Correction: Panhandle real estate sell off just starting

[GaltsGulch]

Unfortunately it appears the real estate boom, called for by ecopal's linked article from a tallahasee real estate conference, missed the direction of their call.

Smiling Joe has posted the October real trends #'s for Sowal, and it really looks like to me the y-o-y trends are worse than they even look like on paper (and on paper they look bad) and November it can be taken as a given, will surely be even worse.

Why do I say they look even worse then the data bears out on paper??? Let's look at dollar value of sales year over year.. Oct. 2004 520M, vs. 347M for Oct. 2005. Residential lots sales - $226M in Oct. 2004, vs. 82M in 2005. Contrast these substantial declines, with the part anecdotal, part emperical fact that listings of lots and residential homes for sale in Oct. 2005 is much much more than was for sale in 2004 on a total dollar basis, and we have the makings of a downswing that has only started, not a boom starting. It will take months and months to bear itself out, as sellers of real estate historically do not aggressively reduce their asking prices, until it's much too late. Some don't have to sell at all, particularly in South Walton. Then there are another group that probably should sell, but hang on anyway, and weather the storm. Then, unfortunately, even in South Walton you have speculators and people who stretched, who have to sell if they bought in 2004-05, because they can't afford a prospectively large capital loss, can't afford to carry the dramtically higher insurance and tax rates, in the face of rents that have been VIRTUALLY stagnant for 6 years, compared to valuations. It is these marginal buyers, who will become the marginally aggressive sellers - and there is no way around it, even in South Walton where the beaches are beautiful. To be sure, some sellers never "have" to sell and this is true of This will be doubly problematic in an area like SOWAL, where much of the activity from 2000 to 2005 has been purchases by speculators, who don't have to live there: i.e. it's an investment.

It is clear when the bulls on SoWal real estate now use phrases like "longer term" and cite the wonderful qualities of SoWal that attracted them to the place in the first instance, that the writing is on the wall.

However, having said all that, although I expect real estate values to resume a normalized annual appreciation rate of 7-9 % per year, after the next 12-18 month downturn, which I would ballpark at roughly 15-25% depending on the kind of property and location.

For those looking to hedge their exposure to South Walton real estate, but don't want to compete with all of the listings that are growing dramatically, by owner, by broker, unofficially and otherwise, the only liquid mechanism available to do so at this time is public trading equity of St. Joe Company, JOE. The perfect time to start shorting JOE however was about 4 months ago in June or July, which was as one might expect 2-4 months after the cognisenti in South Walton had realized the real estate values had stopped rising. Yes folks real estate peaked in SouthWalton somewhere between Thanksgiving of 2004 and March of 2005. It didn't go down, but it didn't continue to rise. Dentists in Birmingham, and Proctoligists in Atlanta starting reading magazine articles this spring about a pending potential real estate bubble, and they were the marginal buyers/speculators. It took the cognisenti on Wall Street, who don't have their finger on the pulse of South Walton real estate as closely as you all do, several weeks, maybe 12 weeks, to figure this out and start selling their holdings down, but there is much more downside to go, should valuations plumet an additional 20% in the area, as I expect is a good possibility and not extreme at all, given the multiple 100% increase in valuations over the past few years...

If you're someone who truly has a 25 year time horizon and have a bunch of cash, get ready to be a buyer, but don't be silly and buy the first significant dip we're about to see born out by the data soon... hold your powder until you see significantly large scales of foreclosures, probably not for 18 months or more, when interest rates on Adjustable Mortgages are back to normalized levels of between 7.5-8.5% - and payments on those mortgages rise 60% as a result, putting the final squeeze on the unfortunate marginal segment of owners.

[Beachside]

Well your analysis is very enlightening and probably true about the over speculation of those folks who should not have pushed as far as they did. Hopefully continued historically low interest rates will help in preventing such a large scale devaluation of property in the panhandle.
Just imagine how bad the Panama City Beach market will suffer if our prestine South Walton property is going thru such a strong correction. Talk about foreclosures.

[tylerT]

Run....for The Love Of Eternal God, Run For Your Lives!!!

[Bob]

GaltsSkier, have you sold your house yet?

[Beach Runner]

DeNial is a river in Egypt.

That's where I be right now, yo. In denial. I love SoWal.

[Cil]

It's spelled c-o-g-n-o-s-c-e-n-t-i.

[Miss Kitty]

GaltsSkier, have you sold your house yet?

Oh Bob...you do make me laugh!!! Galtsskiergonebyby!!!!

[Franny]

I don't believe any one on this board is unaware of the current real estate market, however I DO believe those of us on this board care deeply for South Walton and are trying successfully to have a positive outlook for our beautiful beaches. That is all I have to say on this matter...for now.

[goofer44]

Your house is where you live. It should not be viewed as an "investment" SoWal is one of the most beautiful and unique places in America. I live most of the time in Sedona, Az. another beautiful place. But to me, 30-A is the most wonderful place on Earth.

[Bob]

Your house is where you live. It should not be viewed as an "investment" SoWal is one of the most beautiful and unique places in America. I live most of the time in Sedona, Az. another beautiful place. But to me, 30-A is the most wonderful place on Earth.

Coming from a resident of Sedona, that is quite a compliment!

[Jdarg]

Coming from a resident of Sedona, that is quite a compliment!

No kidding! Sedona is in my Top 10 beautiful places!

[Bob]

Did I pull a RO on spelling?? I was not PUI!

[jimmyp5]

This is a very thoughtful analysis, well based on historical patterns of resort-area real estate market behavior.

