What’s going on in Real Estate?

There has been a lot of discussion recently regarding the status of Real Estate in the Greater Daytona Beach Area. Last month and for several previous, the question was “When is this market going to slow down?” More recently, the question has been “Are we in the midst of a slowdown?”

The answer to the first question is intricately linked to the answer to the second. The first thing to recognize is that the market has recently experienced a decrease in transactions in the Daytona Beach Area. Interestingly, Palm Coast and Flagler County in general has not experienced the same decline. We’ll touch on that later.

In the Daytona Beach Area, the result of the decrease in sales is that there have been fewer transactions and the same number of homes coming onto the market. With the same input and reduced output, we are left with more houses listed than we have had in the recent past. Refer to the graph (Figure A) below for a quick diagram.

Figure A

So then, what are the implications for the average person who is considering selling their home? The answer is more complicated that you might imagine. Obviously, with more houses on the market there will be more competition to sell your home. Given that, and assuming that the trend will continue for a short while, people who are thinking about selling should probably move quickly. Further, those who already have a home on the market should discuss their marketing plans with their agents but be prepared to wait a little longer than previously.

If you are looking to buy a house in this market for investment or for personal use, there is a larger selection today than there has been in some time. Now would be a good time to thoroughly review the inventory to find the right fit. You can review property on the Internet (http://www.daytonare.com) and talk to an agent quickly when you have a feel for what you are looking for. An agent can search all of the existing properties as well as establish a search that will e-mail you when new properties that match your criteria come on the market.

Let’s explore the underlying factors contributing to this slow down and try to answer the question of how long it will last. There have been a number of theories put forth for this setback in our skyrocketing market. I think there are three: hurricanes, fuel prices, and seasonality. Let me explain. While we haven’t really been hit hard by a hurricane this year, we did have three last year. Many people who would likely be investors in our area watched their TVs while they saw Katrina attack New Orleans in late August. Even though there was little effect on our area, the graphics of homes underwater in New Orleans that we see in the media and the possibilities that something similar could happen here can be concerning to those less familiar with the traditional lack of activity in this area.

The second reason for the decline is related to increased fuel prices. Let’s face it, Daytona Beach is a driving community which derives much of its tourism industry from surrounding states. People drive into Daytona Beach to spend money. That traffic has likely been impacted by the increased cost of gas that has affected everyone. One example of this decrease was obvious just weeks ago in our Daytona Beach Biketoberfest, an annual event which draws a large group of amorous Harley Davidson riders to the area. The data for Figure B was provided by the Daytona Beach Convention and Visitor’s Board. In past years Biketoberfest has been averaging approximately 100,000 visitors. In 2004, of course, it was very close to the hurricanes and so you would expect a decline. In 2005, however, there is a large drop which can likely only be attributed to gas prices.

Figure B

Finally, and most importantly, is seasonality. We seem to forget that our busiest season is during the summer. In particular, homes sell in the summer in the Daytona Beach Area. The factors above likely caused our seasonality to begin earlier than it otherwise would but I expect they did little else. Refer to the following graph (figure B) for a quick review. While this graph may have a lot of information on it, it is important to review it as a whole to recognize the comprehensive impact that seasonality has had in recent years.

Figure C

To begin with, let me explain the graph. The red bars represent the number of transactions that we’ve had in each month. The blue line represents the average price for all homes sold during that month. The black line indicates the trend represented by the average price. The data includes all residential transactions during the timeframe that took place in the Greater Daytona Beach Area (Ormond Beach south to Port Orange) as recorded in the Daytona Beach Area Multiple Listing Service.

Ultimately, the graph shows us that a slowdown at this point during the year is not only commonplace but expected. You can see the same result in each of the last two years. Further, the price is not greatly affected by the variation in listing quantity. In other words, from an investor’s perspective we continue to have a strong outlook as the prices trend upward. Likewise from a homeowner’s standpoint, there is nothing to fear with regards to a housing decline throughout the market.

Earlier in this article I mentioned that the Palm Coast and Flagler County marketplace had not been as dramatically impacted. Below in Figure D, you can see that a similar pattern does exist. However, it is not as dramatic. The three hurricanes certainly took a toll on last year’s numbers but remember that those storms represented three, 100-year events all in one year. While there is a seasonal market in Palm Coast it is not as pronounced as Daytona Beach’s real estate sales.

Figure D

Ultimately, we must note that our area will have some seasonality with a much larger percentage being in Northern Volusia County than in Flagler County. In addition, severe weather events, while very rare in our area, can have a future impact. The most important point to note, however, is that despite fluctuations in activity, the prices have remained at a constant rise over the past several years and there is no reason to believe that the trend will not continue. The area remains a very safe investment and owners should continue to see their housing values increase.

Please don’t hesitate to contact your Adams, Cameron & Co. Realtor for more information on the market and the trends that we are seeing. Company representatives are available every day in ten offices located in Port Orange, Daytona Beach, Ormond Beach, and Palm Coast. Information is also available twenty four hours per day, seven days per week at www.daytonare.com.

About the author – John Adams is a native of the Daytona Beach Area and is a third generation real estate broker. His education includes a Bachelor’s of Business Management degree from Florida State University and a Masters of Business Administration from The Kellogg School of Management at Northwestern University. His business experience includes several years with Arthur Andersen’s Business Consulting organization during which he handled engagements domestically and internationally. He was a cofounder in a marketing company which he grew from startup to $40 million dollars in revenue. He took his first company public on the NASDAQ stock exchange at the age of 29.