Post Michael – 2nd Edition Market Report – Mexico Beach to Cape San Blas, FL

I hope everyone is having a good start to 2019.  Conditions continue to improve each day as we recover from Hurricane Michael.  There is a lot going on in the area and most of the news to report is rather positive.  I’m happy to share this update and will try to touch on the most common questions I’m receiving about the area and market.  This region has never been through a storm with this kind of destruction in modern times, and we’re dealing in uncharted territory since the storm.  There were many questions about how the area can move forward, and we all weren’t sure what to expect.  If the City of Mexico Beach could survive this disaster was a real question 3 months ago. We’ve seen huge improvements in Mexico Beach and don’t know all the answers about the future, but feel good about the plans moving forward at this point.  We’ve seemed to move out of the scared and uncertain phase that existed for the first month or two after the storm.  The new mindset seems to be that we understand the recovery is going to take time and a ton of effort and money, but the area will recover and probably be better and stronger than ever in a few years. The zoning and rules for Gulf County and Port St. Joe have been set, and there are no big changes on the table from the local governments.  I’ve been to each of the regular weekly city council meetings for Mexico Beach, and there are no substantial changes on the table for the final set of rules to be adopted later today.  The moratorium on new construction will be lifted and you can start building new properties on Monday. The height limits will remain in effect in all areas, and there are no proposals to allow any greater density than existed prior to the storm.  The only big change to the zoning laws made by the  Mexico Beach City Council has to do with a grandfathering provision.  If they had not passed this change, 100 plus owners (mostly older townhouses, duplexes, and condos on the beachside of Hwy 98) would not have met the 2001 codes and been allowed to rebuild.  The local municipalities do not determine flood zones because this is something done by FEMA, who is updating their flood zone maps for the whole area.  Here’s a link to see the new proposed Mexico Beach flood zones.  There were fears that “everything” would have to be built on pilings.  Everything won’t have to be built on pilings, but there will be higher elevation requirements than there were before the storm and with the new flood zones.  A few examples of the new requirements were given at one of the recent council meetings and Gulf Foods and Killer Seafood will only have to build half a foot off the ground were two examples.  Sharon’s Cafe will have be elevated 2 1/2 feet and there are areas where you previously could have built on the ground that will have to be elevated 4 to 5 feet.  

In regards to the real estate market after Michael, it’s become abundantly clear that many people want to purchase in Mexico Beach and the surrounding areas.  There’s a stronger market than I anticipated and trends are starting to shape up and give us a good idea of what to expect for 2019 and beyond.  The people wanting to purchase right now are confident the area will be better than it was before the storm, and they want to get a property before they believe prices will rise in coming years.  The destruction hasn’t been near the deterrent I thought it might be and most active buyers have a longer range vision.  With  local officials committed to keeping the small town charm in tact as much as possible, this is what most buyers hoped to see from local government.  This has comforted potential buyers that liked what was here before the storm.  Prices are holding high enough that most potential developers are realizing acquiring multiple properties at large discounts is unrealistic, and they’ve moved on.  Prices are also high enough that many looking to invest at largely reduced prices have become frustrated and moved on.  We are nothing short of busy with realistic buyers making purchases.  At one point in mid-January, 98 Real Estate had 6 properties listed in Mexico Beachbetween Hwy 98 and the beach and all are under contract or have sold.  Properties selling within a couple days have become common. There were only 25 sales so far this year in the Mexico Beach market, but things are getting much busier now with more sellers deciding to sell and more buyers confidently ready to purchase.  There are 56 properties under contract today in the Mexico Beach/St Joe Beach market.