That investor with the 25-yr timeframe and a bunch of cash may not have to wait the 18 months you predicted, though ... foreclosures aren't a factor (yet?) but many actual selling prices have begun to decline significantly from the late '04/ early '05 peak you accurately cite.

[Donna]

There will always be people who jump onto a real estate boom wagon when they shouldn't. Rule of thumb is that you shouldn't buy it if you can't carry it. Or...as ye live by the sword, etc. Coastal real estate was long overdue for a correction, lull, whatever you want to call it, before the storms of 2004/2005. The storms definitely exacerbated the problem, as many people are not well informed as to how South Walton fared, relatively speaking. If one more person asks "how much damage we sustained" last summer, I will scream. The answer is none, in fact, a net positive for the Grayton beach. And for the record, we have had reasonable increases in the rental rates on our home every single year and continue to book it pretty solidly for the spring and summer seasons, with the shoulder season rentals increasing.

No one is happy about increases in property taxes (even though they're still underassessed) or increases in insurance, but no one was particularly surprised, either. And at least in FL, everyone shares the pain, not just coastal properties. As for interest rates, over 80 percent of properties valued at over $1M are cash sales in our areas (largely 1031 exchanges, I would assume). Interest rates are not really a factor in such cases.

I follow the listings and closings in the area pretty regularly and they do not support the claims of cynics. Some properties are overpriced, with most owners not caring whether they move or not. Other properties are listing lower because owners just want out now and can still see a considerable profit with the lower listing. Many properties are closing at very close to the listing price, especially if they are well located.

All goes to say that "location, location, location" still means a lot and so does thinking of real estate as a long-term investment. Well located real property will always offer the best return for one's dollar, assuming one can afford the capital outlay and carrying costs. But if the rule of thumb for stocks is that you should play only if you could afford to lose half of your investment, real property stacks up pretty well against that.

I would like to see some perspective in these threads, meaning...real estate dynamics are not usually boom-or-bust. It is a cyclical industry. Day traders need not apply.

[kurt]

Thanks for more words of wisdom Donna.

I still say the next 20 years are going to make the last 20 in SoWal seem sleepy, with giant commercial and residential construction along the 98, 331, and 20 corridors. Over a 40 year timeline we are still in the beginning stages of development.

[Unplugged]

Thanks for more words of wisdom Donna.

I still say the next 20 years are going to make the last 20 in SoWal seem sleepy, with giant commercial and residential construction along the 98, 331, and 20 corridors. Over a 40 year timeline we are still in the beginning stages of development.

Kurt: I couldn't agree with you more - and you have a wonderful knack for keeping it pithy

[ecopal]

Prices seem to be about 20% lower than last year on many properties.

Is it time to buy or to wait for prices to drop more?

There are some desperate sellers out there; some flippers who got caught holding the bag. So I am inclined to think that there are more bargains to be had in certain classes of property if you are patient.

Desperate sellers will tend to be primarily in condos and vacant homes with big overheads and vacant lots with build out times. The question is how fast will these bargains be bought up?

The longterm outlook for 30A maybe one of the best in the coastal south.
30A has constraints on amount of potential devleopment. Currently the supply is ahead of the demand but that is only a temporary phemomenon.

So as some wise posters have already said: if you don't need to sell now don't or you could be sorry.Also, if you really like 30A and want to have a place here now maybe a good time to do some bargain hunting.

Future developable property on 30A is finite and it will become even more valuable as 30A becomes discovered as the most exclusive area to live in the region.


In addition global warming will only help 30A. In fact, go help the cause and go buy a big gas guzzeling SUV to help speed up the process - just kidding.

With more hurricanes and rising sea levels the higher elevation of many 30A properties (although I would be less interested in riskier water frontage property than property close to but a lot or two away from the Gulf/ocean/bay.) may make them more desirable than most Florida property.

Why pay higher prices for low elevation,and more hurricane and flood prone property in grid locked southern Florida when winters here are becoming warmer?

[Coast is Clear]

While there is definite softness in the Gulf Coast market, as with most investments, the smartest investors are the ones who make their move when things look their worst, and get out when things look their best. That is something very counter to human nature.

Those that invest when all the news is bad will look brilliant when things turn. Are we there yet?

Once good news starts to come in it is too late.

[Smiling JOe]

While there is definite softness in the Gulf Coast market, as with most investments, the smartest investors are the ones who make their move when things look their worst, and get out when things look their best. That is something very counter to human nature.

Those that invest when all the news is bad will look brilliant when things turn. Are we there yet?

Once good news starts to come in it is too late.

Not all properties are bargain deals yet, nor will all of them ever be, but there are plenty of good buys on the market now, and many of those are negotiable. If you see something you like, you should make an offer at the price you feel is right for you. Much truth is written in your statement above, Coast is Clear. People should not be looking for quick flips, but longer term investments. Quick flips, even if sales pick up somewhat, are very risky presently, and in my opinion, will be for a while.

Many people are waiting for the bottom to hit and the curve to begin an upswing. The problem is that the "zone" (See author, Barry Sears) only last for a split second. Once it is recognized, the zone vanishes.

[Advance The Man]

...cognisenti in South Walton had realized the real estate values had stopped rising. Yes folks real estate peaked...

It took the cognisenti on Wall Street, who don't have their finger on the pulse of South Walton real estate as closely as you all do, several weeks, maybe 12 weeks, to figure this out and start selling their holdings down, but there is much more downside to go, should valuations plumet an additional 20% in the area, as I expect is a good possibility and not extreme at all, given the multiple 100% increase in valuations over the past few years...

Nice post, but why the big word (and using it twice! ) Any rate, you mispelled it. Here is the correct spelling of cognoscente and definition for the less cognoscenti.

