Clerk of Court Gail Wadsworth had news for county commissioners last week: “Recording is relatively flat,” Wadsworth said of her recording fees—for deeds, mortgages, and other indicators of real estate activity. “It is not doing what you think all of the projections for the real estate market are—that we’re on an upturn. We haven’t seen that.” Couple that with what Property Appraiser Jay Gardner has been telling politicians around the county: property values haven’t stopped dropping. They may not drop by double digits again come next year, but they’ve been dropping, so the budget outlook will be nearly as bleak next summer as it’s been this one.
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And builders aren’t seeing renewed activity, with permits for new homes mired in the 10 to 12 per month. “We’ve been stuck there for about at last two years, and our biggest obstacle is appraisal and availability of credit,” says Jason DeLorenzo, government affairs director for the Flagler Home Builders Association (and a candidate for Palm Coast City Council).
Last month the Washington Post used Palm Coast for the second time in 11 months to illustrate the rut of Florida’s economy, and the dismal state of its real estate economy, dragged in large part by a 13.8 percent unemployment rate. “Past economic troughs may have been characterized by old cities with idled assembly lines and abandoned factories,” the Post’s Michael Fletcher wrote. “This one is defined by places such as Flagler where half-built subdivisions have little hope of ever being filled and thousands of carpenters, landscapers, mortgage brokers, furniture salespeople and interior designers thrown out of work have little hope of regaining their jobs.”
Toby Tobin, the local real estate consultant and columnist and GoToby’s publisher, was one of the voices in the Post article, calling Flagler “the poster child for what went right and what wrong in the economy,” though Tobin then and now is more upbeat about Flagler County’s real estate outlook, as is Matthew Wilson, a real estate broker with Flagler Beach’s Coquina Real Estate and Construction.
“There is increased activity, increased sales,” Wilson says, but while volume is up, it’s at reduced prices, and “a phenomenal number of people have been paying cash.” That’s not an exaggeration. In 2009, according to Multiple Listing Service numbers (MLS) Wilson tracks, there were on average 120 residential home sales per month, 31 percent of them for cash. In 2010, there were 122 sales per month, 47 percent of them for cash. So far this year, there’s been 137 transactions per month, 54 percent of them for cash.
In 2006, there were 400 to 500 transactions a month.
The downturn’s effect, even with an uptick in transactions, is twofold. With fewer transactions, there’s less outright economic activity. But with cash transactions now accounting for more than half the sales, it also means that a slew of collateral vendors are not involved—appraisers, inspectors, mortgage brokers, insurers, and of course banks. “All those people have to be paid, so there’s a smaller economic footprint,” Wilson said. “Alternately, it’s property moving and new home buyers tend to spend money to improve property,” so they’ll hire more electricians or plumbers or painters.
But the collateral loss of trades is reflected in the Homebuilders Association’s membership, which is not made up exclusively of builders or contractors but title companies, home inspectors, roofers, framers, insurers and even banks. The association’s membership peaked at 430 in 2006, at the height of the housing bubble. The membership has fallen by more than half, to 190, where it’s been fluctuating to about 200 for the past two years. A more healthy number that would indicate a relatively normal market would be in the 250 range, DeLorenzo says.
But even he’s optimistic. He cites the latest research by the University of Florida’s Bureau of Economic and Business Research projecting significant population increases for Flagler County. The bureau’s low-end projections sees Flagler’s population increasing from 91,000 today to 109,000 in 2015, to 130,000 in 2025, and leveling off at 140,000 in 2035. The high-end projection sees the county’s population soaring to 300,000 by 2040. Either way, that means a lot more houses needed, even with today’s very pronounced glut.
“We’re going to have a housing shortage at some point in time, but people have to be working to afford houses, so the overall economy has to improve,” DeLorenzo says.
That’s not happening. Joblessness is on the way up again nationally, even as it has crept down, barely, in Florida. In Flagler County, the unemployment rate has fallen more because the labor pool has shrunk than because people have found jobs, especially in-county jobs, which remain scarce. The slog back from the Great Recession is taking longer than any recession since the Great Depression.
“I just turned 68 I may never see another glory day,” Tobin says of Flagler’s housing boom. “That was totally out of character, although this whole slump is one that hasn’t been seen since people have been watching. Housing reportedly went down more in this recession than it did in the Great Depression, in price. We lost more percentage value, and this is a once in a lifetime event for most of us. Most recessions last about 18 months. The housing market is what led the country out of its past recessions, and it’s not doing that, for a lot of reasons.”
But it’s doing something: The inventory of single-family houses available for sale through the MLS in Flagler County dropped below 1,100 for the first time in several years, with a decline of 100 just in the past month. During the worst part of the slump, it was at 2,600. Pending sales are trending up, too, Tobin says, from 400 month after month to 518 in the last month.
“The third thing—and this is an important number that doesn’t get a lot o attention,” Tobin says, “it’s days on market. That number is dropping. These are all positive signs, they’re signs that at current price levels, there’s plenty of demand.”
In 2009, a house has an average stay of 219 days on the market. That went down to 209 last year. So far this year it’s at 188.
None of this adds up to a healthy market yet, and what constitutes a healthy market is itself subject to interpretation. In addition, the foreclosure ratio in June in Flagler was the worst in all of Florida, with 259 homes going into foreclosure (up from 82 in May) and one in 191 homes in foreclosure in the county. But it’s no longer Armageddon, either.
“I do believe that real estate and tourism will be the two driving forces of the Florida economy. Florida will grow,” Tobin said. “And I think Flagler will tend to lead that growth in percentage terms. We’re not always going to be number one like it was before in the country, but the quality of life is really good here.”
When will that happen? “Signs of it will become more apparent in the second half of this year. I think it will be fairly obvious that we’ll be headed back to a normal environment in 2012,” Tobin predicts. “Some people will start agreeing with me by the end of this year. Many more will by sometime next year. There are still several people who do not agree with my assessment of the market right now, these are people even in the industry, but Realtors are by and large much more positive now.”