The Daytona Beach Homes Market – The Elevator Version

Let’s say you know I am a Realtor. We are in an elevator and you ask me what’s happening in the Daytona Beach condos and homes market, here’s my quick elevator version:

“Our prices have dropped to where people are buying homes and condos in the lower price ranges, particularly under $200,000. Distressed properties from short sales and foreclosures will continue for another 2-3 years keeping prices from showing a significant rise. When distressed properties in big numbers are gone, our prices will rise. First, a short spike while people try to buy at the lowest prices and then more gradually. Much of the money to buy local homes and condos comes from outside the area from buyers of second and vacation homes. That makes the national economy more important to home and condo sales than the local economy. Any time in the next few years is a good time to get a great value. Interest rates are super low, making now probably the best time if you will be financing. Thanks for asking.”

That’s the elevator version, here’s why:

1. Distressed properties are driving prices
2. Different Price = Different Market
3. The Daytona Beach area is, Well it’s Different

Distressed Properties Drive Prices

No one has argued that foreclosures and short sales in Daytona Beach are driving home prices. Over the past several years, prices have dropped in half. While we don’t see prices dropping dramatically in the next two years, we do see short sales and foreclosures continuing through next year and into 2012. The reason is that adjustable rate mortgage loans with balloon payments or significant adjustments to monthly payments will continue to come due well into 2011. Many people will not be able to make the balloon payments or pay the higher rates. Refinancing for many of these people will be impossible. A good number will default.

Different Price = Different Market

The Daytona Beach real estate market is a fantasy. There is no one market. The biggest driver of creating different markets is price and in our area it creates many different markets. For simplicity, we are going to draw a line in the sand and create two vastly different markets.

The line is $300,000. The market under that price includes about 90% of all sales over the past several years. There are 9 sales in that price range for every sale above $300,000. In May, 80.5% of all sales were under $200,000 while 91.5% of all sales were under $300,000. So even though we drew the line at $300,000, most sales are under $200,000. The point is that the lower prices segment of the market is hot while the higher priced market is not. This is very important to understand when looking at the big picture.

The Daytona Beach Market is Different

Our market is different from other areas of Florida. We do not have a large industrial or commercial base in our economy. We are primarily a resort community. Many our owners do not receive their income in the area. They use their homes and condos as vacation or second homes. Some use them as investment properties. While almost 60% of sales in other areas were from first time home buyers, we don’t anywhere near that percentage here.

What I’ve seen is that because many of our buyers are from out of town, we were hit hard when the bubble burst in 2006. Our market also started to come back last year for exactly the same reason. Our real estate markets are out of sync with the national numbers because, well, we’re different.

As the national economy improves we will benefit more indirectly from outside buyers becoming more comfortable in buying a second or vacation home. The direct benefit from local residents buying will be much less than in Miami, Orlando, Tampa and many other cities with diversified economies.

That’s it. Leave a comment if you agree or not. If you want to discuss the market and your options, please give me a call at 386-566-7503. I sell condos and homes in Ormond Beach, Port Orange, Ponce Inlet, Palm Coast and all other Daytona Beach area communities.