REAL ESTATE NEWS AND OPINION 4/18/08
HOUSING TURNAROUND NOT SOON ENOUGH FOR SELLERS…
The biggest problem for potential sellers in the current real estate market on Amelia Island and elsewhere can be summed up on one word – supply. There’s a huge amount of inventory on the market. More “normal” market conditions won’t return until there’s a more balanced market between demand and supply. Sales activity needs to substantially pick up and inventory go down to get the market back to a better equilibrium. Absorption of excess inventory could potentially take years.
Since “feeder” markets are also slow, we’re experiencing the domino effect. Potential buyers are sidelined for the home they’d like to purchase here in this coastal paradise, because they first must sell a home elsewhere. Here’s an eye-opener. According to an article dated April, 2008, by the National Association of Realtor’s® chief economist, Lawrence Yun, “close to 80% of today’s prospective buyers have their house on the market. Most of them can’t get serious about buying until someone first takes their house off their hands.” However, the most recent reports from the National Association of Realtors® (April 2008) indicate that housing sales are picking up in some markets around the nation. So it seems only a matter of time for housing activity to strengthen here, when people sell homes elsewhere and are finally able to go forward with a purchase here.
SELLERS NEED PERSPECTIVE – EYES WIDE OPEN
Sellers may get frustrated trying to sell a property in the current environment. Sellers need to fully understand what the market supply really is in their local micro-market. Remember who determines the final sales price of a property…the market.
Many sellers remember what "could have been" if they had sold in the hot market of 2005. Thus, some have difficulty being realistic about pricing their homes to sell in today's market, with the large supply of inventory for sale, and fewer buyers.
Too much for sale vs. limited buyers in the marketplace, besides being a very difficult and challenging environment for sellers, is also an equation for housing price declines – there’s downward pressure on prices. The real bargain seekers have distressed sales they can look at. Sellers who are not in distress are still competing with these properties, since buyers will be looking at all their options and look for the best value.
But in the long-term, remember that since Amelia Island is coastal real estate and a resort island with many unique benefits (such as a being a wonderful seaside community offering a small-town lifestyle, yet close access to an international airport, and a commutable bedroom community of Jacksonville, Florida), it may be turn out to be better insulated from larger price declines, as compared to many other areas.
Here’s a thought you may wish to remember when it comes to Florida real estate. “In Florida, prices tend to shoot up like a rocket and come down like a feather.” This is what Hank Fishkind, Ph. D., one of Florida’s top economists and real estate experts reportedly stated according to a January 2008 article in the Charlotte Sun-Herald, a southwest Florida newspaper. Fishkind reportedly indicated that people are reluctant to cut their home’s price, since the property is typically the owner’s biggest asset.
Similarly-themed comments by Fishkind were reported in the Orlando Sentinel, “housing prices tend to be sticky.” (i.e., they decline a lot more slowly than they rise.) Thus, surplus inventory and “flat pricing will last for years,” Fishkind reportedly stated in January 2008.
Fishkind is frequently quoted in the Florida media, about his forecasts and opinions of what’s happening in Florida housing, etc. Recent comments reported in the media indicate Fishkind’s view that the Florida housing recovery will be slow, but he expects the Florida housing market to improve in 2009, and get even better in 2010, and the Jacksonville market to rebound more quickly than most other markets in the state.
Florida Trend magazine published the "Residential Real Estate 2008 Outlook -- Bottoming Out: The Residential Market Will Likely Hit Its Low This Year," dated 1/1/08. In this article by Richard Westlund, three real estate markets in Florida are noted as the “most likely to attract residents." Jacksonville, Florida is one of these three "lower-cost" markets in Florida that are anticipated to "recover more quickly." Note that the Amelia Island area/Nassau County, FL is included in the Jacksonville MSA --Metropolitan Statistical Area.
The Jacksonville MSA is viewed by Fishkind to be one of the three markets in the state of Florida he expects to recover more quickly. So for potential buyers on the sidelines who can buy (and don’t need to sell something first), consider your window of opportunity to buy now at a favorable time for buyers in the Jacksonville market.
Historically, in the industry, according to the National Association of Realtors®, a 6-month supply on the market is more the “norm.” Consider that for the month of March 2008 on Amelia Island, 26 dwellings were sold by Realtors®, as recorded in the Amelia Island/Nassau County MLS from Mar. 1, 2008 to Mar. 31, 2008 (in the categories of single-family homes, condos, duplexes, and townhomes). The current supply of dwellings for sale is 714 (active listings for sale on Amelia Island in the same dwelling categories noted above, as of April 15, 2008 in the Amelia Island/Nassau County MLS). So you can see the small number of monthly sales vs. a huge supply. (MLS data is not guaranteed and may contain errors.)
PENDING SALES VS. NEW LISTINGS RATIO
Another way to gauge the balance of the market is to analyze the most recent activity – the number of properties that have recently gotten contracts (gone “pending” sale) vs. the number of new listings on the market. The closer the ratio is to 1:1 of “pending” sales to new listings in a month, the better the market balance between supply and demand, and the faster properties will sell (but there’s typically going to be more new listings than pending sales).
Looking at March 2008 activity on Amelia Island as recorded in the local MLS, reveals that 18 dwellings got a contract during 3/1/08 to 3/31/08, in the housing categories of residential (single-family, townhomes), condos and duplexes, in zones 1-6 in the Amelia Island, Nassau County, MLS. (MLS data is not guaranteed and may contain errors.) Compare that to the number of new listings in the MLS for the month of March 2008, which was 104 new listings of dwellings that went on the market for sale on Amelia Island in the same categories as noted above, and you can see the recipe for a very slow moving market. Thus, there were 86 additional new listings above the 1:1 ratio, so the ratio is more than 1:5.
