Cape San Blas Real Estate Blog

More indicators we may be near or at the market bottom in the news this week.  Data released Tuesday by the National Association of Realtors show that in former housing-boom hot spots like Florida, Nevada and California, single-family home prices dropped 20% to nearly 30% in the past year. (See the NAR data.) NAR figures show that nationally, home prices fell 5% in the first quarter from the first quarter of 2007, with drops of more than 10% in places in California, Florida, Tucson, Ariz., and Boston.  Locally, price changes continue to top the list in MLS activity and we’re seeing a bit of an uptick in consumer interest as prices become more affordable.  Today’s post includes one local home down 40% from its mid-2005 price.

Our inventory level remains unchanged, at 466 total, with 174 homes and 292 lots. No closings again this week, but we do have one new contract. There are ten new price tags, nine new listings and six expireds.

We haven’t seen much sales activity recently with lots and most of the homes sold have been gulf front, so our one new contract is an encouraging trend bucking sign in that it’s an interior, gulf view lot. Located on Cape San Blas in Sunset Pointe subdivision which is adjacent to the state park, this lot has amazing views as clearly seen in this photo. This picture is taken from 35 feet up on a boom truck.  The sellers paid $309K for it in early 2004 and listed it for $399K, so I’m really curious to see what it closes for.

That lot contract is especially good news since lot listings led the way 2-to-1 this week with six new lots and only three new homes. Speaking of prices coming back down to earth, if you thought the days of snapping up a lot on the Cape for under a hundred grand were long gone, check out this new listing in Peninsula Estates for only $99,000. This lot offers great bay views and is adjacent to the north side of Ovation, and includes deeded beach and deeded bay access just a short stroll away.

That’s my pick of the litter for new listings, now let’s see what tempting new offerings there are in our ten price changes. The first one that catches my eye is this 3-bedroom, 2-bath gulf-front condo in a 4-unit building for only $309,900  , well below the $315,000 the sellers paid for it in, you guessed it, 2005. Sounds like somebody’s ARM payment recently went way, way up. Here’s the view from the front deck.  Looks to me like the perfect setting for some serious afternoon blender sports.

There’s a lot to like in this week’s price changes and if you’re into waterfront bargains this is your week. Remember when we saw this newly listed bay-front home just a few weeks ago for only $650,000?  This is apparently one seriously motivated seller because he dropped the price already to $575,000, which would be a great price for just the 100′ wide lot alone. I wish I’d been born rich instead of so darn sarcastic because I’d snap this puppy up in a heartbeat.

My final pick of the week is also one we’ve seen before, a sweet little Key West-style gulf first tier home in Money Bayou, listed originally for $389,000, reduced this week to $379,000, down 40% from the market top.  If you recall this is really a sad one as the seller paid $630,000 for it in July 2005. 

That’s a wrap for this week’s review. If you’d like to learn more about these of other properites give me a call at 850-227-5197 or shoot me an email to sherri@sherridodsworth.com . Time for me to head on over to the Salt Air Farmers Market in town.  If you haven’t had a chance to visit, it’s open every other Saturday from 10  til 2, and it’s a wonderful new addition to our area which I hope everyone will support so it can continue to grow.  

 The one question I hear more than any other is “has the market reached bottom yet?”. I believe that the past is the best predictor for the future and therein may lie our answer. Looking back we can clearly see that the local market peaked in late 2004, but robust sales and increased prices continued unabated well into 2005. The game of musical chairs had come to an end but a lot of people thought they could still hear the music. They’re the ones singing the saddest songs today as three-year ARM’s are maturing throughout 2008 and many of those properties aren’t appraising for the hyperinflated prices they paid for them making refinancing expensive or even impossible.  These are the properties bringing prices back down and the word is apparently getting out because I have had more inquiries from investors this past week than I’ve had in months. My colleagues are reporting the same thing. So, we might just be at that turning point where demand starts increasing to reverse falling prices.

