I received an inquiry tonight from a student, Sallie, studying real estate in Texas. She had an assignment to talk with a Florida Realtor and ask for a comparision between our market two years ago and our market today, as well as what we thought the future would hold. I thought I would post my answer to Sallie here.
Sallie - Thank you for your inquiry. The answers to your questions are complicated. Here is my best shot:
Although I am licensed in Florida, Alabama and Mississippi and sell in all three states, my primary market is the Pensacola Bay area (or the Panhandle) of Florida. There are differences in all three markets and you said you needed an answer from a Florida Realtor so I will answer your question for the Pensacola Bay area.
In September 2004, hurricane Ivan hit the Panhandle of Florida. At that time we had a very active buyer's market with two years of rapid appreciation (double digits for our beach and waterfront properties). Hurricane Ivan was a devastating hurricane which affected most of my primary market area, but beach and waterfront properties were especially hard hit. For example, it is estimated that approximately 70% of the single family homes on Pensacola Beach were uninhabitable following the hurricane. This had a dramatic impact on our market as most Realtors with listings saw them go at or above asking price within six weeks of the hurricane. People who had lost homes and were in the position to buy homes did so as there was little rental inventory and they knew rebuilding would be a slow and tedious process.
2005 year's end saw an average of 5.5 months of inventory on the market. The average list price was $207,879 and the average sales price was $202,295. Contractors were few and far between and recovery was slow. Many people had difficulty collecting from their insurance companies as Florida was hit by five major hurricanes in 2004. To make matters worse, Hurricane Dennis slammed the Pensacola Bay area in July of 2005, damaging many of the homes that were being repaired from Hurricane Ivan.
In 2006 we saw more inventory come on the market. By year's end the inventory had risen to 11.83 months with an average list price of $212,478 and an average sales price of $204,161. There were many factors leading to this inventory jump. Insurance rates increased dramatically, especially for those with waterfront and coastal flood plain properties. At the same time property taxes increased reflecting the escalating sales prices which began in late 2002, and the additional costs borne by Florida counties related to hurricane clean up.
By January of 2007 we were firmly in a buyer's market in Northwest Florida. Condominiums on Pensacola Beach are down as much as 35% from their highs of late summer 2004. We currently have 14.29 months of inventory. Of interest is that our average list price is holding steady at $212,200, and the average sales price of $204,507 is just slightly above the 2006 year end figure. In addition to the hurricane woes, people are nervous about the overall economy, the war and the stock market fluctuations.
While I wish I had a crystal ball, in truth I don't. My best guess is that the Florida legislature will be forced to get serious about both insurance reform and property tax reduction. These things move slowly, so I don't look for an immediate recovery in our area. However, Florida has long been a retirement Mecca and if Northwest Florida dodges additional hurricanes, we should see continued growth based on demographic trends which show the baby boomer retirement peak coming in approximately 2012. In a recent article in the Pensacola News Journal, Rick Harper, PHD, Director of the Haas Business Center at the University of West Florida, said that these demographic trends would "trump" the negatives in the marketplace in the near future. We are starting to see the "smart money" - early investors - cherry picking the beach and waterfront properties that are now undervalued. What that tells me is that there has never been a better time to buy in Northwest Florida!
Best of luck with your class!
