Daytona Beach area home sales are slowing down. And getting worse. (more…)

A Florida real estate developer was dragged into the negative numbers in the first quarter by expenses from stock options, impact fee credits and donated land, the News-Journal reports.

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Counting on the sagging market for million-dollar condos to bounce back within the next year, one Florida developer has begun work on a 21-story oceanfront tower on Daytona Beach’s southern edge.

WCI Communities, which has built nearly 300 condo units in Hammock Dunes over the past four years and nearly 80 condo buildings elsewhere, says Daytona Beach will be its next major development area in Florida.

“In a year or two, we’ll be sold out in Hammock Dunes. That’s why Daytona is so hot on our radar screen right now,” said Timothy P. Byal, WCI’s Northeast Florida division president.

Byal said the company intends to develop other oceanfront condo projects in the Daytona area, but has not purchased any other parcels yet, due to the sagging Florida housing market. For now, the company will concentrate on getting the One South Atlantic units pre-sold.

Since buying the project site for a record $23 million in January, WCI has quietly tweaked the design, adding more amenities to justify listing prices that will average about $1 million apiece for the tower’s 134 three-bedroom units. All units will have full or partial views of the ocean.

“The biggest change we’ve made is to reconfigure the elevators so that every unit will have private elevator access. You’ll be able to enter the elevator from the parking garage and take it right up and step out into your own home,” Byal said. “We hope to create a living experience that doesn’t exist anywhere else in the Daytona area.”

However, Karen Ricks, a resident of the Ocean Dunes neighborhood near the construction site, said she and some neighbors aren’t impressed with the project. Florida mortgage costs remain low, but will many people buy into this development after what we’ve seen from the condo market of late?

“I’m sure the inside will be classy but the outside looks dumbed-down compared to what the Bellagio was going to be,” Ricks said. “They met with us and they made some changes - they’re not going to have a big wall around it now - but how can you be happy with a 21-story building in your neighborhood?”

Pricing hasn’t been completed as of yet, but Byal said all units in the facility will cost at least $450 per square foot.

“I can’t imagine any of our units will cost less than $600,000,” he said.

The national developer is moving ahead with the Daytona Beach project even though it’s suffering one of its worst sales slumps in years. Last month the publicly owned company reported its third-quarter profit plunged 73 percent to $10.7 million and new orders fell 82 percent from last year.

Citing “dramatically lower demand for Florida condominiums,” it said it was scrapping land purchases it had planned to make in some areas.

However, Daytona Beach remains a priority. While the luxury housing market is tough to predict, he said the company believes it has reached its low point and will show substantial improvement by the end of 2007.

He said the Volusia County market is attractive to WCI partly because condo flippers have not been as active here as they have in other parts of the Sunshine State. He estimated that about one-third of the area’s newly built condos are owned by investors hoping for a quick resale, while in other areas the “investor overhang” runs 50 percent or higher.

Byal said he thinks One South Atlantic will attract strong interest from local buyers as well as Orlando area residents.

“I may be bullish, but I think I could go to Daytona Beach Shores right now and get 50 percent of our presales purely from current condo owners who want to move up to something better,” he said.

The number of single-family home sales in the Volusia-Flagler housing market in August was down sharply from August 2005, while the median price slipped slightly, the Florida Association of Realtors reported Monday.

However, Richard Sluzewski, president of the Daytona Beach Area Association of Realtors, said it’s difficult to make comparisons between this year and last in terms of Florida home mortgage demand.

“Last year was a frenzy market,” Sluzewski said. “We’ve never had one like that.”

Home prices continued climbing last year in an overheated real estate market, he continued, and this year sellers wanted to add on to such an appreciation factor. But now, with more homes available, sellers are starting to lower their asking prices.

Part of the sales slowdown can be attributed to high property taxes and expensive insurance, Sluzewski said. Combined, those “can almost equal a house payment,” he noted.

Jalene Stockhausen, president-elect of the West Volusia Association of Realtors, said West Volusia’s home sellers are bringing their asking prices to more realistic levels. The aim is to encourage even lower-income families to submit an application for a Florida home mortgage loan.

“Sellers are having to be competitive in their pricing and be more realistic in what they’re asking,” Stockhausen said.

She figures with better pricing, more home sales will be completed in the coming months, especially if Florida mortgage rates continue to stay below seven percent. Freddie Mac, the national organization that links home buyers with mortgage lenders, reported the average rate for a 30-year, fixed-rate mortgage was 6.52 percent last month, up from 5.82 percent a year earlier.

Home re-sales and median prices in the Volusia-Flagler market closely tracked statewide statistics for August. A total of 14,736 homes changed hands, 34 percent fewer than in the previous August’s mark of 22,421 homes. The existing-home median price in Florida was unchanged at $248,400, according to the Florida Association of Realtors.

It’s all part of an adjustment. Despite naysayers, industry analysts predict 2006 will be the third-strongest sales year on record nationally. Florida home loans remain sought after due to the climate and reasonable rates of interest in the state.

Don’t get residents in Dayonta Beach wrong: they don’t exactly like the price of gas being so high.

But the man who measures the state’s consumer confidence every month says most Floridians aren’t that worried about these costs as much as they are focused on the growing real estate bubble.