Correct either with an e or i at the end. :oops:

[Cork On the Ocean]

While there is definite softness in the Gulf Coast market, as with most investments, the smartest investors are the ones who make their move when things look their worst, and get out when things look their best. That is something very counter to human nature.

Those that invest when all the news is bad will look brilliant when things turn. Are we there yet?

Once good news starts to come in it is too late.

Smart Cookie, Coast

[SHELLY]

People should not be looking for quick flips, but longer term investments. Quick flips, even if sales pick up somewhat, are very risky presently, and in my opinion, will be for a while.

Interesting spin on second-home as investment from Philly Inquirer column: Good Time to Buy Second Home?

So is this a good time to shop for that second home you've wanted?

Perhaps - but only if you expect to keep the second home for many years and view it as an indulgence rather than an investment. The days of flipping second homes for quick profit appear to be over, for now at least.

[Paula]

Shelly:

I liked the article because it reminds the potential buyer of a second home to think about all the costs, as well as gains, involved in their particular situation. Though one can't predict all costs -- or all gains and other benefits -- it makes sense, of course, to figure out the costs involved in different scenarios. The article made specific assumptions (how much the house would increase in value, a 5 year time frame, etc.). You'd want to play around with different assumptions based on your personal needs. For example, how long a time frame? As for increases in the home's value, that's a tougher one, though I'm still optimistic about SoWal (if you don't plan on buying and flipping) and I think it will be much nicer than many other places that have gone "upscale" that have are primarily concrete and buildings with no green.

The other thing to consider is what you would do with your money if it wasn't tied up in a house. Frankly, a lot of people (e.g., two career couples) waste their money on things that don't increase in value (e.g., cars, too much expensive coffee even when blind taste testers consider some lower-cost coffees to be better, expensive lunches, etc.). One of the reasons that I wanted to get our property in SoWal, aside from how much we'd enjoy it and it's much warmer than Michigan in the winter, is that it would force us to be more disciplined about saving and managing our income. And that has worked very well -- and we don't miss anything we used to waste money on, though the kids are starting to get a bit embarrassed about our aging van.

As for renting to guests, we've been very happy. The rentals don't cover all the costs for sure (and one should never count on rentals to pay the bills), but I finished our taxes recently and the rentals covered about 2/3 of all our expenses. Not bad at all as far as I'm concerned. That's after 3-4 year of owning the property and the major expenses of furnishing the cottages are over, though taxes, insurance, etc. will continue to go up (but so has the value of the cottages). Of course, I put a lot of work into marketing, keeping our guests happy, working together with the management company, and maintaining the cottages -- but I enjoy that kind of work and I've certainly learned a lot in the past few years. One reason to do all this work, by the way, is that it does seem that there will be a LOT of rentals available and renters will have more choices than before -- so quality and service (and repeat renters) will become increasingly important if you want people to choose your rental over another.

I hope this information adds to the perspective given in the article. Again, I think the best part of the article is that it encourages people to consider all the costs, as well as benefits, of owning a second home. What the article doesn't cover is (once you can cover the costs) whether the second home will bring you joy, happiness, memories, peace, new friends and a community to belong to, a porch to read on that you can call your own, a warm uncrowded place to go in the winter months for walks on the beach and sunsets (the author of the article calls these "extravagences" though he admits that he has a "glass-is-half-empty" outlook on second homes, so it would be easy to miss these benefits with that perspective).

[Coast is Clear]

" ...it does seem that there will be a LOT of rentals available and renters will have more choices than before -- so quality and service (and repeat renters) will become increasingly important if you want people to choose your rental over another"


That may be true locally, but on the Gulf coast overall the inventory must be significantly down with all the storm damage. It will be interesting to see how that translates in SoWal. Either people will flock to what is available, or they will assume that the coast is damaged and make plans to go somewhere else.

[Paula]

Good point, Coast is Clear. I forgot about that. There are so many different things that influence the market, rentals, etc.

Our rentals have been up slightly this year, though I think people may be waiting until later to book their vacations, especially for summer. The risk of waiting too long to book is that you may not get the place or week that is your first choice.

[Sandcastle]

I can relate to your aging van, Paula. We have one of those, too. Actually, we also have an even older pickup truck. It does have a Seacrest Beach decal on the windshield, though. That adds a touch of class! Without it the security guard might have kicked us out.

I agree, I'd much rather have the real estate than the new car.

[GaltsGulch]

Ecopal, to answer your question (with my humble opinion) "is it time to buy now" - my opinion would be most definitely that it is NOT yet time to buy. Although sellers are beginning to desperate, the inventory problem is neither benign nor temporary (depending on what length of time you conteplate by 'temporary')

As I stated in my post December 1st, it is my view that following such a sustained run up in real estate, it would not be damaging, nor shocking to see real estate fall 25% from the highs.. If prices are off 20% now, that is only if you calculate from the highwater mark of asking prices, which occurred roughly 12 months ago.. I would submit that valuations in SoWal have only fallen 10% from that peak so far, and have a good 15% or more to go.

The rate on the 10 yr. bond is creeping up yet again today.... if China, and Japan stop financing our debt, and rates go from current 4.7% on the ten year, to somewhere north 7.5% as could easily happen, we could be in for a much nastier downturn that even i previously imagined. At worst however, my current guess would be that valuations could only drop to 2003 levels (another 30% from today).... and when they do people will be fearful that they drop further (i.e. to 2002 levels).. that's when you can be more assurred that the risk/reward for a longer term investor will be more in your favor; but only those with cash hoards, and therefore no need to use financing at much higher rates will be able to capitalize on that pending opportunity.

I think real estate valuations bottom in SoWal, in June of 2007. I could be off by a good handful of months in either direction though.

