What’s going on in the market?
I’m looking at the data and mixing it with our 20 years of experience of selling real estate here at the beach to see if we can give you an educated guess as to where the real estate market is headed here in 2023. And then to 2024 and beyond. The data show prices for real estate here at the beach roll like waves, they build up to massive highs and then crest and crash before starting all over again as a new wave. We’ve seen it before on the water and we’ve seen it before with our real estate values. Check it out.
Let’s start with Destin Area (FWB, Destin and Miramar Beach):
Destin Area Condos
Destin Area Condos Median Sales Price Trend: The median sales price in January of 2000 for a condo in the Destin Area was $151,000. Condo values rode a steep appreciation wave up to a median sales price of $495,000 in January of 2005 before the wave crested in 2008 and prices fell from $479,700 to $146,000 in 2009, just one year later. Of course another wave started building as that one crashed and we’ve been riding it for fourteen years, all the way back up to a median sales price of $536,250 in January of this year.
Destin Area Homes
Destin Area Median Homes Sales Price Trend: The median sales price for homes in Destin and Miramar Beach (including Sandestin) have run a similar path to condos but because there are so many more owners who occupy their houses as primary residences the crest and trough of the wave isn’t as pronounced but it is still there. Home prices grew steadily from $174,900 in January of 2000 to $210,000 in 2003, then they jumped to $317,450 the next year and to $455,000 the year after that. By 2008 the wave had crested and prices settled back to the mid $200s where they started to slowly build over the next 12 years until 2020. From 2020 median sales prices jumped from $595,700 to $1,100,058 in 2022 – just two years later. Like surfers do, we will keep our eye on the horizon looking to see where this wave is headed.
30A Condos
30A Median Condo Sales Price Trend: The median sales price trend for 30A condos shows a more choppy wave but it is still there. I think the reason for the chop is simply that there are fewer sales so outliers can have a larger influence and more pronounced spikes. Take a look at the three year period of 2000 through 2002 where prices hoovered around the $250,000 and contrast them to 2003 through 2008 where they hoover at or beyond $500,000. 2009 through 2014/15 saw the wave break and prices fall back to that $250,000 line. Then in 2015 the price wave started to build again topping out above the $750,000 level in 2022. Last year the median sales price started to fall back and we’ll have to see if it continues to drop and 2022 was the crest of the price wave.
30A Homes
30A Median Homes Sales Price Trend: The median sales price for 30A homes has a familiar wave shape but with fewer outliers so the wave is easier to see. The period of 2000 to 2003 prices bounced around the upper $200s – mid $300s before really starting to build from 2004 – 2007 where prices hit the upper $700s and even pierced $900K. Of course, in 2008 the wave crested and broke taking prices with it. Prices stayed relatively low growing a little and then falling back a little unit 2020 when they shot up from the mid $800s to as high as a $1.5 million this year. Can they prices stay that high or are they going to break and start falling? That’s the question.
Panama City Beach Condos
Panama City Beach Median Condo Sales Price Trend: The median sales price trend for Panama City Beach condos shows a distinct wave pattern. See how prices started building from 2000 when they were barely $100,000 to just about $150,000 a few years later in 2003? Over the next four years we saw prices double to $370,000 were they crested in 2007. From there the wave broke and prices dropped for bottoming out in 2011/12 back at $150,000 +/-. Of course the wave started building again 2013 and we’ve been riding up since. The big jump came last year where prices jumped from the high $200s to over $400,000 in one year. Now it looks like the price wave may have crested. The question is… is it about to break here in 2023 or do we have some time left?
Panama City Beach Homes
Panama City Beach Median Home Sales Price Trend: Like the PCB condos the median sales price trend for Panama City Beach homes shows a distinct wave pattern. Starting in 2000 they rose steadily from $130,000 to just about $190,000 in 2004. Then 2005 saw prices spike way up where they crested at $330,000 in 2006. From there they dropped back down to $162,000 in 2010. But like waves do, prices started building again and we rode a pretty steady climb up until last year when prices took a big jump up going from $334,000 in 2021 to almost $600,000 this January. And here we are back at the same question again… is the current wave about to break here in 2023 or do we have some time left?
Is this current wave going to crest in 2023? Or 2024?
The answer is hard to say but there are a lot of indicators that make it look like market prices are cresting now and a crash is likely either later this year or perhaps next year. How far it falls and how long it takes for the next wave to hit the same or a higher crest remains to be seen.
Indicators
There are some very clear signals coming at us from several different places, here are a few we are considering right now.
1. The Federal Reserve.
I believe the Fed is the key to everything at this point. Why? Because they control the availability and cost of money. When money is cheap and easy to get then prices waves get huge on the upside. However, when money is expensive and hard to get waves crash and have to reform before they can start building again. With this in mind, money has become much more expensive and a lot harder to get. AND Federal Reserve Chair Jerome Powell told Congress this week the central bank (the Fed) will likely raise rates higher than anticipated and could resume larger hikes after slowing the pace in recent months.
