‘Hold Onto Your Beach Umbrella, Prices Have Dipped’
The Atlanta Journal Constitution has this report on the housing bubble in the Florida panhandle. “Panama City Beach looks like a beach boom town with high-class intentions. Construction cranes sprout from the sand like enormous sea oats. More than 20 new high-rise condo towers already are open. More are under construction.”
“Almost as quickly as Panama City Beach’s boom began, it hit a trough. Several developers have put plans on hold in this Florida Panhandle town, some after starting construction, waiting for better times. Condo prices have, hold onto your beach umbrella, stagnated or even dipped. Much of Panama City Beach is for sale.”
“Real estate agents say there is a backlog of over 2,200 of beach condo units on the market. Median prices for condos sold in Bay County slid 12 percent in the first part of this year, compared with 2005, according to the county property appraiser’s office. The crunch comes even as 1,400 new condo units are expected to be completed by year’s end.”
“Real estate agents turned again and again to the same pool of investors, especially those from metro Atlanta and Birmingham. ‘It became a feeding frenzy,’ says Jeanie Zepponi, a Destin-based real estate agent. ‘They drove it up to a point where it could not continue to rise at that speed. It was beginning to become unrealistic. Some of these investors just got greedy,’ she says. ‘They were putting in reservations on four or five different projects, knowing they didn’t have the wherewithal to close it.’”
“With sales prices soaring, many investors couldn’t make enough renting out the units to cover a condo’s monthly mortgage. Some investors began walking away from down payments rather than closing. Others completed the purchase even as they continued to seek someone to buy the unit. Few owners live in the units. Property owners have applied for homestead tax exemptions on only about 2 percent of the area’s new condo units, says Mel Leonard, Panama City Beach’s director of building and planning.”
“If the number of pre-construction investors walking away from projects increases, it could put a real hurt on developers, says Leonard. ‘That seems like a ticking time bomb.’”
“Real estate agents in the Panama City Beach area say some banks are putting fresh limits on pre-construction sales in hopes of avoiding investors’ becoming overextended. Projects have been halted. Motels or other businesses that were closed after they were sold to make way for development sit vacant.”
“Says Janet Roan, a local real estate agent, ‘Now is the time to buy. It’s a buyer’s market.’ But she offers a caveat. ‘If you are looking to buy something to flip it, don’t even try it right now.’”
“Zepponi advises condo owners to avoid putting their units on the market now if they can avoid it. ‘If people would stop this panic, things would turn around sooner,’ she says.”
Thanks to the reader who sent this in.
stay calm,pay no attention to the man behind the curtain,buy now and avoid the price reductions …..remember foreclosure sales are tacky.
“If people would stop this panic, things would turn around sooner”
Welcome to the panic-selling phase with prices plunging. I didn’t think I’d see this happening until summer. Bring it on.
Yeah I thought this would play out a little slower. I was thinking the flippers would limp through this spring but I’m already seeing 10% and up price reductions
They refuse to not make a profit though. When they’re selling at a loss, then we’ll be heading in the right direction.
I’m seeing small price reductions in the sacramento area but not much movement really.
Tar and feather greenspan?
I’m really happy about this bubble. The Fed is going to lose all credibility after this pops and they won’t be able to pin it on Greenspan because everybody thinks he’s a genius so… the institution itself will come under fire. The death of the Fed was an inevitability given enough time because you can’t outthink free markets.
The Bernankosaur is staring up at the housing comet, sweating, we mammals should be ok.
“with the new high-rise palaces offering extras like multiple pools, tiki bars and community movie theaters”
One of the problems with many of the new condo developments is that they have too many luxury amenities. Even when prices come down, maintaining the common ameneties will still be expensive (read: high assessments). We may see the “luxury” condos selling at lower prices than non-luxury condos.
Agreed. For a benchmark, $300 HOA is what the going rate is round here for a place with just a pool and weight room. (Richmond Marina Bay area, Richmond, CA).
When you are looking at $500/month for the 3 pools, tiki bar, and empty movie theater, somethings going to give.
“If people would stop this panic, things would turn around sooner,’ she says.”
I dont think we have seen any panic,YET. These people have developed such a sense of entitlement over the last 5-6 years it is really crazy. Mean while prices really have not dropped yet, that is when the panic will really set in, I think that is coming, but to say there is panic because you cant flip a property in a few months and make a quick 50-100K-WOW!
The real panic will be when homes are worth considerably less than what is owed on them and people start walking away from these houses and condo’s-that will be real panic.
Any way, it is a beautiful day here in So. Cal. I think I will take a drive and see how many “For Sale” signs are out there.
It is nasty in sacramento today. I agree with what you are saying. We are just getting started in the downhill side. This will take time to play out.
Arizonadude;…You live in Sac.??
I’m renting up here right now for the summer.I have lived in the foothills outside of sac for 20 years. Spent the winter in arizona and really miss the sun. It has rained about every day since I’ve been up here.
Its the worst rain I have ever seen…Do you know the Sac market very well ??
The only for sure thing I know is that is way overpriced here. I’m in roseville and it is ridiculous. I’m most familiar with the foothills toward auburn and it is nuts up there too.
At Borders yesterday, I met a The Learning Annex Real Estate Seminar “Grad”. He was looking to find books on Apts. He’s going to get rich! Didn’t know what a cap rate was, or his head from his @ss, but he’s on his way. Oh man, 51,000 lemmings went to that real estate and investment seminar day. The people who put on the R E Annex are the smart ones.
