Coastal Condo Market Boosted By Strong Rental Demand
By Marcia Bradford, Condo Owner Magazine, Volume 18, Issue 4 (Fall 2014)
Prices are up slightly, inventory is down in most areas, and the rental business is booming. These key factors are contributing to a stable and steady market for coastal condominium sales from Gulf Shores, Ala. to Panama City Beach, Fla., according to area real estate professionals.
“It’s an interesting market,” said Jeff Landreth, an agent and broker with LaFlorida Coastal Properties in Santa Rosa Beach, Fla. “We are seeing pockets of high activity, but on the whole, condo sales haven’t fluctuated very much in the past year. In areas where there have been some slight decreases in the number of sales, we are often seeing a slight increase in price.”
The result of this situation is that the total dollar volume of condo sales is trending upwards, Landreth said. For example, data from the Multiple Listing Service (MLS) shows 238 condo sales in the Destin area (including Sandestin) from July through September, as compared to 257 condo sales from April through June. However, the average sales price from July through September was $367,625, as compared to the average sales price of $354,890 from April through June.
Also, Carmela Bell, broker with ResortQuest Real Estate in Destin, Fla., pointed out that some areas in this region performed very well between April and June 2014, as compared to 2013.
“During the second quarter, both the median and average sales prices in Okaloosa County were 30 percent higher than 2013,” she said. “In Walton County, the median sales price was up 26 percent and the average sale price was up 28 percent. These are the highest median and average condominium sales prices in the last four years.”
Looking at all coastal areas of northwest Florida, Bell said that the average sales price for condos is up 10 percent, the median sales price up five percent, and the average price per square foot is up 12 percent as compared to last year. However, the number of sales year to date has decreased 9 percent from last year.
Alabama Market Attracts More Sellers
As of late September, Stephen Harrison, a real estate agent at RE/MAX of Gulf Shores, said his office’s volume of beach-area condo sales in Gulf Shores, Orange Beach and the Pensacola area was up by about two percent as compared to a year ago. More significantly, he added, there was an approximate 14 percent increase in the average sales price, from $298,927 to $341,777, which included closings in Phoenix West II in the early part of the year.
Signs of a strengthening market may be encouraging more sellers to list properties, he added.
“Inventory is up about 12 percent over this time last year,” Harrison said. “From January through September 2013 there were 996 units on the market, as opposed to 1,013 units for the same time period in 2014. Fortunately, the number of buyers has also increased considerably. And, we are coming off of a record tourist season.”
John Brett, a broker with Brett Robinson in Orange Beach, reported that year-to-date sales along the Alabama Gulf Coast are staying consistent with those of 2013.
Supply Tightens in Panama City Beach
Karen Smith, a broker with Beachy Beach Real Estate in Panama City Beach, said sales in her area are affected by a tightening supply, along with cautious buyers.
“Our actual volume of sales in 2014 is lower than 2013, but this is no indication of a stale market,” she said. “Rather, it is because prices are higher and the inventory is lower. There are fewer bargains, so people are not as anxious to pull the trigger.”
Smith added that limited inventory sellers tend to stand firm on pricing.
“The number of interested buyers has not gone down by any means,” she said. “However, buyers are taking longer to make decisions because the price points are higher than last year and the inventory lower. Gulf-front properties are considerably higher than the general market.”
Landreth said he has also seen a pushback on prices.
“People are sensitive to a five percent price increase, much more so than was the case prior to the recession,” he explained. “They are more cautious, which is helping keep this economic recovery on a solid foundation.”
Hot Price Points
Smith said the hot price point in Bay County is “anything under $300,000, and especially under $250,000, which is really different than last year.”
According to Bell, most condominium sales in the Destin area fall in the $250,000 to $400,000 price range. However, she added that the number of condominium sales over $1 million have increased 40 percent year over year.
In Gulf Shores, Harrison said he is seeing that the fastest sales are occurring at around the $200,000 mark.
When determining what helps one condo sell faster than another similar unit, Brett said that units priced relative to the market, with a good location and view, will always move faster. However, he added that the condition of the unit and financial status of the condo association are often key selling points, as is the overall physical condition of the building.
He further pointed out, when certain types of property are in short supply, they tend to sell faster. “For example,” he said, “there is currently a short supply of one- and two-bedroom gulf-front units for sale along the Alabama gulf coast.”
Details Make a Difference
Smith asserted that you can’t underestimate the first impression.
“The main thing that makes a condo sell, believe it or not, is the overall appeal when a buyer walks in,” she explained. “Even though it seems that it should be strictly a business decision, emotions play a huge role.
“People love to feel that their lives are different and more free when they stay on our beautiful coast,” she added. “I have seen condos that were the same price value sell for different prices, strictly due to adorable decoration and attention to what the vacationer wants when they get here. Many of our condo buyers are buying to use a little for themselves and a little for income, so they want it all.”
Harrison said buyers in his area tend to prefer condos with rich amenities and interior upgrades, such as granite counters, tile floors, and custom cabinets. While many of the newer buildings offer these aspects, owners of older units may need to renovate to match the higher standards, he added.
Access to shopping, entertainment and recreation is also important, Smith asserted.
“The majority of our buyers are gravitating to an amenity-rich building, centrally located so that they can walk to many of their activities,” she said. “We have a huge area of interest in Pier Park, which has shopping, concerts, restaurants and movie theaters. This attraction has taken Panama City Beach from a seasonal to a year-round destination. In addition, our city has become very good at marketing to a diverse crowd with year-round festivals and events.”
Bell advised that sellers be sure to post good photos of their units on Internet sites.
“Since most prospects are searching online, one of the most effective marketing tools is to have professional photography taken of the property,” she said. “A picture truly says a thousand words and people tend to view photos before they read the description. It’s that one ‘signature shot’ of a property listing that catches the eye and starts the process of dreaming of being there.”
The Value of Rental Income
While some condo buyers want a second home or family vacation spot, the majority are seeking properties that have strong rent potential, real estate professionals agreed.
“Over one-half of our customers who purchase a condominium, intend to rent their unit,” Brett said. “These individuals educate themselves about the property’s rental income and potential.”
Harrison agreed. “The rental market has always helped condo sales in this area and many purchasers base their purchase on gross rental revenue.”
According to Bell, stable, strong rental incomes are supporting increased sale prices.
“Tempted by the high rental revenue and vacation exchange opportunities, owners who never before considered renting their condominium are now putting them on the rental market,” she said.
Smith said the rental market in the Panama City Beach area is stronger than she has ever seen it, making people feel a little more comfortable about venturing into a condo adventure. “I have two condos myself that I keep rented all the time, so I, for one, want more.”
End of Year Outlook
In keeping with recent trends, realtors along the Alabama and northwest Florida gulf coast are expecting a stable fall season.
“As is usually the case, we have more real buyers in the fall and not tire kickers who are really on vacation,” Smith explained. “People tend to look in the summer and get serious in the fall.”
Bell also expects a steady number of sales this fall.
“Many serious buyers return in the fall, when it’s easier to view properties and the larger summer vacation rental incomes are not rolling in to influence a seller’s motivation,” she pointed out.
Harrison said he is expecting sales to be very good this fall, with a steady increase in sales prices.
“We live in paradise and everybody wants a piece of paradise!” he concluded.