While I am on the topic, I had some time ago suggested shorting St. Joe (JOE) as a way to hedge exposure for those holding real estate in SoWal, who don't want to sell into the impending weakness. JOE is now down over 30% from its highs 9 months ago.... JOE is probably no longer a screaming short at current levels. It certainly is NOT however, a long candidate either at this time, until we can be more certain that the bottom is on the horizon which stocks get comfortable discounting ahead of time. If you think we're less than 6 months from a bottoming real estate market in the Panhandle, you would want to get long some JOE. I won't be making that bet, just because I don't think the 'bottom' is that close.

Prices seem to be about 20% lower than last year on many properties.

Is it time to buy or to wait for prices to drop more?

There are some desperate sellers out there; some flippers who got caught holding the bag. So I am inclined to think that there are more bargains to be had in certain classes of property if you are patient.

Desperate sellers will tend to be primarily in condos and vacant homes with big overheads and vacant lots with build out times. The question is how fast will these bargains be bought up?

The longterm outlook for 30A maybe one of the best in the coastal south.
30A has constraints on amount of potential devleopment. Currently the supply is ahead of the demand but that is only a temporary phemomenon.

So as some wise posters have already said: if you don't need to sell now don't or you could be sorry.Also, if you really like 30A and want to have a place here now maybe a good time to do some bargain hunting.

Future developable property on 30A is finite and it will become even more valuable as 30A becomes discovered as the most exclusive area to live in the region.


In addition global warming will only help 30A. In fact, go help the cause and go buy a big gas guzzeling SUV to help speed up the process - just kidding.

With more hurricanes and rising sea levels the higher elevation of many 30A properties (although I would be less interested in riskier water frontage property than property close to but a lot or two away from the Gulf/ocean/bay.) may make them more desirable than most Florida property.

Why pay higher prices for low elevation,and more hurricane and flood prone property in grid locked southern Florida when winters here are becoming warmer?

[Donna]

The problem with this thread is that its originator is thinking in terms of absolutes, "boom or bust" real estate cycles, nothing in between. It also bases assumptions on small investors. If you look at real estate dynamics in the U.S. over the past 20 years, there has been a scarcity of this type of "bust" dynamic. A big part of the reason for this is diversified investment. South Walton homeowners and investors are coming from all over the country, a dynamic that will soon expand to more global players.

South Walton rental vacationers would take issue over the claim that rents have been stagnant, which is not at all true. Most rental properties have steadily increased rents (and even passed on some of the maintenance costs) for the past five years, with little change in the numbers of visitors during season.

If you are a potential buyer waiting for the South Walton market to "crash," you may well watch that train go through the station without stopping. The correction in the market with be a more subtle realignment of price expectations in combination with many surplus properties being taken off the market, because they were testing the waters to begin with. It will be a shrug, not a collapse. The best approach is to decide what kind of property you want and can afford, anticipating some cost increases over time, and buy at a price you feel comfortable with. At these prices, purchase of a vacation home or even an investment property is not for the faint of heart or marginally capitalized.

If you are a seller, consider who your future buyer will be and when they will be mobilizing. Bullish segments of the economy fuel real estate investment. The stock market has not made the kind of recovery that most investors need to see for reentry. A change in the current administration will translate into considerable divestiture from the energy and defense industries. This means future investors coming from Texas and Oklahoma and Southern CA.
We can also anticipate more Middle Eastern investors looking for target real estate markets in this country. Do you remember the huge influx of Middle Eastern investors in Southern CA in the early 1980s? Changed their real estate market forever, just when everyone there thought inflation had done that market in and assumed a "bust" condition was inevitable. Didn't happen; just the opposite. And the baby boomers exit from the urban workforce will zenith in 2008-2010. Prior to that time, boomers will be searching for desirable retirement homes.

JOE recovery may be elongated because of their very large inventory and their huge capital investment and commitment, the latter of which is far from over. They could be ripe for a buyout by 2007. Look at the nationwide history on these kinds of large, master-planned communities. History does repeat itself. The early ones can be great investments, because the level of amenities is much greater than future developments will be able to offer. Investors can take advantage of the miscalculations in St. Joe pro-formas, which were developed when they were trying to woo the local officials.

As they say on Broadway, "Somewhere in all this manure, there has to be a pony." If you want to buy a pony, look for a good horse at a good price. The rules haven't changed. If it's freedom you're seeking, stay in the shelter of the barn until the storm passes overhead, then look for a break in the fence.

[GaltsGulch]

Donna, I'm not sure from your post whether you disagree with me or not? It sounds as though you think people interested in buying should kick the tires and find the best deal they're comfortable with as the market stabilizes... I wouldn't disagree with that. I think stabilization means giving up a good portion of the last 2 years of appreciation from the beginning of 2004, through the peak in early 2005 - nothing more - market should easily be able to retain the historic appreciation it experienced from 1992 to 2004.

I wouldn't call my prediction of a further 20% decline, from current 10% off/ballooning inventories environment a "boom/bust" call. It may feel like it however to anyone who bought from mid 2004 onward only. We're talking about declines of 20% after a 8 year run which has seen valuations go up 300% or more. I would call that a "correction". You state that this hasn't happenned too often and point to Detroit and California as examples. In the first instance, has Detroit had a similar SoWal run up in valuations anytime in the post Nixon era that I am unaware of? California has experienced 20% plus corrections in recent history. And those corrections did not follow such historic explosions upward in value..

