State of Real Estate

 The State of Northeast Florida's Beaches Area Real Estate

Making Moves | By: Kevin Waugaman

At the national level, the election is behind us.  Whether you perceive the result as good or bad, consumer confidence is now at its highest level since 2004 and interest rates have reacted in a manner that speaks well for economic strength and a good housing market into 2017.  The challenge continues to be housing supply.  Demand remains strong.


For Sellers, beware interest rate trap:

Sometimes it is important to remember the major decisions are what we call the life decisions.  We need a bigger home for our growing family.  We want to experience the lifestyle of a different neighborhood.  The kids moved out and we should look at something smaller.  We’re grandparents now and need to be closer to our family.  And of course we also have death and divorce that prompt the life decisions.  As interest rates move up, we are sometimes distracted from the life decision by that amazing rate at which we refinanced last year.  Rates are still at super-low levels to make moves that make sense.  You may begin to feel trapped in your home by your current low rate when rates move beyond 5%. 


Also, check with your Realtor® on the value of your home.  Only 37% of the US population of homeowners believe they have greater than 20% equity in their home.  The number that actually do?  A staggering 79.1%!


For Buyers, “maybe next year” is here:

The average 4th Quarter 2017 rate expectation from Fannie Mae, Freddie Mac, Mortgage Bankers Association, and National Association of Realtors is 4.43%.  Still very low, and on the climb.  If you are renting and considering signing another lease, consult with a trusted Realtor® first.  If you keep visiting our area and know you will retire here, it may be time to buy your future home and rent it out for a few years in advance while the cost of ownership is still extremely low. 


For investors, pay very close attention to your model and cap rates that make sense.  Some markets are saturated and you will want some guidance from a professional to help with current valuations and rental or improvement projections.


The local update: 

The First Coast Beaches (Ponte Vedra, Atlantic, Neptune, Jax) residential report shows a steady and consistent market year over year.  The inventory issue for our area exists in the lower price points.  The local absorption rate is still near equilibrium at an average of 5.51 months for the 6 months ended December 2016, compared to 5.07 for the same period ending December 2015.  October 2016 was an unusually high absorption because of a low number of closings relative to inventory.  The market was substantially impacted that month across all price points by both Hurricane Matthew aftermath and to a lesser extent pre-election concern.  These averages are indicated on Figure 1 with green lines.  Absorption rate is the amount of time it would take the current demand level to absorb the available supply.  6 months equals a normal market.  A number less than 6 months indicates a seller's market and greater than 6 months indicates a buyer's market.  This number will fluctuate widely based on the market price segment that is being analyzed. 


The 6 months ended December 2016 averaged 607 active Beaches residential listings.  This number is virtually even with the 604 for the same period ended December 2015.  Demand was off just a touch, averaging 110 units sold per month compared to 119 per month last year.  Again, this was due to the low number of sales in October of 67 units for the Beaches.  This does not appear to be a trend, and December sales were even with last year at 116 units. 


When looking at average price per transaction for the 6 months ended December 2016, there has been an increase compared to 2015 due to market appreciation.  In the 6 months ended December 2016, the average price for Beaches residential sales was $555,354 versus $533,433 for the same period last year, a modest 4.1% improvement.  Average days on market is 87 compared to December 2015 at 94 days, both are indicative of market strength of sales in the lower price ranges.   


Beaches home sales in the $1.0 million + segment were steady compared to the second half of 2015 thanks to a strong summer.  October through December were especially light with only 15 closings compared to 35 last year, again probably associated with Hurricane Matthew and the election.  With consumer confidence now at 2004 levels, this market segment should gain steam again in 2017. In the middle to upper segment, or $500,000 to $1.0 million, there appears to be some strengthening.  Closed sales were up 11% for the second half of 2016 compared to 2015.  This made up for some weakness in the first half of 2016. 


The greater Northeast Florida area saw pending home sales up a mere 1.5% YTD compared with 2015.  However, the absorption rate for our entire region is still extremely heated now down to 3.3 months, substantially below the market equilibrium target of 6 months.  Again this is due to low inventory, there are 20.3% fewer active listings compared to December of last year – 7,699  down from 9,668.


Figure 2


Figure 3


What now?

There is pent up seller demand as equity continues to build.  The average length of primary home ownership is pushing 9-10 years and the historical norm is 6 years (Figure 2).  As long as this inventory comes to market, 2017 should be another excellent year and a healthy market with good appreciation.  If it doesn’t, many would-be buyers could decide to rent and be subject to future mortgage rate increases (Figure 3) and continued rental rate increases – both of which will affect wealth creation.


The decision to sell or purchase real estate deserves great attention to personal objectives.  The overall market conditions noted above convey the real estate environment for our area.  It is extremely important to drill down to an even more hyperlocal level when evaluating a sale or purchase of real estate.  Make sure you consult your real estate professional for analysis on price trends in specific neighborhoods and on the property you are considering selling or buying.  This way, you can make a great decision based on your personal circumstances.


**Statistics from NEFAR MLS 1/1/2015-12/31/2016 for residential property type located in Ponte Vedra Beach, Atlantic Beach, Neptune Beach, and Jacksonville Beach.


To discuss how this information affects your property or investment goals, contact Ilona Fischer today.