I didn’t talk much about Port St. Joe or Cape San Blas in my last report and I’m pleased to share that these areas are on the fast track to recovery.   They were significantly damaged by Michael, but not in the magnitude that Mexico Beach and St. Joe Beach were impacted.  In Port St. Joe, the schools, hospital, grocery stores, pharmacies, hardware, auto stores, etc. received minimal damage and have been open for some time.  I believe about 80-85% of businesses are back operational.  The average resident of Port St. Joe has convenient access to the majority of services and products that they used before the storm.  They are starting to live pretty “normal” lives if their home wasn’t damaged or is repaired.  Not all properties survived and were as fortunate.  Michael’s destruction changed the future landscape of Port St. Joe.  Sunset Coastal Grill was damaged beyond repair, and Burger King is now a vacant lot.  The Shell Station is heavily damaged as well as the Exxon.  The Exxon has had new pumps installed and you can get fuel there as well as JV Gander on Garrison.  The marina received enough damage that the “rumor” is the owners (The St. Joe Company) are going to go ahead and redesign it and make a larger and nicer, with a grand re-opening approximately 2 years out.  The Baptist and Methodist churches near the water both received major damage.  The Port Inn is closed for repairs and upgrades along with Hungry Howies.  Subway is closed with no repairs underway.  I’m sure there are other businesses closed not mentioned.

The damage in Port St Joe along the bay, particularly on the east side of town was intense and many of the classic homes along the highway have had to be demolished.  The surge was also larger than anything ever seen in the town’s modern history and reached deep into the city.  A large portion of the homes located between the bay and the south side of Marvin Avenue, which is a few blocks from the bay were flooded.  Homes in these areas may look normal on the outside, but entire neighborhoods flooded.  The homes have had to be gutted and reconstructed on the interiors.  I’ll often show homes in Port St. Joe and all of the choices are gutted down the to the studs.  These flooded homes that sellers are selling “as is” have created an interesting new market and turnover.  Here’s a link to the 43 flood damaged homes in Port St. Joe that are on the market or have sold since the storm.

My point here is that despite the destruction in Port St. Joe, it is doing great, and it’s night and day from nearby Mexico Beach.  You can park on Reid Avenue in Port St. Joe and choose from 10 different restaurants to walk to that are open for lunch.   When I’m showing someone property that’s looking in both areas, they can’t believe the difference from Port St. Joe to Mexico Beach/ St. Joe Beach.  It is also great that Mexico Beach/ St. Joe Beach residents have access to Port St. Joe and all of these services just 10-15 miles away.  I hear often Mexico Beach residents talking about being thankful the storm didn’t damage Port St. Joe like it did the beaches.  The recovery would be much harder and more difficult if Port St. Joe was in the same shape as Mexico Beach and St. Joe Beach.

The Cape San Blas and Indian Pass Area is comprised of a much higher percentage of 2nd homes and rental homes compared to Port St. Joe. This area also has the most newer and elevated construction,  which fared well in the storm.  You can tour some of the newer neighborhoods and see very minimal signs of damage.  That’s not to say there weren’t major casualties from the storm, and the North end saw same particular devastation with the Cape Shoals townhouses being washed/blown away as an example.  The South Cape saw less damage and Indian Pass did pretty well in regards to wind damage, but had huge areas flooded.  These Cape markets seemed to take a deep breath and pause with little buyer interest after the storm, but are now getting back to where they were October 9th.  The Trading Post, Scallop Cove, and Indian Pass General Store have all been open, but 3 restaurants are still closed.  Tripletails received significant damage, and The Raw Bar had extreme flooding.   St. Joe Shrimp in Simmon’s Bayou was wiped out and Conehead’s is still closed.  It seems the majority of the residential properties were much luckier than the handful of commercial properties in these areas.  The Scallop Republic fared well and is open for a cold beer and good music.  The Sandbucket restaurant is also back open.  The T. H. Stone State Park reopened in mid-January.

The owners and rental companies for the Cape that I’ve talked to say spring and summer rentals look strong for the homes that are rental ready.  Many guests that stayed in Mexico Beach are booking the Cape this year, and the few vacation rental homes on the rental market in Mexico Beach have reported they are set for very strong summers as well.  The beach is on track to be completely cleaned in Mexico Beach by the end of March and the canal looks like it will be open by later in the Spring.  Many of the guests are booking this year and telling their rental companies they really want to help and support the local economies this year, and they are fine with fewer commercial options being available.  I’m somewhat surprised with the demand to vacation in Mexico Beach this year, but the guests want to help out however they can.  I’ve heard a few say that they came to Mexico Beach for the beach and the fishing and both of those will be same as they were before, but they’ll have less competition with other guests for their favorite fishing spots. Canal front properties remain in high demand with the lowest sale to date a $235K home that will most likely be demolished.

