May 2007 Market Update
Is a general overview of the Panama City Beach Real Estate Market what you really want?
By Christopher Arnold
Published May 18,2007
It seems that every other day we get an update on the “Panama City Beach Real Estate Market”. Someone makes a judgment on the overall market from their 10,000 foot view. Another person looks at the number of active condo listings and says the market is saturated. If you are looking for the easy answer to a very complicated question, feel free to go with those assumptions. If not, grab a snicker bar because you’re going to be here for a while.
It amazes me that no one is reporting the clear market segmentation we have been seeing over the past six months. We are seeing clear distinctions between new and older Panama City Beach condos for sale. The market is further segmenting between new condominiums with strong amenities and new condominiums without strong amenities. If you look closer you can clearly see the preconstruction condominiums that are now being completed and how they are affecting the market. It is these preconstruction condominiums from years ago that are showing strong resale activity.
There are several preconstruction condominiums that are finishing construction. When this happens all of the contract holders need to close on their units. Several of the condominiums that have just finished construction went under contract two, three and even four years ago. Many of their contract prices were well below the current market prices. They went under contract before we saw drastic increases in land cost and commodities pricing. Some of those individuals never intended to close. They wanted to flip their contracts and make a nice profit. These same individuals appear to be willing to sell their units at or close to the price they have a contract for. This is one of the reasons you see so much activity and price fluctuation as the properties switch from preconstruction to owner occupied.
We have recently seen individuals purchase brand new 1 bedroom condominiums in the very low to mid 200’s. We have seen 2 bedrooms in the mid to low 300’s. Every one appears to be solely focusing on square foot prices alone and I believe they are missing the boat. I am not saying that people shouldn’t look at per square foot prices, but if that is your only indicator you haven’t begun to scratch the surface.
The interesting part is that this is only the first quarter in a four quarter game. The first thing to realize is that there are good preconstruction projects and bad ones. A good or bad project has nothing to do with the building, the developer, the construction, etc. It solely has to do with the price at which the individuals are contracted to close. These prices range from strongly below market value (as they should be) to drastically above market value. Several of the properties that have switched from preconstruction to owner occupied this year were below market value to strongly below market value. Many of these were due to construction delays on the developer’s part. The result was a nice supply of buyers happy to purchase resales near the prices these individuals were originally contracted at.
As we move forward to the end of this year and into 2008 this is unlikely to be the case. The prices that some of these individuals are contracted at is not significantly below market. In some cases it may be significantly above. Contrary to popular belief, this is not the result of big bad developers taking advantage of individual buyers. There was no way the developers could have forecasted all of the things that have happened over the past few years. Rather than seeing the strong year over year appreciation continue, we had a market correction caused by many factors. This correction has left several of the preconstruction projects to come in an interesting circumstance when it comes time to switch from preconstruction to owner occupied. That will be the second quarter in what I believe to be a four quarter correction.
In summary, you may want to focus more on the individual condominium rather than the general market when shopping. At the same time, you should not feel pushed into purchasing something you aren’t ready for. You can find the best deal in the world, but if you can’t afford to furnish it and make the payments it can easily come back to haunt you. On the other hand I honestly believe we are seeing some activity that clearly shows the bottom of the market at some condominiums and some of the individuals buying now are getting some phenomenal values. Keep in mind that developers will never be able to build condominiums for the prices they sold for only a few years ago. Construction costs and land cost made sure of that.
Disclamer:
All opinions expressed by Christopher Arnold on this website are solely Chris’s opinions and do not reflect the opinions of Prudential, Prudential Shimmering Sands or their or affiliates. Chris’s opinions are based upon information he considers reliable, but neither Prudential, Prudential Shimmering Sands nor its affiliates and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such. Chris’s statements and opinions are subject to change without notice. No part of Chris’s compensation from Prudential Shimmering Sands is related to the specific opinions he expresses. Past performance is not indicative of future results. Neither Christopher nor Prudential Shimmering Sands guarantees any specific outcome. You should be aware of the real risk that property values can and do fluctuate both up and down following the purchase of a property. Properties values may go down in value once purchased. You must make an independent decision regarding the real estate market and your purchases of real estate. Before using any information contained on this site, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from other professionals that may be relevant in your decision making process.