You also intimate that I keep thinking of SoWal as a local market. My first response would be that real estate is local (check valuations in Malibu, Redondo, vs. Detroit/Grosse Pointe to use one of your citations) it seems quite local to me, but I could be wrong.. But I could agree that what has driven SoWal is not local, valuations have been driven higher by 2nd home purchasers/speculators, from Atlanta, Birmingham, Nashville, New Orleans, Houston, Memphis, Knoxville, St. Louis and a sprinkling from Northeast, upper Midwest, California 1031 money, and Germany, UK etc.. So you are correct, it was not buyers from Freeport and Defuniak that drove the beach values up - I don't think I said that, or implied that they did.

Do you currently own some property in SoWal? I did until last March, and therefore I can empathize with your hopes that 1) we see a soft landing, 2) that boom/bust cycles are myths (I'm not calling for a bust here, just a 30% correction we're in the process of on the back end of multi-hundred percent appreciation upward in short time)...

To your point about rental rates...... rental rates have BARELY gone up over the last 5 years (YES, they went up a few percent a year from 99 through the end of 2004), but peanuts compared to valuations. What does that tell you? I know what it told me - namely that renting became much cheaper than owning - that's all. That fundamental market mechanism was crystalized for some, after some catch up in tax assessments, and unfortunate uptick in insurance rates.


The Panacea of the new location and longer runway at the Airport in Panama City I think has been overdone. SoWal valuations, to go higher, need buyers who don't fly commercial. Not sure avoiding a connection in Atlanta for the commercial flying public is going to in and of itself, drive valuations higher. It could expand PCB's spring break, to non-drive in students. The newly located airport is not a bad thing, it can only help.

Maybe I'm wrong about all of this. only time will tell. If you think I'm wrong, I assume you're looking to buy at this point then. There is a growing amount of inventory to choose from, so maybe there is a "deal" to be had - for somone.

For me, I'd prefer exposure to the auction business for the next couple of years. You're going to be hearing a lot about rising interest rates in headlines, and articles this week, and this weekend. The 10 yr. yield is just now reaching levels that we haven't seen in a couple of years. A Breakout trend.

[Donna]

Galt's Gulch, we are not necessarily in disagreement on some points, particularly those associated with the current South Walton market situation. However, I do maintain that the new airport will be a big factor in future appreciation. Keep in mind, many people who had private planes sold them in the past couple of years and have opted for purchasing air space, the timeshare version of private luxury flight. And lots of those people are complaining that their schedules are impacted by the need for these planes to fly away asap to service other investors. So they have resumed first class travel as a preferable alternative. I'm not sure that a house at South Walton really equates with a person who owns their own air transportation, though. The prices there are still a screaming bargain compared to most East and all West Coast beaches.

Yes, we own a house at Grayton and are probably not looking for another property there, regardless of the market. For the sake of diversity, we are looking at Bainbridge Island, WA and possibly a condo in HA as the next moves. We considered putting our Grayton house on the market, primarily because we're tired of viewing hurricanes from afar and we don't get down there often enough to justify having the house (long journey with segmented flights and the time differential). However, we purchased the house in 2001, before the big increase in values. Even a desperado sale would yield an almost absurd profit. Just the same, I think we are going to keep the property under the assumption that the area is very desirable and we don't see the need for panic.

I believe the pre-construction condo and spec single-family home group may well be in for some pain. The jury is still out on lot sales. Then again, I have never been one for investment opportunities related to condo development. It is wonderful for a person who wants a place away from home without the headaches of maintenance. But usually not a sound plan for long-term investment, because there is such a tendency toward proliferation of attached product. Lots of this product can go into the ground too quickly. I'm frankly surprised that the "patio home" has not caught on down there.

Yes, we agree on much. But I also believe that the great disparity of owners and investors in South Walton has finally translated into an uncertain and hard-to-define market dynamic. There is no overall market trend that one can hang their hat on. For example, we recently asked several listing agents for their take on what our home might list for. The estimates reflected a RANGE of $1.4M. Something wrong with that kind of feedback. As for interest rates, keep in mind that about 80% of $1M+ sales are cash sales. The 1031 exchange factor is key.

[SHELLY]

The 1031 exchange factor is key.

In a market when inventories are piling up, and investulators are dumping their stash, the 1031 daisy-chain is far more tricky to pull off.

[GaltsGulch]

I'm with you on not owning condo - supply can proliferate too quickly. We also had single family (Seagrove Beach) until we sold almost one year ago now. I can see why you might consider selling, only since you're so far away - (not because you have to) - but it really says something that people from California love the beach in the Panhandle.

- We will be looking to re-enter the market again, but are in no hurry as our young children are hitting those busy years soon, where weekends will be so busy with practices/games/other, that numerous regular trips to the beach will be difficult.

Do you ever rent your Grayton place out by chance? Any links i may look at to check availability for us?

[Paula]

What's a "patio home", Donna? We have what is called a Land Condo -- has association fees and shared property, but the homes are free standing. It has been much easier for us to maintain the place and create a nice little community from afar by going the condo/land condo route. Don't sell your SoWal home because you'd miss us all and we'd miss you!

[Donna]

One has 45 days from the date of sale to I.D. an exchange property and 180 days from date of sale to close on the exchange property. It makes sense to choose an exchange once an offer is rec'd on the property to be sold. However, the longer listings stay on the market for the exchange, the more likely one will be able to perform on those identified during the initial 45-day period. Also, the more that is on the market to choose from, the better for exchange purposes. Worst case scenario for an exchange is few properties on the market in one's targeted area and high prices resulting in buyers bidding for those available, combined with lots of activity. Squeeeeeeeze!