Insurance is one of the hottest topics in the area and is a big factor shaping up the post hurricane market.  Many of the sellers with destroyed or flooded homes are far from desperate and unhappy owners that buyers seem to picture in their minds.  A majority of the sellers so far have actually been in an opposite situation. Due to their insurance payouts and current vacant lot/flooded home prices, they are pleased as they are getting far more between insurance and their current values than they could have sold for pre-hurricane.  A few common examples are flooded homes in Port St. Joe and completely destroyed beachside homes in Mexico Beach.  Let’s take a Port St. Joe home that was worth $250K before Michael that flooded and had some additional wind damage as our first example.  This owner had flood insurance with a $150,000 payout and then a homeowners payout of another $40,000 for their damaged roof, windows and fence.  They then sell for $120K “as is” and walk away with $95K more than they could have received before the storm. The buyer is also very happy as they paid $120K for a home they can remodel for $80K and then be in a $250K house for around $200K.  Certainly many of these owners don’t want to leave their homes, and the ones doing well with insurance are upgrading their homes and will have a nicer home than they had before the storm with funds left over after their remodels are complete.  In Mexico Beach, we are seeing a number of sellers on the beachside where their homes were completely destroyed.  An average older single family home in this area could have sold for $350-$400K.  I’m seeing owners in this situation receive $300K in insurance and then sell their lots for $225K, which results in quite a bit more than they could have sold for pre-storm. This has been an active market with 5 sold and 7 currently listed with 6 under contract.  In recent years, buyers would only see 2 or 3 of these type of lots listed each year.

Dealing with insurance and losing your home is not a fun process. I hope we never see anything like Michael again, but I wanted to share that there are some sellers saying they will be better off financially due to the storm and it’s not all bankruptcies and financial misery because of the storm.  There’s a huge misconception about the current market.  I receive at least 10 calls a week that start the same way with potential buyers saying, “I don’t want to take advantage of the situation down there, but I know there are lots of desperate sellers that have to sell, and I’d like to buy a massively discounted property.”  I then explain that’s not what’s happening and many callers get upset and think we are lying as they are sure they should be able to buy a “cheap”, distressed property.

By no means is everyone with damaged properties making money or improving their financial situation due to insurance.  I gave the above example because one of the questions I’m asked almost everyday by buyers is who are these sellers and why are they selling.  In many cases, they are selling for positive reasons and are upgrading or moving to a different location 3 blocks away they always liked more and others always wanted to build a new home and are going that route.  Some 2nd home owners are certainly “cashing out” and are going to take a break from the market.  Our lack of available rental housing has caused many full time residents to have to move to areas like Tallahassee as it was the closest place they could find a decent home to rent while they rebuild.  I’ve taken a few phone calls I haven’t liked recently as I hear they’ve decided they like the area where they are renting and don’t plan to return.  I hate to see good residents not planning to move back.

Another question I get asked a lot is do you have to have insurance on a home?  The answer is no.  If you pay cash for a home, no one makes you get insurance.  If you get a loan, your lender requires homeowner’s insurance and only requires flood insurance which is a completely separate policy if you are in a flood zone.  Most people here had some kind of insurance on their homes with the huge majority having some kind of homeowner’s/wind policy.  What many people (including myself) did not have was flood insurance.  The massive storm surge caused deep flooding in areas that have never come close to having flood waters.  Flooded homes that didn’t have flood insurance is where I’m seeing owners face big losses.  I’m also seeing most owners in this situation not selling at this point.  This is also where there are huge fights with insurance companies as they try to determine was the damage caused by flood or wind.  I didn’t know what a public adjuster was on October 9th and now almost everyone with damaged homes has hired one or an attorney to help with their insurance claims.  The new storm lingo has moved from talking about your debris pile to talks about your adjuster/attorney.  The huge discrepancies in what owners are being paid with insurance claims will be an ongoing topic throughout 2019.   Those owners that are getting near full payouts are then able to have options in regards to their next steps, and their choices are influencing the future market.  We are also seeing a considerable number of owners with damaged homes close to the water choosing to move slightly further away from the coast inland a mile or so to areas that weren’t damaged or had minimal damage.  We’re seeing this shift quite a bit with Port St. Joe residents.

