The Summer of 2014 is setting up to be a showdown that those wanting to see prices rise have wanted for years. This showdown will be between buyers that want to buy near prices that are in effect the lowest they were since 2001 and sellers that aren’t willing to sell for these prices. I thought this showdown where either buyers would have to pay more or sales would slow down would have happened in 2012 or 2013 and it did not. Post-boom buyers are smart, well researched and have been buying up the best deals. There have been over 1,600 sales since the start of 2011 from Cape San Blas to Mexico Beach. I was wrong in thinking that we were through the majority of short sales and foreclosures. There have been 523 properties sell since 2011 that were either listed as short sales or foreclosures. In hindsight, it’s clear that a high volume of distressed properties holds prices down. When over 500 properties are being sold at basically whatever price the market would pay in a relatively quick timeframe, it is not good for rising values even if hundreds of people a year are buying.
It looks like we are finally through the bulk of the low priced short sales and foreclosures that have held prices down. We are starting to have sellers that would like to sell, but aren’t in a position where they have to. There are only 3 homes listed as foreclosures on the RAFGC MLS with one in Mexico Beach, 2 in the Port St. Joe Area, and zero on Cape San Blas or Indian Pass. There are still 27 vacant lots listed as foreclosures. Twenty-seven is way down from where we’ve seen it over the past couple of years. The majority of these vacant lot foreclosures on the market are held by banks with rather unaggressive policies on selling their foreclosures. For example, Capital City Bank owns 9 of the 27 vacant lots. It’s amazing that all but one of their 9 foreclosures has now been listed for over 1,085 days. The number of foreclosures has been going down for a couple years and the market is very happy to see that the number of short sales is also finally down significantly. Only 14 properties are currently listed as short sales- (The number of short sales on the market was closer to 100 at times in the past few years.)
We are still finding people great deals, but it’s taking patience and even some luck at this point. The national lenders don’t use a lot of common sense with how they’ve been handling short sales. This is where I say you sometimes need both patience and luck. Short sales can take years to get approved and the seller’s banks won’t negotiate with the seller in most cases until they have found a buyer and signed a contract. This is terrible for values and forces sellers of short sales to list at aggressive prices so they can get a contract and then go negotiate with their bank. This process can take years and often the 2nd or 3rd buyer that signs a contract is the one that’s still around once the seller’s bank has approved terms. I worked with the buyers who purchased this awesome house last month for $700,000. There was a buyer that had a contract for months that didn’t close and these buyers stepped in and had a relatively short wait to close on a short sale at only 3 months. I’ve had 2 other sets of buyers find out about this sale and ask me to find them something comparable. I can’t come close to anything like this for the price at this time. This home originally sold for $1,390,000 in 08′.
The number of properties on the market has crept up from 623 last month to 629 as of March 16. A fair number of the new listings are from owners that have heard the market has improved. They are trying to sell for prices higher than properties have closed for in the past 2 years. These include a handful of sellers that bought in the last 2-3 years that are trying to sell for profit. I’ve listed 6 properties since my February market update and already have 3 of these properties under contract. Each of these sellers have contract prices that are slightly higher than they could have reasonably expected last year. I feel like we’ve had more snowbirds than normal looking to buy this year and that’s also helped the market more than it has the past couple of years. There are now 85 properties currently under contract vs the 68 properties that were under contract when I sent out my February update.
Coastal real estate prices have been on a wild and crazy ride over the last decade. A good example is of a listing I sold last month for considerably more than the sellers paid in 2009. In 2005, the vacant lot this home sits on sold for $625,000. Four years later in 2009, the 3,000 plus sq ft home that was built on it was foreclosed on and sold for $475,000. It closed on 2/28/14 for $150,000 more than it sold for in 2009, but also the same exact $625,000 the vacant lot sold for in 05′. The owners that sold it last month had made some improvements and sold it furnished with a very impressive rental history that helped justify the increase in selling price.
Another sign of improving values and a scarcity of deals is evident with the amount of backup contracts being used. I don’t think I used a backup contract from 2006 through 2010 and might have done one or two a year the past couple of years. There wasn’t a big need for backup contracts as buyers could usually find a comparable deal on a different property. A backup contract is used on a property that is already under contract with a buyer and the 2nd buyer is hoping the first one doesn’t close or defaults on their contract. We now have so few of the aggressively priced listings that backups are becoming more common. Buyers are looking for other properties and finding that in many cases they can’t get close to what some of the properties are selling for and they are willing to put in backups and are hoping the first buyers can’t close. I am currently working with 5 properties that are under contract that have active backup contracts.
It looks like there is some big relief coming to offset some of the negative outcomes that resulted from the Biggert-Waters Act. Here’s an article about the bill that the House of Representatives passed last week. http://www.miamiherald.com/2014/03/10/3985641/proposed-new-house-bill-to-refund.html
98 Real Estate Group