Our inventory certainly seems to have stabililzed as it continues holding steady at 460 listings with only a shift in the allocation. Four more houses (174 vs. 170) and four fewer lots (286 vs. 290).  It’s been a good week in that we had one closing and one new contract. Eight new listings were added to the mix, an equal number were withdrawn  (including our Ovation lot featured as one of last week’s price change picks), ten properties are sporting new price tags, and three expired unsold.

Our sale and new contract this week are one and the same, an interior lot on Seminole Street in Indian Pass Beach subdivision.  The sellers bought this lot in February 2005 for $350,000, have had it listed since November for $170,000, went under contract on Saturday, and closed on Tuesday for $155,000 cash, or less than 50 cents on the dollar.  Sounds like that old Kenny Rogers song, “You gotta know when to hold ‘em and when to fold ‘em”.

We have ten price changes, and believe it or not two of them are price increases! That’s something you don’t see much of any more.  Once again we have some really tempting and attractive offers. My pick of the week, though, has to be this gulf front duplex on Indian Pass.

I love the views of the gulf and St. Vincent Island from the deck.

Both sides of this duplex are on the market and have been priced at $595K and $545K but reduced this week to $495K and $455K respectively.  What a great opportunity to own a gulf front home in a quiet and secluded section of beach.  You owe it to yourself to check this one out.

If you’d like to know more about these or any other properties give me a call at 850-227-5197 or shoot me an email to sherri@sherridodsworth.com . It’s a great time to buy - make sure you don’t miss out. Thanks for stopping by today.

Spring arrived right on schedule this week with warm, breezy days and clear blue skies. The azaleas and wisteria are in full blloom, and even the crepe myrtle are starting to show signs of color. Let’s take a look to see if there were any signs of new life in our real estate market.

Here’s a first: our inventory remains unchanged at a total of 480 active listings in the MLS, with 178 homes and 302 lots, same as last week. Even so, we had 21 listings expire unsold, 9 were put back on the market, 2 were withdrawn, 11 new listings were addded, 2 sold (yea!) and 9 changed their prices. Funny how the inventory numbers worked out.

 I always like to start with dessert, so we’ll begin by taking a look at our two sales, both single family homes in Indian Pass.

The first sale was this 1475 square foot, 2-bedroom, 1-bath home on a 0.18 acre lot Seminole Street in Indian Pass that went under contract two weeks ago on the first of March. Listed in November for $365,000, the Seller got full price, cash, on Monday. That’s the kind of wearin’ of the green on St. Patrick’s Day I could really get into! Here’s a detailed description of the home:

(Enjoy) sitting on the expansive screened-in front porch overlooking Indian Pass Beach and St. Vincents Island in this first tier beach cottage. Completely remodeled with granite kitchen, KitchenAid stainless appliances, tile floor, new carpet in bedrooms. Excellent rental history inluding 3 websites. Home is situated on an ‘X’ flood zone and qualifies for FEMA flood insurance.

 Our second sale of the week, this gulf-front home near Indian Summer, isn’t as pretty. The Seller, who is also the builder, originally put this home on the market back in May of 2006 for $1.495M. After five price reductions down to $999,999, it finally closed on Friday for $875,000, or just 58% of the original asking price. The contract price of $875k turned this into a short sale which was approved by the lender and allowed to close. Sometimes it’s simply best to cut your losses and move on.

We had nine listings change their prices this week, but six of those were price increases. Talk about contrarian pricing. Of our three price reductions, one clearly stands out above the others, as it’s the bay-front house with a dock that we saw reduced two weeks ago to $699,000, and they have dropped the price again this week another hundred grand down to $599,000!

  In case you missed it last time, here’s the Seller’s description:

Nice 2 bedroom, 2 bath Bay front home. 100 ft. Bay Front, dock and plenty of screened porches to enjoy the views of St. Joe Bay and the cool breezes. Large great room and dining area. Complete kitchen with all the extras. Pantry and separate laundy room. Double doors in great room and bedroom lead to huge screened porch. Approx. 1.25 Acres of beautiful old Flordia. Secluded site. A great rental. Some owner financing available.

These people are begging you to make them an offer, so call me. My cell is 850-227-5197 and my email is sherri@sherridodsworth.com .

