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2007 Where Are We Now. Reflecting on The Year's Gulf Coast Market

By
Real Estate Agent with RE/MAX of Orange Beach

 

2007 Where Are They Now?

By Peyton Posey
In March, Condo Owner spoke with Dr. Semoon Chang, professor of economics and director of the Center for Business and Economic Research at the University of South Alabama in Mobile, and asked his opinion on the current status of the market on the gulf coast. Now, eight months later, we wanted Chang's take on the market today and what he believes will happen down the road.

"The absence of major hurricanes this season is undoubtedly going to be good for the area, but unfortunately, some things have remained the same. I still think it's a buyers' market. What I said [in the spring] still holds true: yes, sales are slow, but people need to be patient and let the market return slowly," Chang said.

In terms of the inventory of condo units, the Baldwin County Association of Realtors' MLS data lists the available number of units as of Nov. 1 on the market to be 879 units in Gulf Shores (south of Intracoastal Waterway), 1,195 units in Orange Beach, 193 units in Fort Morgan and 167 units in Perdido Key.

Tinsley Myrick, broker associate with RE/MAX of Orange Beach, provided a breakdown of this inventory from her MLS data search, which showed gulf-front-only property for Gulf Shores, Orange Beach and Fort Morgan combined to be 923 units currently on the market.

Condo UnitsIn terms of condominium sales volume, Pensacola-based Metro Market Trends (MMT) reports that for Baldwin County, $823 million in real estate was sold in the first three quarters of 2006. In the first three quarters of 2007, MMT reports $783 million in sales, resulting in a 4.9 percent decrease.

As for units sold in the first three quarters of 2006, MMT reports 2,032 sold in Baldwin County, with 1,822 sold in the first three quarters of 2007, resulting in a 10.3 percent decrease. Of those sold, Myrick said 212 were listed as gulf-front, according to her MLS data.

When analyzing this data to reach the average price per unit, the average price in September 2006 was $405,019, while it rose slightly for September 2007 to $429,747. Myrick attributes this to sellers increasing listing prices in hopes of gaining back a return on the investment and the increase in newly constructed units with upscale amenities and buildings that are more structurally sound.

Over on the Mississippi Gulf Coast, the exact number of units on the market from MLS data was unavailable, but according to Real Estate Broker Linda Beaton of Prudential Gardner, more than 1,500 units are scheduled for construction within at least five new developments.

Shifting gears from the real estate market to tourism, one major change, Chang said, was the boom in the rental market. "We saw a big resurgence in the tourism industry and a record number of visitors. I think this is because renters can come down and enjoy the area without the financial responsibility of being an owner. They don't have to worry about association dues, insurance or property taxes."

This boom can be attributed to the lack of destructive storms this season, he said. "The people who may have stayed away are coming back, bringing in more dollars for the county," Chang said.

Mike Foster, director of communications for the Alabama Gulf Coast Convention and Visitors Bureau (CVB) can produce encouraging numbers, indicating the tourism market is indeed experiencing a tremendous boom from the past several years. "Taxable lodging revenues are up more than 20 percent as of September compared to last year, resulting in $204 million through the end of August," he said.

These revenues were spent by visitors renting the 14,805 units available in the area, Foster said, which totals more units than other cities such as Charleston, S.C., and Daytona Beach, Fla. Even with the increase in inventory, he said the occupancy rate was up 4 percent from last year. "We also know that all visitors aren't potential owners, but most owners were probably at one time visitors. Although we [at the CVB] are in the tourism, not real estate, business, we hope the record numbers will drive the real estate market to grow in the coming year."

So what does this mean for buyers? What does this mean for sellers? Chang said that each one is looking for something different to gain from the real estate deal.

"Some sellers need to look at the buying price and lower it in order to attract buyers. There are owners who got into the market at, say, a price of $300,000 (for the unit) and may be asking $500,000. They will have to realize if they really want to sell it, then they may have to lower it to $400,000. There is still a profit to be made," he said.

As for buyers not attracted by the high pre-construction prices, Chang said developers will often not come off the asking price but instead add amenities to the package. "This trend can attract buyers looking for more than just a unit, people who are looking for the whole resort package."

Condo SalesChang said people willing to invest in the condo market must also consider other financial factors. "You have to calculate not only the buying price but also the cost of insurance, association dues, other monthly expenses and see what you can afford. It's not only listing prices that may be dissuading buyers. But if these things factor into your budget, then now is as good a time as any to buy. I don't see it getting worse, I only see it getting better."

Myrick agreed with Chang on many accounts, and said while the market is not great, it's not bad either. "From a seller's perspective, the inventory is high. Serious sellers need to get their unit well priced by looking at what's selling, especially in their own building. If there are 10 units priced below yours, with the same floor plan, then you need to reconsider your pricing," she said.

Myrick said some sellers are hesitant to lower their price but insisted that buyers are out there and that price is one of the first things to lure them into a unit. "We are not going to see the (high) figures of 2005, but there is still a profit to be made," she said.

From a buyer's perspective, the time is now to invest in coastal real estate, Myrick said. "There is a large inventory, so that's makes finding the exact unit desired, with all the amenities, much easier. There are great deals to be had."

Overall, Myrick said, "Down on the coast, things are looking better than ever from the streets, to the businesses, to the condo buildings, which all have recovered well and have a great appearance. Even the dunes are building up again. The market is going to recover; that's how things work-in a cycle. There is a lot going on in terms of buying and selling, and, personally I think it's on a positive up turn."

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