Best March in six years

Palm Coast Observer
Opinion

Flagler’s real estate market has turned a corner. There were 172 single-family homes reported sold via Multiple Listing Service in the county during March. That’s the most homes sold in March since 2005. It represents a 20.3% increase from February and a 44.5% increase from March one year ago.

There are only 885 MLS single-family home listings in Flagler County. At March prices and selling rate, that represents only 5.1 months of inventory — well within the range industry analysts consider a “normal” market. The low end of the market is dominating. Only 211 of the listed homes are priced under $125,000, yet 98 homes in that segment sold in March; an absorption rate of 2.2.

Distressed and cash sales continue to comprise roughly half of all home transactions. Eighty-six were distressed sales — either lender-owned via foreclosure or deed in lieu or short sales. That and unavailability of credit are holding prices down. Fully 51% of the sales were reported as cash transactions.

This is an unprecedented market. Traditional analytical tools were meant to measure market behaviors that no longer exist, so we resort to reading tea leaves, looking for nuggets among data.

Median prices have stabilized, but have yet to begin to rise. But there are pockets within the market showing strong signs. Lender-owned properties are now typically receiving multiple offers with winning offers above listing price.

Agents and brokers tell me they are unusually busy with active clients, but fret that they are working twice as hard for half the reward. Commissions are halved by lower transaction values. Distressed properties require more intensive documentation and nurturing. Still, many of them fail to close, and brokers are only compensated at closing.

Investors have definitely entered the market. Not too many months ago, I documented sales at prices less than half the most recent sale which typically occurred between 2004 and 2007. Recently, I’ve noticed an increase in the number of flipped transactions. Investors are selectively acquiring distressed properties that need a little tender care, making a small additional investment and then reselling the homes.

Investors are also buying single-family homes and renting them. It makes sense that single-family home rentals are in demand. Those who recently went through a foreclosure or short sales will be unable to buy for some time, swelling demand for quality rentals.

Flagler and Volusia home builders recently completed their respective 2012 Parades of Homes. Both groups report more sales and potential buyers than in recent years. The mood is shifting. There is more optimism in the air — the kind of optimism that is necessary for a healthy housing market.