That about does it for this week.  I hope you have a wonderful Easter weekend, and I appreciate your stopping by today.

There’s been a fair amount of activity compared to the past several weeks surrounding the holidays, so let’s take a look at what’s been going on in real estate the past week in the Cape San Blas market. 

For the first time since we started tracking activity back in early September our inventory grew this week by over 2%, back up to 500 from last week’s low of 489, with 174 homes and 326 lots, up from 169 and 320 respectively. I hope this is just a one week blip and not the beginning of a new trend; we need to bring the inventory down.  Way down. We have 500 properties on the market and only one sold in the past thirty days; we’re looking at an absorption rate of 41 years!  Not good.

On the bright side, we did have two new contracts and one sold this week (the first since November 30).  The two properties that went under contract were both single family detached homes on Cape San Blas, one a bay view and the other a bay front, and both located within easy walking distance of the state park.

The bay view home on Blue Heron Dr. built in 2002 is a 1040 sq. ft. 2 bedroom, 2 bath home with a loft. It sits on a one-half acre lot and was listed on October 18 for $287,000. 

The bayfront home under contract this week is located in Peninsula Estates, less than a mile south of the state park entrance.  The lot has 100′ of bayfront, about 0.6 acres in all.  This 1800 square foot home, built in 1993, has 3 bedrooms, 2 1/2 baths, a private dock, and deeded gulf access. The home was for sale by owner for some time before the seller finally hired a Realtor in March of last year and listed it for $675,000.  They are scheduled to close by February 28.

And finally this week we have our first sale in over a month, and it, too, is a bayfront home.

This 2188 square foot, 3 bedroom, 1 bath home with 80′ of bayfront has been listed since November 2005, originally for $2.6M, finally ending up listing for $899,000.  The seller, who is also the listing agent, closed this week for $605,000, or just 23% of the original asking price. I think this one falls under the category of ‘it doesn’t hurt to ask’.

An even one dozen price changes this week, most modest, with our biggest reduction being a 25% price cut on a 50′ Gulf front lot on Cape San Blas, reduced from $750,000 to only $569,000.  According to the MLS notes,

“this site is ready to build on in an X Flood zone buildable area. SELLER MOTIVATED - MAKE AN OFFER! The Seller has obtained building permits for this lot. The water tap fee is paid and a septic tank permit has been obtained. These items will transfer with the lot. Watson Constuction will construct either of the home plans included with this listing for approximately $210,000.00. The home plans are approx. 2100 square feet with decks. The pilings are now set and the lot is ready for building!”

Later this week I’ll be highlighting some of the truly atrractive pricing we’re starting to see showing up.  There are more and more buying opportunities and now is the time to really start being on the alert for great investments.  If you have questions about a specific property feel free to give me a call at 850-227-5197 or shoot me an e-mail to Sherri@SherriDodsworth.com .

How do they do it?  How many times have you heard someone talk about their income-producing property?  Some properties are more profitable than others.  How can you tell before purchasing?

In this post we’re going to explore the Quantitative Measures (QM) you can use to compare the market value of prospective income-producing properties.  You may not become an expert in real estate investment, but you will become familiar with the lingo that you could (and should) discuss such matters with your accountant or tax advisor.  Math phobics should prepare their favorite cocktail at this time.  And now, with calculators and cocktails in hand, let’s begin.

Simply put, QM is a number and you use them all the time.  Take temperature, for instance.  You might consider a Caribbean vacation in February because an average daily temperature of 75º is appealing.  Average daily temperature is just one QM you might use.  Others may be the cost of air fare, lodging, meals, etc.  Just as you wouldn’t use mean temperature alone to determine where to vacation, no single QM can be reasonably used to determine which income-producing real estate investment best suits your needs.  In what follows, we will use several QMs.

An income-producing property may be for you if it results in a better rate of return when compared to other investments, i.e. money market and savings accounts, bonds, dividend yielding stocks, etc.  Let’s say you have just inherited $100,000 from a rich uncle.  What do you do with this windfall?

