Jason’s April 12, 2008 article titled “Have We Hit Bottom Yet?” implies that because there are no negative newspaper stories concerning the current real estate market, that we must be nearing the bottom. Jason quotes NAR chief economist, Lawrence Yum predicting “Notable Improvement” in 2008. I have been following Yum’s analyses and predictions from the months leading up to the top of the real estate bubble (mid to late 2005) up to his latest prediction. The thing that stands out about Yum’s analyses is that he has been 100% wrong on every prediction. We all want to believe that the bottom of this market cycle is near.
However, quoting a source that has been wrong 100% of the time for the past three years has a negative effect on our credibility as real estate professionals. As quoted before “If you get all of your information from a source whose career and income relies on a particular event happening, then you can be assured that that information will be skewed toward that event happening. Real estate investing is ruthless and it is heartless. If a real estate investor lies to himself about things concerning money, he always loses”.
Is the Panama City Beach condo market nearing the bottom? Here are some sobering statistics concerning the number of developer unsold units in buildings on the beach that were completed in 2007/2008 according to Bay County Clerk records as of 4/16/2008 .
Aqua: 61 unsold units out of 237 (26%)
Origin at Seahaven: 161 unsold units out of 285 (68%)
Shores of Panama: 401 unsold units out of 732 (55%)
Tidewater: 203 unsold units out of 571 (36%)
Emerald Beach (not counting the 200 units Wyndham purchased): 71 unsold units out of 327 (22%)
Grand Panama: 133 unsold units out of 300 (44%)
Sterling Breeze: 95 unsold units out of 145 (65%)
Magnolia Bay Condos: 170 unsold units out of 200 (85%)
Laketown Wharf: 760 unsold units out of 800 (95%)
Buildings to be completed in 2008—-
Palazzo – 136 units
Ocean Reef – 161 units
To be fair, Tidewater is still closing with an average of 50 units per month since November 2007. Sterling Breeze is also still closing but only four units closed so far in April. Ocean Reef starting closing last week.
If we believe the historical evidence from the buildings that were completed in the last two years, 40 to 50 percent of the Palazzo and Ocean Reef units will not close at completion. There are 2,055 unsold units in the completed buildings above. Add a possible 150 unsold units from the two buildings yet to be completed and you have 2,200 or so unsold units lurking in the background.
The holding costs for the average beach front condo unit (HOA dues, insurance, taxes, utilities, etc.) typically range from $700 to $900 per month before debt service. A developer with say 150 unsold units pays $120,000 per month ($1,440,000 per year) in holding costs before debt service. The financial pressure for the developer to sell these units in enormous
Is the bottom here yet? Based on the evidence, probably not. This is not all good news and would be what Jason calls a “negative story”. However, it is my opinion that in order make money in the real estate business, you must know the facts of the market no matter how negative they are.
Sam Portman
PCBDaily 
Wow. With the cost of raw materials rising it is difficult to build future buildings at the current price. What is needed is more visitors. This can be accomplished by bringing in more attractions and beautifying the area to shed the redneck Riveria image.
LikeLike
I recently closed on a unit in the Palazzo building. The building contains 127 units, 19 of which are owned by the developer and are for sale. According to my realtor, the closings have gone very well with only 30 left to close. Of those 30, 15 have asked for delays due to market conditions; whereas, the other 15 are about to close and will close successfully. Therefore, assuming 15 buyers will be unable to close, plus the 19 developer units, that puts the rate of unsuccessful closings at no more than 26% at a max, which is much lower than your guess of 40-50%.
Nevertheless, I agree there is pressure on developers to lower pricing to move inventory.
Little Fish
LikeLike
Never trust what a realtor or developer “says”. They will say anything to get you closed then do whatever they please. This includes not finishing their developments and leaving out the amenities as promised. I’m a living testament to this fact!
LikeLike
Hi Sam,
Interesting information. I have to agree that you have to look at the source of the information, case in point, your article provides great information but then provides a link to your site, which requires a $35/ year membership. So some could say you are using “fear” tactics in order to sell memberships. I don’t think that was your intention at all, I think you are simply presenting the numbers. But on that note, Jason did the same, based on your site February and March 2008 sold more condos then 2007, so that is good news. It’s all on how you read and present the number.
