The Daytona Beach Homes Market – The Elevator Version

Let’s say you know I am a Realtor. We are in an elevator and you ask me what’s happening in the Daytona Beach condos and homes market, here’s my quick elevator version:

“Our prices have dropped to where people are buying homes and condos in the lower price ranges, particularly under $200,000. Distressed properties from short sales and foreclosures will continue for another 2-3 years keeping prices from showing a significant rise. When distressed properties in big numbers are gone, our prices will rise. First, a short spike while people try to buy at the lowest prices and then more gradually. Much of the money to buy local homes and condos comes from outside the area from buyers of second and vacation homes. That makes the national economy more important to home and condo sales than the local economy. Any time in the next few years is a good time to get a great value. Interest rates are super low, making now probably the best time if you will be financing. Thanks for asking.”

That’s the elevator version, here’s why:

1. Distressed properties are driving prices
2. Different Price = Different Market
3. The Daytona Beach area is, Well it’s Different

Distressed Properties Drive Prices

No one has argued that foreclosures and short sales in Daytona Beach are driving home prices. Over the past several years, prices have dropped in half. While we don’t see prices dropping dramatically in the next two years, we do see short sales and foreclosures continuing through next year and into 2012. The reason is that adjustable rate mortgage loans with balloon payments or significant adjustments to monthly payments will continue to come due well into 2011. Many people will not be able to make the balloon payments or pay the higher rates. Refinancing for many of these people will be impossible. A good number will default.

Different Price = Different Market

The Daytona Beach real estate market is a fantasy. There is no one market. The biggest driver of creating different markets is price and in our area it creates many different markets. For simplicity, we are going to draw a line in the sand and create two vastly different markets.

The line is $300,000. The market under that price includes about 90% of all sales over the past several years. There are 9 sales in that price range for every sale above $300,000. In May, 80.5% of all sales were under $200,000 while 91.5% of all sales were under $300,000. So even though we drew the line at $300,000, most sales are under $200,000. The point is that the lower prices segment of the market is hot while the higher priced market is not. This is very important to understand when looking at the big picture.

The Daytona Beach Market is Different

Our market is different from other areas of Florida. We do not have a large industrial or commercial base in our economy. We are primarily a resort community. Many our owners do not receive their income in the area. They use their homes and condos as vacation or second homes. Some use them as investment properties. While almost 60% of sales in other areas were from first time home buyers, we don’t anywhere near that percentage here.

What I’ve seen is that because many of our buyers are from out of town, we were hit hard when the bubble burst in 2006. Our market also started to come back last year for exactly the same reason. Our real estate markets are out of sync with the national numbers because, well, we’re different.

As the national economy improves we will benefit more indirectly from outside buyers becoming more comfortable in buying a second or vacation home. The direct benefit from local residents buying will be much less than in Miami, Orlando, Tampa and many other cities with diversified economies.

That’s it. Leave a comment if you agree or not. If you want to discuss the market and your options, please give me a call at 386-566-7503. I sell condos and homes in Ormond Beach, Port Orange, Ponce Inlet, Palm Coast and all other Daytona Beach area communities.

Daytona Beach Homes Prices Drop 1.55% in the Past Six Months.

Median prices of Daytona Beach Homes have fallen this year, but most of the drop was in the first quarter. The drop in the second and third quarters was less than 1.6%. Yes, that’s right, in the past six months, median home prices in the Deltona-Daytona Beach-Ormond Beach metropolitan area, as recorded by the National Association of Realtors (NAR), have fallen only 1.55%.

In the latest quarter, median prices dropped 0.4%. These numbers are indicating that prices have been stabilizing. These are median distribution values (1/2 above and 1/2 below) and sold prices for similar homes may swing wildly, but these differences were present for all the time periods measured. In other words, there are bargains to be had, but the overall price drop has slowed way down.

So, what do we see happening. Well, it’s interesting. Very few who venture to forecast housing prices are willing to say that housing prices have stabilized. Indeed, most are forecasting a 10-15% drop next year. I think a good part of this is a hedging of bets. They are unwilling to go out on a limb and say prices have stabilized and will stay that way. I don’t blame them.

The Housing Price Wildcards

There are a few factors that we see as the swing factor in what will happen in 2010:

• Interest Rates
• Home Buyers Tax Credit
• More Foreclosures
• More Balloon Loans Coming Due
• The Economic Recovery

Interest rates are very low. Most forecasts have them staying that way through 2010, but watch them carefully. They can make a big difference in monthly payments.

The home buyers $8,000 tax credit is currently set to expire in June, with contract signed by April 30. Congress may extend it again, but not if signs of recovery are strong. NAR is forecasting that 2.6 million homes will be purchased using the extended credit. After that money stops chasing home purchases, we may see a dip in prices again as fewer buyers force more competition.

More foreclosures are coming and balloon payment mortgages will continue coming due through 2011. The foreclosure issues will be with us for some time. 14% of all mortgages nationwide are in financial distress, but the number in Florida is higher, about 25%. See our post Foreclosure and Delinquency Rates Rise for more details. However, we believe these issues are reflected in current prices.

Finally, the recession is officially a year old. How much longer it will last is uncertain. If the economy recovers next year, as many are forecasting, this will reflect positively on prices. If we go into a second phase of the recession, the “double dip” as it is being called, we believe that will affect home prices negatively.

What Now For Daytona Beach Home Buyers?

Most of the recent housing news has been positive. The exception is housing start which is bad for the overall economy, bad for sellers of existing homes, but good for buyers. Why? Because when builders start building again, that will mean that prices have strengthen to the point where it is profitable to build again. When builders start building in Daytona Beach, the bargains will be on their way out.

If you are considering buying Daytona Beach Condos or homes, you need to be tuned into all these factors. You can spend a lot of time reading and researching, or you can come back here regularly for more information. In either case, staying on top of market conditions is critical.

Some financial advisors are advising their clients that if you are buying for the long-term, missing the bottom by a little is not a big deal. However, if you are buying for the short-term, you need to buy at the bottom.

My advice at this point is to get into the market with considerable patience. Don’t wait until any sort of deadline is looming. Why? Because with patience and multiple offers you will get the best possible price and beat the averages. If you beat the averages, you will be in a better position in 2012 and beyond when most of the distressed properties have cleared the market.