A call to your favorite Realtor® reveals that she has a town home available valued (V) at $100,000 that produced an Actual Gross (rental) Income (AGI) last year of $12,000, with Operating Expenses (OE) of $3,500.  The owner set aside $500 in Reserves for Replacements (RR) to cover future replacement of such things as air conditioning, carpets, appliances, etc.  The property’s Net Operating Income (NOI) is $12,000 - $3,500 - $500 = $8,000 before taxes.  In other words,

AGI - OE - RR = NOI

Our first QM is the Capitalization Rate (R).  As the term implies, it measures an investment’s rate of return.  NOI (Net Operating Income), V (Value), and R (Capitalization Rate) are related by the expression

NOI / V = R

From our example, the town home’s R (Capitalization Rate) for last year was $8,000 / $100,000 or 8%.  If this sounds confusing, just think that if you dropped the entire $100,000 into a vehicle that returned 8%, your first year profit would be $8,000.  If some other investment vehicle (stocks, bonds, etc.) could reasonably be expected to return, say 8½%, then the town home might be less attractive.  As a savvy investor, you determine that a minimum R of 9% may induce you to purchase the property.  At that rate, what would you pay for the town home?  Rearranging the previous equation into

NOI / R = V

The value of the town home is $8,000 / .09 or roughly $89,000.  This QM should not be used alone in evaluating property value because a small change in R results in a large change in V.

Another QM for comparison is the Equity Dividend Rate (EDR).  The EDR is probably the most useful to the typical investor because it assumes that the purchase will be financed.  Borrowed funds are widely used to finance real estate for two reasons. First, most of us do not have adequate funds to purchase real estate outright.  Second, by making a down payment (Equity) (E), and financing the rest, we hope to reap the advantage of positive leverage.  Thus, the EDR represents the rate of return on equity.  Unlike R, in which the property was purchased outright, we must now account for Debt Service (DS).  DS is now an “expense” which must be subtracted from NOI (Net Operating Income) to figure what is left before taxes.  Let’s call this amount the Before-Tax Cash Flow (BTCF).

NOI - DS = BTCF

Let’s say that you could purchase our town home for $90,000 with a 20% down payment at 7.5% annual interest.  Your first year DS (Debt Service), (the total amount of interest and principle paid), is $6,041., Therefore, the BTCF is $8,000 - $6,041 or $1,959.  Finally,

BTCF / E = EDR

and our return on equity is $1,959 / (0.2 x $90,000) = $1,959 / $18,000 = 11%.  Recall that our return R on the outright purchase of the property was estimated to be 9%.  The EDR shows mathematically the potential advantage of leveraging (financing) at least a portion of your $100,000 windfall.  For a constant BTCF, as E (Equity) decreased, the EDR Equity Dividend Rate) will increase.

Rarely will you find a highly leveraged property that immediately provides a positive EDR.

A simple QM your lender may be especially interested in is the Debt Service Coverage Ratio (DSCR).  This QM gives an indication as to how much of a decrease in NOI (Net Operating Income) a property can sustain yet still remain adequate to cover the debt service.  In our example, the annual DS (Debt Service) is $6,041.  The DSCR is defined as

NOI / DS = DSCR

and our DSCR is $8,000 / $6,041 = 1.32.  This means that the NOI (Net Operating Income) could decrease by 24% and the lender is still assured of receiving the mortgage payment.  Lenders typically look for a debt service coverage of at least 1.15 to 1.30.

Emotions and anxiety can run high at the thought of purchasing real estate.  Even if you are positive that income-producing properties suit your needs, determining which property to buy requires careful planning and research. By learning a few ways to evaluate properties, you can help narrow your search so that when you get with your financial advisor before deciding to buy (and you should always consult with a professional before investing), you can save both of you time.  And we all know time is money! (Just pray the IRS never figures out how to put a dollar figure on it).

Two other values you obviously want to consider are your gains in equity and potential increases in value of the property during the time you own it. We’ll take a closer look at these concepts next week . . . let’s just let our brains cool off a bit for now.