People should do their, due diligence but you have to agree that most people don’t. They relay on their Realtor for the knowledge. And of course many Realtors are simply looking to make a sale, not rip anyone off but to make an honest sale to someone looking to purchase a product, they simply don’t point out potential negatives, nor should they. Imagine a car sells person saying, “This is a great car for the money but this brand depreciates the quickest.” A house or condo just like a car is an investment… the person making the purchase should take the time and responsibility to find the facts.
Nigel, The area is working on making the area more appealing. The current state of local economy (real estate, pier park, etc) is one of the arguments for getting this new airport done. Attractions can not afford to move into the area without more people. With the price of gas, PCB will not get more people but less! We ARE a drive in destination*. It is going to take PC/Bay County at least three years to recover from it current state and this is assuming the airport will be open by 2010.
On the, “Redneck Rivera” comment, 40-50 years of marketing to the Blue Collar family can NOT be changed in five years. AND you have to consider, if we market to upscale to much the Blue Collar family will vacation else where more affordable and still might not get the affluent market to come. Leaving us in a even worse situation. Case in point, this past summer I personally asked many families where they are from, what they do for a living, other vacation locations and thoughts about PCB… many times the answer was not positive for PCB, statements like, “We spent more money but got less.”, “Charging more but providing less.”, and another common one, “You got me/us once but never again!”. I travel… I travel a lot. Just spent time in Orlando and Sarasota with a friend and colleague, for less money we had great meals, wonderful top class service… overall more bang for the buck! Why? Competition! In the past, PCB competed for the Blue Collar worker and only against each other. So why would a local business put 40-60 hours of training an employee when the clients didn’t expect AAA service? The clients was interested in a good (not top class) service for a very affordable price, period. But now we are marketing to the people that can and has travelled to many places and has a higher standard of service and quality then our past clientele. But PCB businesses hasn’t evolved quick enough to offer this level of service… not because it doesn’t want to but we are in a catch 22, winter is to slow to keep employees and thus many leave the area, why would a business make that type of investment only to lose it three or four months later? Now with all at that at hand, Pier Park is thrown into the mix! They are a year round facility and the larger corporations have and require the training, thus forcing the local business to “step-up” their game. It will be a very very interesting the next few years!
*=Yes, US Airways is now offering service here, have you priced out a ticket to or from PC lately?
Chris, you are right! But that applies to almost complex or large all business transactions… Everything should be documented versus promises or words spoken.
As always, thanks to Jason for his serve to the community and to you Sam for providing a good service to investor and realtors.
Regards,
Charles
LikeLike
Great numbers, but here is a different take.
Throw out the off the beach stuff that no one wants(Laketown Wharf, Origins, part of Grand Panama, etc). Next Tidewater should mostly close because those were presold in 2002 or so.
You go from 2200 unsold lurking units to less than 1000 prime oceanfront condos.
Not good, but not that bad.
LikeLike
I live damn near across the world, in Vancouver, B.C.
Vancouver is a world class city, but has world class prices to match. A one bedroom condo in North Vancouver, where I live, starts at 350K and for that, you’re getting a studio near the furnace. You might not realize it, but I think there’s great value to be had here. Will it take time, it might, but you can’t duplicate the Gulf of Mexico during a sunset. To some, it’s priceless. And in terms of what people are prepared to pay, my thinking is where do people want to retire..when you find out, get there first.
LikeLike
There are some inaccuracies in the total number of units in each of these developments. As a result, the percentages are heavily skewed. I market and sale real estate here on the beach and have personally worked with many of these developers through ther pre-construction phases. Here are a few examples of the inaccuracies of the totals: Laketown Wharf-765 units, Shores of Panama-709 units, Magnolia Bay-99 units, Tidewater-570 units. Another consideration is that he researched these numbers via public records which included the units that have not even started construction in additional phases. Hence, I do not disagree that we have a substantial inventory remaining, but these stats inflate the totals to a much higher degree.
