Article Courtesy of The Panama City News Herald
By John Henderson

Published September 28, 2016

PANAMA CITY BEACH -- The condominium and hotel markets on the Beach are taking “baby steps” toward a recovery from a boom in the early 2000s that left a glut of units on the market after the recession, brokers said.

One indicator is new buildings that have been approved.

The last year the city issued a certificate of occupancy for a large high-rise was 2008. Since then, no one had built major condominium buildings or hotels on the Beach — until this year.
 

Leonard said some of the larger hotel chains now believe they can be competitive with some of the bigger condominiums and have decided to build on the Beach.

“We used to be mom-and-pop hotels,” he said. “Now we’re starting to get some of these big chains because I think they feel comfortable they can compete with other Gulf-front stuff.”

During the economic boom that spanned 2001 through 2006, 6,301 new condominium and hotel units were built and came on the market, according to figures from the city’s planning department.

“It shows how intense that run was in the mid-2000s, and it turned off like turning off a hose spigot,” Leonard said.

Room for improvement

The market is improving, but nowhere near what it was during the boom, brokers said.

Before the Great Recession in 2005, there were 5,047 active condominium listings, with an average sales price of $417,781 and a total sales volume of $534,759,826, according to Multiple Listing Service (MLS) numbers.

In 2015, there were 2,699 active listings, with an average sales price of $217,593 and a total sales volume of $269,162,351.

After the recession kicked in, 11,782 condo and hotel units were permitted by Panama City Beach but never were constructed, planning department figures show. Those approvals since have expired.

Leonard said the condo boom on the Beach “could have been twice as big as it was, but things got shut off in the middle of it and probably half the projects that were planned never happened.”

“Even though it was as intense as it was, it was about to be even more intense, and now we’re just starting to see some recovery from that — some green shoots in the economy, some mid-rise hotels [are being built] and one possible high-rise condominium. It’s not by any means exploding. It’s more like baby steps.”

Brokers and real estate agents say now is a good time to buy, as prices are not only way below what people were paying before the recession but are rising.

In 2005, the average sale price for a condominium on the beach was $417,781, according to MLS figures. The average sale price of a Beach condo this year through Sept. 15 is $227,069.

However, the average sales price paid for condos and number of units sold over the last year has increased in a year-to-year comparison of the last two years.

The average price of a beach condo sale from Sept. 15, 2014, through Sept. 15, 2015, was $212,835, compared to $227,069 for the year ending Sept. 15 of this year.

The volume of Beach condo units sold over the same time frame also has gone up, from about $250.3 million the year ending Sept. 15, 2015, to $268.8 million for the year ending this Sept. 15.

Keith Hodges, the broker/owner of Counts Real Estate Group who has been selling condos since 1980, said the condo market is recovering “slowly but surely.”

“Last year was an absolutely bumper year for us,” Hodges said.

He said with construction of beachfront condos and homes starting up again, the sales prices for existing inventory is increasing.

“We’re seeing a lot of beachfront houses being built and the lots bought up, and so we’re going to have more and more” on the market, he said.

Hodges said another factor helping the market is that many foreclosures from the recession have been bought out.

“Our company writes 140 to 150 deals a month,” he said. “I probably see maybe one to two short sales a month now. Three or four years ago, 20 percent of my deals were short sale.”

Short sales occur when a homeowner sells the property for less than what is owed to the bank.

Impact of homeowners fees

Clair Pease, the owner of Pease and Associates, which sells and rents out condominiums on the Beach, said the condo market “has a long way to go,” but it’s a buyers market.

Pease said one factor that might be preventing the condo market from making a stronger rebound is the fact that so many condo owners — including some who paid premium prices for their units during the real estate boom — have fallen behind on their homeowners fees.

“We’re kind of watching that closely,” Pease said. “Some of them are still riding the line whether they were going to make it or not, and it could be that we have got a little wave of (foreclosures) coming where folks that just can’t hang on to them.”

Pease said she suspects the down rental business resulting from stringent Spring Break laws has cut into the condo owners’ revenue stream, which they count on to pay their unit debt. She suspects others who have fallen behind on condo fees bought units in foreclosure and were promised an income stream from rental income that just didn’t pan out.

“We have one condo that is probably $200,000 in arrears” on homeowners fees, Pease said. “Another one is $100,000 something in arrears. … It hurts the association.”

Pease also said there are also many developer-owned units for sale in different beachfront condo buildings that were struggling during the recession and initially were taken over either by banks or the FDIC until a private company in recent years bought them out.

Pease said the association in one building she did not identify is owed $150,600 in past due homeowners fees and has 30 units for sale on the Multiple Listing Service.

Several buildings also have quite a few units on the market. Pease said there are 98 bulk-buyer units for sale at Origin at Seahaven, 268 bulk-buyer units in the Shores of Panama and 658 bulk-buyer units in Laketown Wharf.

Bill Thomas, a Realtor with Beach Time Realty who sells units in 750-unit Laketown Wharf, said the building, which was taken over by the FDIC a few years ago when a bank that owned the project filed for bankruptcy protection, is now under stable ownership with Sherman Capital Group.

“The building is finished,” he said. “We had 300 units on short-term rental, and we have about 300 units on long-term rental. We got our financing straightened out where we can sell the units last September. We have since sold 50 units, and we are providing our own financing.”

Thomas said sales are positive.

“Our prices are going up,” he said. “Our sales are strong. We are outperforming the market.”