As indicated above, a buyer today is likely to have just been through a stressful sales process with their existing home. Sellers need to remember the majority of buyers have been “in the same boat.” They, too, have recently been through the seller’s cycle. Maybe they just accepted a “low ball” offer on their existing home to get a contract. If that’s the case, then they likely feel justified to turnaround and try to get a really good deal on a home replacement purchase. Some sellers who absolutely have to sell may make a deal. (Yet, other sellers not in distress will be reluctant to cut their home’s price drastically, as indicated above, according to economist, Hank Fishkind.)
DETERMINING FAIR MARKET PRICE FOR HOMES IN CURRENT ENVIRONMENT
Licensed appraisers in northeast Florida (and likely around the nation) are reportedly having some difficulty arriving at “fair market value” for homes in the current environment. With fewer sales for comparison, appraisers reportedly often don’t have good, recent sales “comps” within the same neighborhood of the subject property, to look at.
FORBES NAMES JACKSONVILLE, FLORIDA ONE OF THE “10 BEST CITIES FOR BARGAIN HOUSE HUNTERS”
According to a Forbes magazine article (Feb. 12, 2008), “the best place to get a bargain on a home is an area where there is healthy job growth and more houses available than people to buy them.” Forbes reportedly sought out markets “where damage from risky lending hasn’t’ been as dramatic as seen in some parts of the country.” Reportedly, “the foreclosure rate [in Jacksonville, Florida] is slower than the rest of the Florida cities, making the large inventory likely to improve.”
IT’S A GOOD TIME TO BE A BUYER OF FLORIDA RESIDENTIAL REAL ESTATE
Not everyone is depressed, however, when it comes to the housing market. It’s a strong buyers market for those who can buy (those who don’t have to first sell a house to buy). Some think it could be the bargains of the decade in Florida – housing is now more affordable than in recent years, buyers have loads of choices and the upper hand in price negotiations, interest rates are still historically low, and here on Amelia Island, Florida, property taxes and homeowner’s insurance rates are indeed trending down for homesteaded, primary residences, making it a bit more affordable to live here.
New choices are now available for homeowner’s insurance in Florida, with the big insurers out of the market for coastal properties, and entry of new, more competitively-priced insurers available in Florida. (But do your homework -- shopping around and getting several quotes for property insurance will likely save property owners money.) With regard to property taxes, for example, property tax millage rates in the city of Fernandina Beach on Amelia Island have been trending down the last few years. A few years ago the millage rate was over $22 per thousand assessed value, but for the tax year recently ended in 2007, the millage in the city had been reduced to $17.40 per thousand.
Furthermore, another property tax vote on the November 2008 ballot, if passed, reportedly could potentially further reduce Florida property taxes an average of 25%. For those employed in Florida (for those considering a move into Florida from another state), remember, there’s no state income tax in Florida, and for entrepreneurs, Florida continues to be rated one of the most business-friendly states in the U.S.
Real
estate is cyclical, so buying at the absolute bottom is going to be as
difficult to time perfectly, as selling a home at the highest peak in
the cycle. How many people have the investment acumen to succeed at
that?
If you plan to own the property for awhile (you're not looking to “flip” for a quick profit), then it appears to be a good buyer environment for prospective buyers in Florida – better than it's been in years. Buyers today have lots of choice in the marketplace. New home builders in Florida, in particular, are offering buyers huge incentives to make a new home purchase. Mortgage interest rates still remain historically low.
MOST RECENT HOUSING SALES ACTIVITY ON AMELIA ISLAND
During the month of March 2008 on Amelia Island, the number of closed sales transactions was 26 in the residential categories (single-family homes, townhomes, condos, duplexes), as sold by Realtors® and recorded in the Amelia Island/Nassau County MLS from 3/1/08 to 3/31/08. (MLS data is not guaranteed and may contain errors.) Compared to the previous month of February 2008, March sales picked up, more than doubling February 2008’s 12 sales of dwellings (in the same categories noted above). The median price of the 26 dwellings sold on Amelia Island during March 2008 was $432,000, compared to a median sold price of $436,000 a year ago in March 2007. However, residential sales activity this year on Amelia Island during February and March 2008, is still far slower than sales activity a year ago in February and March 2007.
THE ROAD TO RECOVERY
“What goes up, must come down.” We’ve all heard that. And “this, too, shall pass.” Florida residents who’ve owned a home five years, or more, are still way ahead, with median housing prices still far above what they were five years also, and also benefiting from home ownership tax benefits (deductions for property taxes and mortgage interest). We saw prices “shoot up like a rocket” on Amelia Island a few years ago. I'm sure most Amelia Islanders are hoping they “come down like a feather…”
Of course, there are some around the country who tapped equity out of their homes and spent it on items like nice cars, vacation travel, and other things (but not on improvements to the home). Tapping equity out of homes can be risky business, a hard lesson now learned.
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THE AMELIA ISLAND COASTAL LIFESTYLE
Amelia
offers small-town coastal living with 13 miles of dune-laced beaches, the charming
historic district of Fernandina Beach with marvelous Victorian-era architecture, world-class golf and spas, and luxury oceanfront
resorts -- the Ritz-Carlton, Amelia Island Plantation and Summer Beach Resort. Yet, Amelia Island is
located close to the big-city perks of Jacksonville, Florida, with its symphony, NFL team (the Jaguars), and convenient Jacksonville International Airport, only a 30-minute drive away.
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About the author -- W. B. Lawson has lived on Amelia Island fourteen years and writes tourism, lifestyle, and real estate articles, is a member of the National Association of Realtors, the Florida Association of Realtors, as well as the Amelia Island/Nassau County Association of Realtors. Send eMail to contact@ameliaislandliving.com.