LikeLike
I AM FROM OUT OF TOWN AND A LAKETOWN WHARF BUYER. MY PHONE IS BLOWING UP WITH DIFFERENT PEOPLE MAKING DIFFERENT OFFERS FOR ME TO CLOSE. I REALLY DON’T KNOW WHAT TO BELEIVE ANYMORE AND I KNOW I MADE A MISTAKE….. DOES ANYONE KNOW THE COST PER FOOT RIGHT NOW AT LAKETOWN. I HAVE HAD OFFERS FROM 280 DOWN TO 230. UNFORTUNATELY, I BOUGHT IN AT 310. I WOULD APPRECIATE SOME LOCAL OR EXPERIENCED INSIGHT.
HD
LikeLike
I put down 10% cash and a letter of credit for another 10% on Laketown Wharf. I received a letter from Laketown Wharf that gave me a closing date of 30 days out. I then drove to PCB from Central Florida to see what my condo looked like. As I drove down Front Beach Rd for the 1st time in 2 years I was shocked at how awful it looked! Who would want to purchase anything there. I arrived at the Laketown Wharf sales office and they had a security guard open my condo for me to view (this is after I called twice and was assured that a sales person would be there)!!! I had set aside $300,000 in cash for this condo. After my trip I put the money elsewhere and forfeited my deposit. I still love PCB though and will come back if things ever turn around.
LikeLike
I agree that the numbers above look a little inflated. While we do do obviously have a surplus of unsold units at this time, they are moving. What is really needed is for the local governments to start spending the hugh increase in tax revenues that these condos are generating and begin the process of cleaning up front beach road. Old buildings need to come down and lots cleaned up. Sidewalks and steets rebuilt. We all know the problems that create the blighted look on Front Beach Road and need to get things moving in order to make PCB look like a place someone would want to visit. Pier Park is a fantastic start, but try to walk there. The only other improvements have been the connector roads from front beach to middle beach. I don see any improvements along Front Beach other than the new condo buildings which are private business improvements. When is the beautiful Front Beach improvement plan going to become reality?
LikeLike
For HD: the average price per square foot for a condo on the gulf today is about $291. I would estimate the value of the LTW to be around $250-$260SF.
LikeLike
Little Fish,
Check public records. To date it looks like aprox. 61 closings at Palazzo, which is less than half. Agents like to tell stories, especially here.
LikeLike
Does anyone have any information on the Tapestry park Inn Condominiums that are being pre-sold. I noticed on their website it has 0 rooms, 1 bath…what is that all about?? I am located in Blountstown not far from the beaches and plan to ride and take a look at the development. Any comments from you locals down there??
LikeLike
I’m actually searching for a realtor friend of mine’s email address and came across this thread. It will be incredibly interesting to see what is going to happen. I am completely unbiased (except for the fact that I care about people in general) I am a broke single mother and I rent property. I am not a realtor but I have been doing a market research project for a group of investors. Truthfully, I can not give them a definative answer or even come close to one. I mean… this airport is supposed to be HUGE… I can’t even describe… I know most of you know, but when you put the facts together, compare it to other places that have had airports, and listen to what is about to happen to this place, it will blow your mind. It will no longer be BFE… in a major sort of way. And then add in the facts and figures with the value of this property v. the prices, and the fact that these are the most beautiful beaches in terms of water and sand in the country…. BUT this stuff with the banks, depression, etc…. this skews it. I am not a fortune teller and am not able to crunch these numbers. Are you a gambler? If the prices had kept going the way they were, the airport would be a mess. Do you realize bc of our distance from the panama canal… NW FLorida may be considered AMerica’s Gateway to the WORLD???? We shall see. I am considering doing something with this mass of information I have gathered… I will let you know when the time comes… but it is going to be verrrry interesting. Put it this way…. if NWF does not recover, no part of America will. If you are going to invest in US real estate at all, NW FL is the ONLY real estate to look at. Lates wait until 2010 or thereabouts.
LikeLike