[dsilvar]

"I believe the pre-construction condo and spec single-family home group may well be in for some pain. The jury is still out on lot sales. Then again, I have never been one for investment opportunities related to condo development. It is wonderful for a person who wants a place away from home without the headaches of maintenance. But usually not a sound plan for long-term investment, because there is such a tendency toward proliferation of attached product. Lots of this product can go into the ground too quickly..."

Donna..there is very little that you post that I disagree with, but your take on condo ownership as a long-term investment does not reflect the facts.
Quite simply, the operating principle is the age old "buy low sell high".
I bought a condo fro $300,000 and will sell for 1 mil plus down the road..unless you think that condos will not appreciate with time...at all?
Why would any builder/developer build any condominum complex unless they see that there will be a market for that real estate. If they can see that condos are a bad or even a poor investment, as you and GG seem to see, then I can assure you there will be no further condo building.
The same applies to your vacation home. If builder/investors see they can make a profit building homes they will and they will make a profit and there will be more vacation homes.
Will there be a correction in prices across the board? yup.
Did your home appreciate faster than my condo..probably.
But 5 years down the road, we will both make money, I assure you.
And my acquisitions in SoWal are 1031 delayed exchanges.

[Paula]

I agree that condos can do well. Our "land condos" in SoWal have been excellent investments as well and have gained a lot in value since we bought them (one in mid-2003 and one in early 2004). We have no plans to sell for a two - three decades, though, because we bought them to enjoy with family and friends, to have a sweet place to retire to someday, and to give us some financial discipline.

Would I buy a place now if I didn't own these already? Probably, if I wanted to keep the place a while and make 30A a home or a home-away-from-home rather than just an investment. I've seen what look to be some decent deals lately.

[Buckhead Rick]

New York Times front page article last week (sorry but I don't remember which day) discussed the stand off between buyers and sellers on the coasts. Sellers don't want to reduce their offer price, buyers, hearing about the upcoming(?) drop in values, do not want to pay the asking price.
Since I know nothing about real estate but do know this site has plenty of opinions, who do you all think will bink first???

[Amp22]

New York Times front page article last week (sorry but I don't remember which day) discussed the stand off between buyers and sellers on the coasts. Sellers don't want to reduce their offer price, buyers, hearing about the upcoming(?) drop in values, do not want to pay the asking price.
Since I know nothing about real estate but do know this site has plenty of opinions, who do you all think will bink first???

A seller who has to sell will make a deal somehow.

But I have seen time and time again, a vacationer catch the fever and absolutely have to buy something while they are here or shortly thereafter.

[SHELLY]

One has 45 days from the date of sale

...to SELL when properties are many, buyers are few and money is tight...that's the rub.

[SHELLY]

Sellers don't want to reduce their offer price, buyers, hearing about the upcoming(?) drop in values, do not want to pay the asking price.
Since I know nothing about real estate but do know this site has plenty of opinions, who do you all think will bink first???

Realtors...when their babies need milk and the SUV needs gassing up.

[SHELLY]

I bought a condo fro $300,000 and will sell for 1 mil plus down the road..Why would any builder/developer build any condominum complex unless they see that there will be a market for that real estate.

The only "market" developers care about is the initial (or pre-construction) first sale...they couldn't care less what happens to the market after that. They will keep building new condos as long as they can sell them out. Once they unload their stock in one building, they're done with it...they simply move on to the next. Problem is, there will be plenty more condos than there are now when you put yours on the market for $1 million down the road. Do the developers care whether you sell your condo or if the market is flooded?....In a word.....nope.

[SHELLY]

New York Times front page article last week (sorry but I don't remember which day) discussed the stand off between buyers and sellers on the coasts.

NEW YORK TIMES
March 4, 2006
Hoping for Best in Home Sales, 2 Sides Sit Tight
By VIKAS BAJAJ and DAVID LEONHARDT

Along much of the East and West Coasts, home buyers and home sellers are engaged in a stare-down.

Many buyers, having heard that the real estate market is a bubble in danger of popping, are refusing to offer the asking price on a house, convinced that it will soon drop. But many sellers are not blinking either, thinking that offers will improve when the weather does and biding their time until then.

As a result, the housing market is now in a deeply confusing state, with average prices still rising even though homes are taking much longer to sell and the number on the market has soared. Sometime soon — probably in the spring, the peak sales season — one side or the other will have to capitulate, many economists and industry executives predict.

"In my opinion, the jury on housing is still out," said Antonio B. Mon, the chief executive of Technical Olympic USA, a home builder. "The period from now until May will tell the tale."

Many real estate agents argue that the current slowdown is merely a pause, pointing out that interest rates remain low and that Americans still seem convinced that houses are a great investment. Buyers, on the other hand, are hoping that the rising number of unsold homes is a signal that a slump is coming. It was an early sign of the last housing slump, in the early 1990's.

Nationwide, the number of existing homes for sale jumped 36 percent between January 2005 and January of this year, the National Association of Realtors reported Tuesday.

In Manhattan, 42 percent more co-ops and condominiums were available for sale at the end of last month than was the case a year ago, according to Miller Samuel, an appraisal company in New York. More Manhattan apartments were on the market in late February than at any point in at least five years.

For now, though, average selling prices have continued to rise, even in the markets that had already experienced the biggest leaps in prices and the increases continued even in the final months of last year. Prices rose 40 percent in the Phoenix area during 2005, according to the federal government. In Manhattan, the median price of an apartment was $760,000 at the end of last year, up from $605,000 at the end of 2004.

The latest statistics on house prices appear to be dominated by sellers who, for one reason or another, quickly received good offers. That has kept average prices rising. Builders of new homes have also offered bonuses to buyers, like enclosed sunrooms or top-of-the-line appliances. So the builders have been able to continue selling homes without cutting the list prices.