They also plugged metals, oil, etc…, and didn’t offer any details. People are going to get creamed, IMHO. I’ve been at it two years. Its a lot of work.
I feel the same way you do. So many people made money in the last 5 years almost by accident (in spite of themselves) and the more careless and stupid thier decisions were the more they made. Does any one with any brains think that can go on forever?
Speaking of ‘brains’ or lack thereof, I submit that the bubble in mainstream USA has now peaked. I was in Indianapolis last week visiting family - and my perenially drunk, unemployed cousin started going on about how he had just bought a house and was going to flip it! He didn’t know why he didn’t think of flipping sooner since it’s such a sure fire way to make money!
You have to have known this guy as long as I have to fully appreciate this - but he is the Greatest Fool - anywhere - ever. There are no greater fools to be found. I’m calling the top of the bubble for the non-coastal markets!
I encounter folks all over the place who don’t have any clue that the market has even begun to flatten or show weakness. A lot of people never read anything and have virtually no knowledge of current events. I find this among people in people in my original bubble market as well as in my current rolling bubble market. There are more suckers waiting to jump in. The question is, will they be able to.
This quote just shows how bad things are going to get. All this excitement so far is just over the mild concern that the talk of a bubble -might- have some truth in it. There are people out there who don’t even admit that much yet. There are hundreds of thousands of people in the business, mortgage brokers, re agents, appraisers, stagers, escrow officers, on and on who have no idea that 2005 was the most they’ll ever earn in their entire lives. Places around Phoenix are going to forced to close entire neighborhoods because they can’t afford to provide services. I can forsee municipal programs to get the dozen families holding on in a mostly empty tract of hundreds to relocate to viable neighborhoods. The level of denial is such that they imagine 10% appreciation to be painful. The best part is that there’s a huge undercurrent of floppers that imagine themselves to be clever vultures. They are going to be buying in all the way down just like tech 2000.
“I dont think we have seen any panic,YET.”
Panic is relative. You hear a sudden loud bang on a commercial flight and you might panic a bit. You see the door get ripped off and the flight attendant get sucked out you may panic a lot. You see the wing get ripped off and well….you get the picture. We’re at the housing equivalent of the loud bang.
Says Janet Roan, a local real estate agent, ‘Now is the time to buy.’
And when did any realtor ever say otherwise?
When talking with close loved ones.
Unless she is trying to get a listing, then it’s, “Now is the time to Sell!” There is never, “Now is the time to do nothing”, because then there would be no commission. A salesperson has got to try and make a living…it’s up to the customer to be savy.
I love it, “Now is the time to buy.” followed by “If people would stop this panic”
she has yet to see real panic
Don’t you just love the realtor self interest. It is time to buy now, even with a glut of inventory. Oh, and don’t list now - keep the inventory down so that RE agents get their investment condos sold first.
2% owner occupancy! I’d hate to be one of the 2% that bought a condo to actually live in, must be eerily empty and quiet in those buildings. Next will be the section 8 renters.
Here’s a little math the realtors won’t do for you… To buy an overpriced condo the mortgage, HOA and taxes total about $4,000 a month or $48,000 a year.. or you can rent one of the furnished condos with maid service for $200 a night. So if you go to the beach for 14 nights a year that’s $2,800 to rent vs $48,000 to own. And you don’t have to worry about a hurricane destroying the building.
And put the money you save into some nice liquid investments.
Yeah, but what about the movie theatre?
Aren’t we being a bit hasty here? What does Suzanne have to say about this?
Suzanne is researching new job opportunities.
LOL! Classic
I’m sure Suzy Q will chart a course for us as soon as she is done brainstorming this multi-faceted matter.
Good point, a good family vacation cost around 2-3K for a week vacation (with in driving distance).
“Now is the time to buy”. And if you do, buy some Kevlar gloves to catch the falling knives.
Panama City is but one beach area. Many others will crash, despite the fact that agents and beach house owners will tell you that oceanfront property prices never go down.
The sword of Damacles is weighing heavily over the Hamptons right now. Bring on the Repo crews. Mercedes look best being towed from McMansions.
Some ocean front property does go down. Down the cliff, that is. Too much rain. But, didn’t Appleton-Young say ‘ it never rains in southern california, but when it does, it pours ?).
And with global warming, maybe we’ll see the ocean level come up. And the hurricanes don’t seem to be be getting any less intense or infrequent. They say the northeast will get a big hurricane one day too. The rush of people spending gigantic amounts of money just to be on or near the water is most lemming like.
The most importat paragraph to me:
“Property owners have applied for homestead tax exemptions on only about 2 percent of the area’s new condo units, says Mel Leonard, Panama City Beach’s director of building and planning.”
What does this say about the other 98%. If a large number are second homes/speculators, the blood bath will be worse than I imagined.
they’ll be jumping from buildings with their hair on fire!!
For the kind of buildings they’re talking about in that location, historically the number of people claiming them as primary residences has been 5% or less. I don’t see that percentage as unusual or a sign that something is necessarily wrong.
What’s behind that number is that most people used to rent them out because you could get a reasonable 10-15% annual return on investment. You could cover a lot (though probably not all) of your mortgage, taxes, and HOA fees.
But after the price spike of 2004, you’d start seeing ads talking about getting a 5% annual return on a home like it was some sort of desirable number. Cut the per unit prices in half, or a little more than half, and you’re back to getting reasonable return rates again.