, nor experienced radical price valuation increases and thus have positive projections. However, cities such as Orlando (-34.2%), Miami (-32.2%), Sacramento (-26.1%), and Las Vegas (-26.3%) experienced such rapid value growth that the 5 year adjustment is negative.

Projections are based on a 15 year history of the property value/rent correlation. For us to get back to reality with regards to the real estate market on a national scale, the gap between property values and market rent rates needs to close.

The entire article: click here.

As you’ve heard me say in the past, real estate is very local and regional in nature. In Panama City Beach, I’ve always thought we were a little ahead of the national market with regards to market conditions. I feel that prices were shooting up here before many of the larger markets, and the correction began sooner here then it did in many of the local markets. Don’t get me wrong, I still think we are going through a correction period, but we’ve come a long way. Not to mention all the future economic development that is slated for our area over the next five years. The Airport relocation can do mounds for our area in putting us on the map and seeding growth and opportunity. It will open this market up to many who just couldn’t rationalize spending the money and going through the effort it takes to get here.

The airport will be great and our area will be awesome in 5 years. The CRA will be done, Pier Park will be very well established and we should have planes coming in from all over the country and hopefully a few big corporations’ headquarters here.

The Fed cut rates by quarter point Tuesday December 11th

In a highly anticipated move, The Fed cut interest rates Tuesday by a quarter point. The only problem was that the anticipation was for a half point and the market was let down as evidenced by the Dow’s plunge of 300 points.

It is down from 4.5 to 4.25%. The Fed hopes to ward off a recession and give the economy a boost in light of the housing slump and industry mortgage troubles.

Bernanke left the door open for another rate cut during Q1 2008 if need be.

Read article.

Will Disney and Universal be coming here afterall?

This past week I was sent a document presentation of our area and the future planned growth that we will see in the coming years. It was put together by Accrue Planning. I couldn’t find anything about them on the web, but I decided to post it anyway. There is some good information, but there is also other information that I’m not sure how accurate it is. When I say I couldn’t find any information on the web, I should have been more specific in that I couldn’t find a website.

The document cites that there are no inventory, franchise, or state-level property taxes in our area and that our area remains to be attractive for businesses. Discussed in the 78,000 acre, master-planned West Bay Sector Plan by St. Joe and the new airport. Also discussed is the possibility of FedEx and UPS relocating their international operations centers here. Please correct me if I’m wrong, but I don’t think that has been confirmed.

The Gulf Coast Parkway will stretch from 231 to 98, just west of Mexico Beach and will improve hurricane evacuation, open up more development opportunities and reduce traffic through Tyndall Air Force Base. The Gulf Coast Parkway is also expected to open up travel corridors from the East Bay area to the new Airport.

Currently, Highway 79 is undergoing a transformation to a four-lane highway up to I-10 and there are plans to widen highway 77 up to I-10 as well. Actually, this could have already happened or begun already. My travels do not take me up that road.

Also in the document in information about Disney and Universal Studios coming to our area. I know nothing of the validity of this information, but they are claiming that 55,000 acres known as “Moody Pastures” is under contract and that Disney has spent money on the site. Also discussed is the possibility of Universal coming to the East Bay area.

Once gain, I feel it necessary to note that I was unable to find information on the publisher of this document and I do not endorse the validity of the information it contains.

Here is the link to the document: Northwest Florida Future Development

50,000 Residential Units in Panama City Beach

In working on a market study locally, a buddy of mine came across some information on the Panama City Beach Chamber web site (www.pcbeach.org). According to this information, Panama City Beach is expected to have an additional 8,500 residental units open in the next 5 years with an additional 15,000+ to be announced at a later date. 5,800 opened this year including The Shores of Panama, The Towne of Seahaven, Nautilus Cove, Grand Residences by Marriott, and Aqua just to name a few. There were some that I know are on hold for now and of course market conditions will determine what comes online in the future, but still I thought this was very interesting information. There are currently almost 21,000 condos, hotel rooms, and townhouses in Panama City Beach.

Some of the big ones include Breakfast Point at 3,100 total units expected to be open in 2012, Grand Panama with 795 total units, Laketown Wharf with 735 units open this year, Miracles (on the old Miracle Strip Park site) with 700 units open in 2012, and Solimar Resort and Spa with 812 units open in 2010.

New Developments