- April 24, 2024
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Until recently, the Palm Coast and Flagler County housing market followed a pattern of increasing sales, declining inventories and stagnant pricing. This pattern has no precedent in history because the underlying market conditions had never existed before. What makes the recent housing market so unusual?
From January 2006 to January 2012, local home prices dropped at least 50%. Flagler County and Palm Coast were just coming off two years as the highest growth county/city in the nation. That growth brought with it a surge in new home construction at prices inflated by the rising housing bubble and its lax lending standards. The result was a lopsided proportion of over-priced homes.
That’s why our market became the poster child of the real estate bubble. That’s why the Washington Post chose to feature Palm Coast in a Sunday June 6, 2011, front-page article.
Homeowners facing negative equity had few options. Those with sufficient income or cash reserves maintained their credit rating by continuing to make mortgage payments on a declining-value asset.
Those who sold their underwater home brought a check to the closing table to cover the negative equity.
Foreclosure, short sale, bankruptcy or deed-in-lieu remained as the only options for those with no reserves. The result was a flood of distressed sales (bank-owned properties and short sales).
Even as the number of homes sold increased from 2008, distressed properties continued to depress prices and affect appraisal comps. Meanwhile lenders’ over-corrected underwriting standards and appraisal guidelines made borrowing more difficult while the number of underwater owners limited the buyer pool.
But a new pattern is emerging. Distressed sales are declining overall. While bank-owned sales have remained relatively steady, short sales are down. The percentage of sales for cash is on the rise, driven by investors. Investors prefer quick closing lender-owned sales to the uncertainty and delays inherent in short sales.
Today’s investors differ from the speculator/investors that fed the bubble. They are using cash rather than easy credit. They have a defined plan with an exit strategy. Most are picking up carefully researched bargains from among the distressed housing inventory. Then they rehab the homes as needed with new appliances, fresh paint, new flooring, upgraded cabinets or fresh landscaping.
Investors are playing an integral and vital role in the local housing recovery by replacing rundown low-priced comp-depressing eyesores with good clean inventory, raising the value of the target property as well as the value of surrounding homes.
| Year | Homes sold | Short Sales | Lender-owned | Depressed | Cash |
|---|---|---|---|---|---|
| 2010 | 1439 | 37.50% | 16.20% | 53.60% | 47.00% |
| 2011 | 1633 | 29.10% | 23.70% | 52.80% | 53.00% |
| 2012 | 2027 | 24.70% | 23.90% | 48.60% | 52.90% |
| 2013 to date | 405 | 19.50% | 21.50% | 41.00% | 57.80% |
| Source: Flagler MLS |
