The housing markets are dynamic to say the least. And Palm Coast is certainly no exception. It’s a well known fact that the U.S. Census Bureau ranked Flagler County as the fastest growing county in the country from July 1, 2003 through July 1, 2005. Most of this growth occurred in the City of Palm Coast. And a significant portion of that growth was fueled by artificial demand for new construction. T he rest may be history, but there are important lessons to be learned. And that requires an understanding of the forces that resulted in the unsustainable inflation of home prices in Palm Coast.
Homes built in Palm Coast during the height of the housing boom are very real, so you may be wondering what is meant by artificial demand. Home construction was so hot in Palm Coast that builders were willing to build them without buyers. These were known as spec homes. Spec is an industry term that is short for speculation. A spec home is built when the builder is confident that it will sell in a relatively short period of time.
The presence of some spec homes can be an indication of a healthy market. But the Palm Coast market wasn’t healthy during the peak years. It was red hot. And these conditions attracted unhealthy business practices with respect to housing. Many homes were built under contract with buyers that had no intention of ever living in them. These buyers were investors that would market and advertise home under construction at prices well above the builder’s contract prices. They would quickly flip homes for obscene profits. This is an excellent example of artificial demand. These homes were flipped at inflated prices and sold to buyers that believed the home would continue to appreciate. Even the banks that financed these purchases believed values would keep rising. As we now know, they were all wrong.
When the bubble popped, construction of many spec homes were halted mid stream. Many completed spec homes sat vacant for several years and eventually ended up in foreclosure. All too many investors ended up with newly built homes that never sold and also became bank-owned. Many of the folks that purchased a home at the market peak would either end up in a short sale or foreclosure.
In the years that passed after the bubble popped, many other homes not built during the peak would sell as short or REO sales. Many of these homes were over-financed during the hot years, some with exotic products such as Option ARM loans. Even homes that were not over financed went “under water” as property values declined. Jobs were lost in the downward spiral and more homes ended up as banked owned. But as 2011 approached, there was finally light at the end of the tunnel.
Here we are in 2014 and signs of improvement can be seen throughout Palm Coast. Foreclosures and short sales are steadily declining. Builder confidence is rising in response to increasing demand for new homes. There are actually a few spec homes on the market. Flippers have to remodel homes and add real value to them in order to sell for a reasonable profit. Property values have increased. Risky loans are unavailable and fewer homes are underwater.
This is great news for buyers and sellers alike. After a prolonged period of adverse market conditions, it’s quite clear that things are improving. As confidence improves Palm Coast is entering into a long overdue period of prosperity. Now is the time for buyers and sellers in Palm Coast to get off the fence.