But many houses in the Northeast, Florida and California are, in fact, selling for less than they would have six months ago. In parts of the Northeast, the drop has been about 5 percent, estimated Robert I. Toll, chief executive of Toll Brothers, the biggest luxury home builder in the country. Other sellers have cut their price and still not found a buyer.

In Buxton, Me., a suburb of Portland, Geof and Cheri Toner put their three-bedroom Cape Cod-style house on the market for $379,900 late last year, shortly before moving to Raleigh, N.C., for Mr. Toner's job. They have received only one offer — for $350,000, which they rejected — and recently reduced the price to $374,900.

Mr. Toner said he assumed that more buyers would look at the property as the weather warmed up. In the spring, they would not have to wonder whether snow covered up flaws in the lawn or the roof. He expects that the eventual buyer will be a transplant from elsewhere in New England who is willing to pay significantly more than $350,000.

"We're not panicking over it," said Mr. Toner, 48, the regional sales manager of a video equipment maker. "It's just a matter of sitting it out and seeing what happens."

Many real estate agents argue that people like the Toners are doing the right thing and that the market will not slump as it did a decade ago. The job market is now improving. The interest rate on a 30-year fixed rate mortgage remains just 5.79 percent, according to Bankrate.com. And the number of homes on the market remains far lower than in the early 1990's, relative to sales volumes, despite the recent increases.

The current slowdown is simply a transition, the agents say, from a scorching hot housing market to a normal, healthy one. "All we are seeing is a pregnant pause," said Richard A. Smith, chief executive of Cendant's real estate division, which owns Coldwell Banker and Century 21, "a disconnect between sellers and buyers."

But many buyers say they have a sense that the long boom has finally come to an end.

In the San Jose, Calif., area, where the average house price increased 21 percent last year, Sathish Pottavathini, a programmer at eBay, said he was taking his time with the search for a new home and trying to find a good deal.

"I don't want to rush into things especially in this kind of situation," Mr. Pottavathini, who is 32, said, "where you hear about a slowing down everywhere."

He and his wife, Madhuri, spend $1,200 a month renting an 800-square-foot two-bedroom apartment, where they live with their 21/2-year-old daughter, Siri. They would like to find a three-bedroom town house with a two-car garage for less than $500,000.

Although he does not expect prices to fall significantly, he does not think they will rise either and hopes he can find a bargain — a goal that seemed all but impossible in Northern California in the last few years. Now, Mr. Pottavathini said, "If I wait, I might get a better place."

Buyers who showed similar patience in the early 1990's were rewarded. From the summer of 1989 to the summer of 1990, the number of homes for sale rose about 10 percent, according to the Realtors association.

At first, many sellers refused to accept lower offers, thinking that they would get their asking price or close to it. But they eventually had to unload their houses, and in the Northeast and California that often meant reducing the price. In the Los Angeles area, the median sale price of existing houses fell 22 percent from 1992 to 1996, before taking inflation into account.

If a similar slowdown were to happen again, Mr. Toner said he would consider changing his mind and his asking price. "At some point, if this were to become protracted, I would consider lowering the price to attract a buyer," he said.

Mr. Pottavathini, meanwhile, is giving his San Jose search four months. After that, he plans to take a break and wait until his daughter is a bit older and his wife returns to work. With more money coming in, they might be able to pay more.

If they still have not succeeded, they would then consider leaving Northern California — which he called "the best place in the world" — and returning to their native India.

"If the condos become $600,000, it doesn't make any sense to live here," he said. "Imagine owning a house and paying your whole life for that house. I would rather move back to India."

[dsilvar]

The only "market" developers care about is the initial (or pre-construction) first sale...they couldn't care less what happens to the market after that. They will keep building new condos as long as they can sell them out. Once they unload their stock in one building, they're done with it...they simply move on to the next. Problem is, there will be plenty more condos than there are now when you put yours on the market for $1 million down the road. Do the developers care whether you sell your condo or if the market is flooded?....In a word.....nope.

Shelly, my dear girl...I know developers worship their margin of profit..no surprise there!
However you say "..They will keep building new condos as long as they can sell them out. Once they unload their stock in one building, they're done with it..."
But, by definition there is NO market for condos anymore!! Preconstruction or otherwise..especially preconstruction!! The condo flippers are feeling the flames of financial hell licking at their heels and the resellers are not "willing" to reduce their prices.

If there is no market then no more condo building! period.

Lets not forget the very healthy real estate price differentials between the Florida coasts or even up and down the gulf coast. Tampa, Sarasota and Naples are higher than we are in SoWal.
I have a lot in Gulf cove down in Port Charlotte that is up 400%..not any place you want to live (as yet, anyway). The prices for lots and condos there are almost on par with SoWal and they had a hurricane go right thru.
I know there is a saddening disconnect between the acquisition of the Almighty dollar and human kindness..but market mechanics will deal with the good the bad and the ugly with an even hand.

[Cork On the Ocean]

It seems that it gets down to the old adage - People that see the glass half full and those that see it half empty and I really don't think the inherent nature of the person can change. I see a pattern of personalitites and it's quite clear that none of us have a crystal ball and there's equal opinions on both sides which are mere predictions. I see the glass half full - always have in everything.

My question is to Galtsgulch and is related to the prices that he/she is gauging the "high mark" from.

"if you calculate from the highwater mark of asking prices, which occurred roughly 12 months ago.. I would submit that valuations in SoWal have only fallen 10% from that peak so far, and have a good 15% or more to go."

My question is how in the world can someone calculate the highwater mark as asking price? This is a hope, a dream, sometimes akin to hitting the lottery. Asking price is not fact or reality in any sense. I don't know of any appraiser or financial expert that bases value (not valuation) on asking price. When the IRS taxes you, it's not based on asking price . When the bank lends you money, it's not based on asking price.

