Your friends at www.condosaletrends.com have been searching for a little good news in the Panama City Beach Condo market. The beaches look great. Pier Park looks great. The new airport looks great. The condo market looks a little ragged.
The following is our analysis of sales and re-sales from the 75 buildings contained in the condosaletrends.com data base. Developer sales not listed in the MLS were not included because we cannot confirm the existence of or lack of seller concessions.
There were significantly more sales during the first three months of 2010 compared to 2009 with fewer sales since May. July sales took a steep downturn with approximately 40% fewer sales than 2009. August doesn’t look much better. The oil spill didn’t help but the primary reason is due to the weak economy and the generally pessimistic outlook held by potential buyers.
Foreclosures and short sales continue to be major restraints to price stability. Bank related sales accounted for 47% of the total number of June sales and 60% of July sales. A majority of the bank related sales were in the newer, beach-side buildings. To complicate the problem, a large number of new foreclosures and short sales hit the MLS over the past month. Bank related sales will most likely be with us for the next couple of years. In one newer beachside building that has been particularly hard hit by bank sales, 34% of the current owners are $100,000 or more upside down. Some are $300,000 upside down. Many of these owners will finally throw in the towel.
The market trend line is illustrated below. It is structured to show a sale price trend measured in terms of the percentage sale price as of a particular date. The starting date used was January 1, 2009 so we could show the price trend since January 2009. We chose units from a variety of beach side buildings of different ages and sizes that had a sufficient number of sales as to be statistically significant. All of the sales used in this analysis are from beach side buildings. There is no collusion of beach side properties and off-beach properties. The buildings include Boardwalk Beach, Calypso, Celadon, Emerald Isle, Grandview East, Grandview at Long Beach, Gulf Crest, Regency Tower, Tidewater, Seychelles, Splash, Sterling Reef, The Summit, Ocean Villa, Twin Palms, and Treasure Island.
The sale price of each type of unit is only compared to the typical sale price of that particular type of unit as of January 1, 2009. As an example, a sale of an 846 SF, 1BR/2Ba unit located in the Celadon is only compared to sales of 846 SF, 1BR/2Ba Celadon units. A unit type with a January 1, 2009 market value of $400,000 is represented as 1 or 100%. An October 2009, $380,000 sale of that type of unit is depicted as .95 or 95% of the January 1, 2009 sale price. The chart contained in the following price trend analysis is a trend line of the trend lines of the sale prices of each type of unit from the 14 buildings. Foreclosure sale prices that were unrealistically low (mold problems for example) were not included. There were 187 sales used in the chart. The analysis does not try to skew the price trend in any direction. The data is just the data.
Our January 2010 analysis predicted at least a 5% decline in value for all of 2010. That was obviously too optimistic. We have blown past a 5% decline during the first seven months of 2010. The data indicates that the typical beach side, Panama City Beach condo lost approximately 13 percent of its value during the past 12 months and 9% in the last seven months. The rate of depreciation appears to have accelerated over the past three months. Of course there are exceptions, especially with units that were sold exclusively through the developer.
As in the past, there are several factors at play that will continue to put downward pressure on current market values.
- Financing a condo continues to be difficult for the average buyer.
- There are still a large number of owners who have a mortgage in excess of $100,000 more than the current market value of their condo. There is no evidence that the number of foreclosure and short sales will decline in the near term.
- The lack of robust national economic growth does not inspire potential buyers to pull the trigger on a large discretionary purchase.
So what’s in store for the rest of 2010? It sounds like a broken record. The new airport will have a positive effect on the number of rental nights for the area but a minimal effect on condo sale prices. Foreclosure and short sales will continue to put negative pressure on current market values. Financing second homes located in Panama City Beach condo buildings will continue to be difficult. The number of sales will continue to be volatile.
Panama City Beach condos will continue to lose value. The question is how far prices fall before the bottom. I’m afraid to speculate. A good friend of mine likes to say “when you think it can’t get any worse, it does”. The vultures and bottom feeder buyers are even scared. Purchase prices in this environment appear to be based on perceived risk. The lack of a robust economy is one risk factor. The potential of additional price declines is another. However the overriding factor preventing a stabilized market is the seeming endless supply of bank related sales.
The market cannot stabilize until all of the properties that are held by owners that owe substantially more than current values and do not have the financial ability or the will to continue ownership are transferred to new owners.
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