Condo Re-Sales Plummet

by September 18, 2008 • 1 comment

Here at, our only job is to take the data and present the trends so market participants can make informed investment decisions.  So, no cheerleading, no anecdotal evidence.  The data takes us to where the data takes us.  We only track the sale of condo units within the 75 buildings along Thomas Drive and Front Beach Road (20,000 plus units) that are in our database.  The analysis covers this particular segment of the market.

The number of real estate sales over a defined period does not by itself tell us if the bottom is near.  However, the number of sales is a major factor in how supply and demand affects the market and merits analysis.   Be warned, the following analysis is not for the faint of heart.

Our goal in this post is to look at the number of sales in order to gleam knowledge, based on empirical data, as to “what the hell is going on” around here.  The “number of sales” or the “percentage of sales compared to listings” is not meaningful without comparing it to something.

The following table illustrates the number of arms-length condo sales from buildings in our database.  The Palazzo auction sales are not included because they would skew the trend.  What we really want know is how the auctions of unsold developer units may be affecting the larger condo resale market.

The August 2008 sales were down about 30% from the August 2007 sales and were trending downward from the 2008 May, June, and July numbers.  The next table shows the number of sales from June 1, 2008 to September 15, 2008 compared to the same time frame in 2007.  Because of the short time frame, the sales are broken into ½ month intervals.  These are the reported numbers as of 3:30 pm 9/17/2008.

There were only nine reported sales for the first two weeks in September 2008.  There were only three reported sales during the second week in September.  Granted, there may be one or two additional sales within this time frame that are reported in the coming days.  The data indicates that the trend in the number of sales is downward and steeply downward since late August.  We will have a better idea of the sales trend in October after all of the September data is in.

The Palazzo auction resulted in 48 sales.  As of 9/15/2008, public records indicated that 42 have closed.  There are anecdotal reports that Palazzo has additional post auction contracts which have not closed.  There are anecdotal reports that Sterling Breeze has 35 contracts based on some auction-type pricing, however none have closed.  Ocean Reef with 162 total new units (only eleven units have closed since opening in March 2008) is holding an absolute auction for 31 units on October 18th.

It appears that the process of transferring 1,200 plus unsold developer units to private ownership is adversely affecting the number of sales within the larger resale condo market.  In other words, those buyers who are financially able and willing to buy appear to be bypassing the Realtor/Seller relationship typical of most resale transactions and opting instead for the perceived discounts offered by the auctions or directly by the developers.

The data indicates that the number of sales of existing properties will continue to decline to levels we have never seen.  Resales just can’t compete in terms of age and price with all of the unsold developer units.
Put on your spurs and hold on tight.  This is going to be a wild ride.


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1 Comment


1 Scott Seidler September 20, 2008 at 9:14 am

Even though my article was intentionally limited in scope to include only MLS sales, pendings and closed transactions it is still a very important “snapshot” and definitely no less empirical. Absorption rates have always been considered a valuable piece of information when considering a market’s overall performance. I was not attempting to enter the realm of speculative analysis based on the data. Your charts on the boom and post boom years show a pattern that is helpful for us to see where we have been in comparison to those other years you took into consideration. Of course, the years you took into consideration are only the boom and post boom years and are also by nature limited in scope –(are we to consider them normative?) Your article shows that we are now in the slowest of the post boom years, something I ‘m quite sure we all had a feel for. Neither your article nor mine are able to predict with certainty where our market will be in two years or even 6 months after the elections. There are simply too many other factors that have nothing to do with either of our limited articles. The elections, the security of our nation, the overall well being or lack thereof of the financial markets, interest rates, accessibility of money, consumer confidence, unemployment rates, taxes, the strength of our dollar, the continued development of our airport, the affect the rest of hurricane season may have on us are all relevant to the possible improvement or challenges that our local real estate market will face.
In your article on Palazzo dated 8/11/ 08 you noted that Palazzo’s 2/2’s sold for $221 per sq. ft. According to my article, the average sold Gulf front unit in the MLS for August was $285.72 per sq. ft. I did not limit my number to 2/2’s but if I did it would have been 15 sold 2/2’s for August for an average of $267. 62 per sq. ft. and some of those were built in the 80’s. If you took the ones built in the 80’s out of the mix, 11 would have sold at an average price per sq. ft of $287.38. The REALTOR® listed and sold Gulf front condo’s post 1980’s 2BR 2 Bath closed for over 23 % more plus a savings of least 4% on commissions . That price per sq. ft. includes, as you stated in your article, a 10% auctioneer’s brokerage fee for the Palazzo units. The units that sold in the MLS system sold with brokerage fees that topped off at 6%. There appears to be a four to six percent savings on brokerage fees for the seller selling through more traditional means. Palazzo did have 48 sales in one day where the mls posted 37 sales for the month, but how many one day sales are we going to have? I would find it very interesting to set this observation in a wider context, comparing REALTOR® MLS solds price per sq. ft. comparative to the less traditional venue that you are particularly interested in.
One more note: In that same article mentioned above you made this statement and I quote:
The auction process appears to be a good way to sell unsold units if a developer and his bank are willing to sell at what ever the current market value is as of the day of the auction. However, it is reasonable to assume that the current market value established by an auction will be something less than the current market value established by the previous auction.
I would in some measure disagree with the above statement now that we have the empirical facts. It is “unreasonable” to assume that the auction units sold for current market value. They sold for 28-30% less per sq. ft. for 2/2’s than the average of all others listed and sold by REALTORS® in the MLS System . Those who bought at that auction price per sq. ft. got a heck of a deal for August 2008. I am not going to speculate on whether or not it will be a heck of a deal for August 2009. It may be a good way to sell 42 units in one day but in hindsight August closed sales on 2/2’s per square foot proved to be considerably stronger outside the auction for units that are in many cases (not all) older and inferior. I would have been more judicious in my speculation before writing the above comment which I quoted. There is no question that Palazzo would not have sold as many units during the month of August but they would have been in the ball park for selling some at a much stronger price point. They were listed at $408 per sq. ft. pre auction prices and sold for $219.33 per sq. at auction, according to your article. I guess I could call that “bi-polar sale syndrome”. It seems to me to be two extremes. Now they are listed at $263 per sq. ft. post auction and they are not moving, at least not yet. What if they had no auction and dropped their price in the system to $289 per square? Could they have sold some? I think so, if there never was an auction. We now have empirical proof that the price per square foot is rather dramatically reduced, at least at this particular auction, comparative to MLS listed and sold sales by REALTORS® in the very same month. I am going to go out on a limb and say some money was left on the table and some damage was done to the overall market as far as value goes. I am not so sure that it is a good way to sell from the perspective of a seller. I am sure that it was a good way to buy. If the price per sq. ft. before the auction was in decline (and I think it was) after the auction it was in sharper decline. This most recent wider context study of yours helps to demonstrate that point.