“What are properties selling for in the Mexico Beach area compared to before the storm?”  That is the question I’m asked most often.  We did not have damaged homes before the storm, so all I can really compare accurately is vacant lots and undamaged homes.  I’m seeing vacant lots sell on average within 10% of their pre-hurricane values.  So far buyers have been happy with the slight discount and things are selling quickly if priced in these ranges. The average vacant beachside lot priced in the mid $200’s is lasting less than a week on the market.  The first beachfront lot since the storm to hit the market in Mexico Beach was a 100 foot lot listed on 1/18 for $649K.  It was quickly under contract by 1/21, and it will be an interesting barometer to see where beachfront values settle. There are a few more beachfront lots listed in SJB including this permitted lot at $479K, which is the lowest priced beachfront lot on the market (this lot has gone under contract while writing this report).  There haven’t been many undamaged homes in Mexico Beach or Port St. Joe that owners wanted to sell, but those that have sold are seeing similar values to pre-storm or even a slight premium.  This is true for undamaged homes particularly in the $300K or less range as the buyer is probably someone with a destroyed home that is buying a new home with their insurance settlement.  The Mexico Beach City council did make some LDR changes that are going to allow everyone that had a home here before the storm to be able to rebuild by being grandfathered in even if there lot sizes aren’t big enough for the current LDR codes.  This is very helpful to owners of many of the beachside townhouses that were destroyed.  This grandfathering provision has created a new market for partial lots/townhouses parcels for owners that don’t want to rebuild.  There’s been these 4 listed so far.  I expect quite a few more.

Who is a good contractor to help with my remodel?  I’m asked this almost daily and don’t have a good answer.  The larger contractors I’m used to working with have been booked for months and are trying to stick to new construction vs. remodels, which is what their businesses focused on before the storm.  New construction was already very busy before the storm, and now you’ve got all of the owners with destroyed homes now planning to rebuild as well.  Very few lot owners planning to build prior to the storm have changed their minds about moving forward with their builds.  Part of this reason is construction is so busy that they don’t want to lose their spot in line with their contractors.   I’d guess  we had 10-15 stable contractors that worked in the area before the storm.  We could use another 30 or so for the next year or two to get all the work done that owners want done.  About the same goes for electricians, drywall companies, carpenters, handymen, window companies, etc.

What’s all this talk about new developments in Mexico Beach?  There are two developments that have each been in the works prior to the storm that are going to grow Mexico Beach to the north and to the west if they come to fruition.  Neither of these have anything to do with developers buying up distressed properties, and the owners have both owned them for decades.  I have an 87 acre tract listed that’s been under contract since June 22, 2018.  These developers want to do a canal front development on this property and are in the early permitting stages.  The St. Joe Company owns 1,000 plus acres that border the rest of what is currently developed in Mexico Beach including an approximately 200 acre section to the west of town bordering the new boat ramp.  Their CEO did attend the December 13th Mexico Beach City Council meeting where he announced the company plansto move forward with developing this property into a new “residential and retail village.” The St. Joe Company also owns the property directly to the west of the Mexico Beach canal where a development known as Bonfire Beach was approved in 2007, but they’ve yet to break ground and no plans for this were mentioned. The St. Joe Company has been bullish on development since the storm and are developing approximately just under 100 additional lots in WindMark Beach to sell to DR Horton who has had good success selling their homes in WindMark.  The storm did further help them as they have brand new homes ready for new owners, and these are some of the few options like this that exist near Mexico Beach.

I hope conditions continue to improve as much by my next report as they have since my last report.  If there is anything I can do to help in the meantime, please let me know.

Take care,

Zach Childs
Broker/Owner- 98 Real Estate Group
#1 Producing Real Estate Company Located in Mexico Beach- 2013, 2014, 2015, & 2016

[email protected]