“As I mentioned, the latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated,”
– Jerome Powell
This is not good news for real estate sellers. Or buyers for that matter. When money is expensive and hard to get (like it is now and going to get even more so) buyers can’t afford to pay what sellers want… even if they want to. The result? Sellers will feel massive pressure to lower their price.
2. The Trend Line
Destin Area Condos and the Trend Line: Markets are always reverting to the trend line. You can see on the graph in the early 200s prices were below the trend line until they started building in 2003 and kept going until 2008. They overcorrected and jumped way over the trend line. Of course they overcorrect the other way and we saw prices fall below the trend line from 2009 to basically 2020 when they jumped way up again. Here we are in 2023 way over the trend line again and if history is a guide, it would be fair to say prices are about to over correct back down.
Destin Area Homes and the Trend Line: While the condos had much more pronounced jumps and fallbacks homes have also spiked above and dropped below the trend line as well. Most notably in January of 2007 and certainly that 2004 to 2007 period. That period from 2008 to 2020 was a steady build up that really jumped in 2021 with median sales prices going from $595,750 to $1,100,058 in 2022. Again, we will have to watch closely to see if this is the crest or if there is still more to come.
30A Condos and the Trend Line: Again you can see that there are periods where the market is above the trend line and periods where it’s below. Generally the way it works is prices take a big jump up over the trend line and then overcorrect back the other way creating the wave effect. The 30A condo market is currently way over the trend line and perhaps starting to overcorrect. Stay tuned for more on this.
Panama City Beach Condos and the Trend Line: As you can see there are clear cycles where the median sales price for condos in Panama City Beach ran below the trend line before overcorrecting and jumping up – even way up – over the line. Of course prices always want to revert to the trend and ultimately fall below – even significantly below the line. Right now Panama City Beach Condos have a median sales prices very much above the trend line. Will this continue or will market forces pull prices back to the long term trend line?
Panama City Beach Houses and the Trend Line: There is a clear median sale price wave for homes in Panama City Beach as well. Prices ran on the trend line in the early 2000s before jumping up 2005 and staying over the line through 2008 when they started dropping. Prices didn’t get back to the trend line for eleven years when they bumped up to it in 2020/2021. Of course, these last two years have seen prices spike way up and median sales prices are very much above the trend line. Will this continue or will market forces pull prices back to the long term trend line? That’s the big question.
3. Transactions Have Crashed
In January of 2022 there were 163 condos sold in the Destin area, in 2023 there were only 82 sold – half as many. February saw similar numbers going from 195 condos sold down to 104. That is a massive indicator that buyers and investors are choosing to or are being forced to sit out this market at the current price points and mortgage rates. In other words… real estate at the beach is too expensive.
This is not just a Destin condo issue… it’s houses and condos… it’s Destin, 30a and Panama City Beach. It’s across the board: Navarre, Crestview, Fort Walton Beach.
4. Everyday Life:
I got my haircut last week and as I was sitting in the chair I asked the gal working her magic if she’s been busy. She said, “Yeah, but it’s slowed down a lot.” I thought that was an interesting answer and asked, “How does that work, doesn’t hair grow at the rate it grows?” She said, “It does, but people are going longer between cuts.”
What about your husband, he cuts grass, right? How’s he doing?
The same, people are going longer between cuts.
Boom. That is exactly what happens, and people are feeling this effect across the board. The restaurateur is feeling it as people go longer between eating meals out. The truck drivers are feeling it as they have less to deliver because people are going longer between buying items. Rental managers are feeling it as people go longer between vacations, book shorter stays, or decide to staycation at home rather than coming to the beach.
The wave has crested, and we are about to start riding it back down.
Where are we right now?
My sense is there are a lot of sellers right now who are holding on to see how the spring break and summer rental seasons hold up. If the rent is strong it will allow them to continue to hold their properties. If the rent is soft look for inventory to jump mid summer as sellers try to get out before the wave crests and prices start to drop.
What I am seeing and hearing from rental companies and property owners is rents are picking up some but there are open dates and a lot of folks are dropping prices to put heads in beds. If this hold true… you can cue the theme music for the TV show Hawaii Five-O cause the waves are about to start breaking.
Our Advice?
It depends on who you are… if you are a buy and holder (at least five years and probably longer right now). If you are then find a property that achieves your goal for owning and go invest in the best deal you can get knowing that over time you will likely win big… and win big.
If you are an owner that plans to own for a long time (at least five years and probably longer right now) then sit back and ride this market out knowing that over time you will likely win big… and win big.
If you a are a short time holder (five to seven years) our advice is to sell now and mitigate the risk of steep price drops. Note: Most indicators are pointing to price drops as some point… probably soon.
If you are buying to flip and grab quick cash… be very careful.
Bottom Line
We are wealth builders, so our goal (whether you are buying or selling) is to build or protect your wealth – based on your financial goals and the current market conditions. Call us today and lets talk about how you can max out your position as a buyer, a seller or as an owner to continue building your family’s wealth well into the future.
Committed to your success, John Moran – CEO The Smart Beach Investor | Keller Williams Realty AT THE BEACH TEAM Keller Williams Realty – For Your Place at the Beach