IMHO, people who continue to gauge the market on asking price are just looking for a way to turn things into a negative. The only reality is sold prices and conjecture about people's dream price is just that. Meaningful value assessment must be based on reality and the reality here is that the average value has gone up, not down, so even in a period when the number of sales have dramatically dropped, the average price is going up. Wait another year and see what it is. In the absence of some catastrophe, there will be no "mass carnage", only people missing the boat. I think that those predicting mass carnage are either dreaming or hoping that they could afford to buy something or believe they have in some way "lost money" (even though they paid peanuts in many cases) because they didn't sell it when they should have.

One of the most important things that anyone ever told me was from a very wealthy man who made his money in real estate and that was "If you're afraid to sign your name, you'll never make the first dime". I think fear stops more people from realizing success than anything else. I would truly be interested in knowing how many people that are negative towards the market have a net worth over $5 million. Highly successful people don't look at the glass as half empty, they base decisions on facts not speculation and they are flexible adapting to their environment.

If an investor is smart, there's always a way to make money in real estate. In a market where housing prices have gotten astronomical and the number of buyers have dropped, it makes sense to me that owning and renting affordable housing is prime. In our area, jobs are increasing, the population is growing and the price of housing has become so expensive that the working class can't afford it so they have to rent. Throw in increasing mortgage rates (with which I don't see a big problem yet but think are inevitable) and voila! As a small investor, I'm going to DSF's that are still under $400K and put them on long term rentals. If I had a lump of money to park and didn't want the hassel, there are some great land prices and I'd sit on land. If I were a large investor, I'd be looking at buying apartment complexes or developing affordable housing. Glass empty people won't be buying, glass full people will.

[SHELLY]

I think fear stops more people from realizing success than anything else. I would truly be interested in knowing how many people that are negative towards the market have a net worth over $5 million.

Why the World's Best Real Estate Investor is Cashing Out

[beclareesq]

Cork,
It is admirable that you are so loyal to SOWAL, but you are stretching common sense if you are arguing that now is a time to buy, at current asking prices. The only reason to be positive about the market is if you believe, like I do, that prices are going to fall 20-30% and there will then be buying opportunities. The area is great, unique and the longterm looks bright. There is no reason to sell for fear of a crash but otherwise, those who need to sell are going to find it rough sledding.

The proof is in the pudding as they say.. if the current asking prices were attractive to buyers then properties would be selling. They are not and it's not because people are too scared to write the check.

[goofer44]

Cork, the time to buy any asset is when even you ( the generic you ) are so scared that your hands are shaking with fear. Or in the case of real estate, when you want to puke all your holdings because you think we are going into a deflationary period like the 30's. That is not going to happen. But i think this late fall will be the great opportunity. ARM's payments going higher, hurricanes again, and the speculators hitting the panic button. They will squeal no mas......that will be the bottom.

[tylerT]

There are a lot of folks on here that are scared of reality - but positive spin or attacking the messenger doesn't change the facts which are that there is an absolute glut of both single family homes and residential land on the market in South Walton. All realtors are worried and sales have fallen dramatically. It will take years for the local market to absorb everything that's for sale. An airport might help years down the road, but for right now and at least several, several months and possible a few years to come, there's little money or return to be made here.

You can't spin the facts, and if you say differently, you're trying to change them by a positive attitude or boosterism that is becoming almost pathetic. I know and am close friends with several reputable realtors who have seen their commissions plummet - decline by triple digits over the same time last year.

Many of you folks are no longer credible because the truth is becoming obvious, but you refuse to change your tune. Well, wee, wee , wee - forget what you see and trust us to tell you what's really happening.

[Smiling JOe]

There are a lot of folks on here that are scared of reality - but positive spin or attacking the messenger doesn't change the facts which are that there is an absolute glut of both single family homes and residential land on the market in South Walton. All realtors are worried and sales have fallen dramatically.

Not true, maybe many are worried, but not all.

It will take years for the local market to absorb everything that's for sale.

Only at today's rate of sale. That too can change.

An airport might help years down the road, but for right now and at least several, several months and possible a few years to come, there's little money or return to be made here.

Only if you don't know what you are doing.

[Paula]

There are a lot of folks on here that are scared of reality - but positive spin or attacking the messenger doesn't change the facts which are that there is an absolute glut of both single family homes and residential land on the market in South Walton. All realtors are worried and sales have fallen dramatically. It will take years for the local market to absorb everything that's for sale. An airport might help years down the road, but for right now and at least several, several months and possible a few years to come, there's little money or return to be made here.

You can't spin the facts, and if you say differently, you're trying to change them by a positive attitude or boosterism that is becoming almost pathetic. I know and am close friends with several reputable realtors who have seen their commissions plummet - decline by triple digits over the same time last year.

Many of you folks are no longer credible because the truth is becoming obvious, but you refuse to change your tune. Well, wee, wee , wee - forget what you see and trust us to tell you what's really happening.

The best tunes to sing are not "sky is falling" or "everything's rosy" -- overstatements and simplistic thinking of any kind are the kiss of death for smart decisions. Most people on this board (I'd say all people on this board) are wise enough to know the market is changing, as all markets do. Most people also know that some people will lose money (that's nothing new), some people will make money (that's nothing new), some people will try to time the market and buy when they can get the lowest price, some people will buy when they can get a good-enough-price, most people know not to put all their eggs in one basket, etc., etc., etc.

I think what surprises (and seems to bother) some people on this board is that many people can love a place and feel good regardless of what the market is doing.