“High gasoline prices have been around for a year or more,” said Chris McCarty, survey director at the University of Florida. “I suspect that a lot of people have more or less accommodated to them.”

McCarty’s team of pollsters reported a July confidence index reading of 89, up 1 point from June, as a growing number of people surveyed agreed now is a good time to make a big purchase. But McCarty predicted unease about values in the housing market will push down confidence levels for the next several months; Florida home mortgage demand may suffer as a result.

A look at Florida mortgage/consumer confidence surgey

UF’s index uses a 150-point scale for its monthly survey of 500 households, with 2 representing maximum pessimism and 150 representing maximum optimism. A score of 100 is used as a reference point to show Floridians’ economic mood in 1966. Over the past year, the index has fluctuated from 78 last September to 95 in January.

“We expect a fairly pronounced effect from the decline in the real estate market,” McCarty said.

As prices soften, there will be a “leveling or decline” in home equity, a loss of construction jobs and slower sales of appliances and building products, he said. Need proof? Area homes marketed by Realtors sold in June for a median price of $221,300. While that was $12,600 higher than the median price of a year ago, it was $10,200 below May’s price level.

“There’s clearly a lot more inventory on the market now, but sellers haven’t come to grips with that yet,” McCarty said. He expects prices to fall farther in higher-priced coastal markets like Naples, Fort Lauderdale and Sarasota, but he was uncertain whether Daytona Beach will follow suit. Many hopeful buyers - “bubble sitters” - are hoping this is the case, as they continue to wait to file a Florida mortgage loan application.

The response by sellers

One local seller who recently lowered his asking price is Bill Fletcher, an Ormond Beach resident who had been trying to sell a two-bedroom starter home on Sherwood Lane in Holly Hill for $147,900. After four months of waiting for a buyer, he’s lowered his price to $143,900.

“My theory is that the market is very saturated right now, and interest rates are going up,” Fletcher said. Many first-time homebuyers are likely to have modest incomes and lower credit scores, he added.

Mark Soskin, an economist at the University of Central Florida’s Daytona Beach campus, can understand why sellers are nervous about empty properties. Speculators trying to flip expensive new condominiums while juggling interest-only Florida home mortgages are perhaps at greatest risk, he said.

How come? Because this group will be more likely to default on a Florida home loan as rates reset. Make sure you’re aware of your situation and speak with a lender to learn more about various Florida mortgage refinancing options if you fall into this category.

People may have been in search of a Florida home loan throughout the Volusia-Flagler real estate market - but they did more looking than buying during February. According to the Florida Association of Realtors, sales of existing homes in the area dropped to 642 - 24 percent fewer than a year earlier.

Those who did buy property and/or take out a Florida home loan were willing to pay record prices. The median price for single-family homes changing hands last month rose to $227,000, or 34 percent above prices paid in February 2005. The new figure represents a $2,400 advance over the previous monthly high of $224,600, set in December.

Florida home loan experts don’t seem concerned this housing downswing will last too long.

“I don’t think our market is in any trouble,” said Anne Yordon, president-elect of the Daytona Beach Area Association of Realtors. “If a property is priced fairly, it will sell. Daytona has a long way to go to catch up with the rest of Florida’s prices.”

Condominium prices came in even higher, according to the the most recent report.

The new condo median price hit $250,000, or 6 percent higher than last year, and 5 percent above the $237,500 level recorded only a month earlier. That put the Daytona Beach market above the statewide median condo price of $218,700 - making it pricier than traditionally posh places like the West Palm Beach-Boca Raton market at $220,800 and Fort Lauderdale at $216,800.

Some agents said sales already have started to rally.

“I’ve had an awful lot of lookers, but not a lot of action except for the past couple of weeks,” said Debbie Aiken, president of the Flagler County Board of Realtors. “I think we may see some good sales numbers for March - a little pent-up demand maybe.”

The issue of property taxes

However, Patricia Steiner, who is trying to sell a two-bedroom home in Ormond-by-the-Sea for $231,900, said she thinks property taxes are scaring away many prospects.

Steiner and her husband buy fixer-uppers, renovate them and sell them. She said their smaller homes had annual property taxes in the $600 range a few years ago. But now the property she’s marketing at 19 Linda Drive carries a tax bill of $2,900.

“People who want to downsize can’t afford to move to a smaller house because their property taxes will end up higher,” she said.

While this factor may negatively affect those seeking an affordable Florida home loan, the nationwide increase in home sales provides hope. The market in The Sunshine State has always been known to remain strong.

With home prices through the roof and the climate even hotter than the weather, observers have been predicting a real estate cool down in Volusia and Flagler counties for some time. After all, how many seven-figure luxury condominiums can a small area really support? The Wall Street Journal mentioned Daytona Beach (right) — along with Las Vegas, Phoenix, Fresno, Calif., and Orlando — in an article about rising housing inventories last week. The above markets were cited as the most vulnerable to price weakness if investors’ appetites wane.

Yet many local developers and Realtors remain downright bullish about the future, writes Donna Callea of the Daytona Beach News-Journal, even as the inventory of houses and condos keeps rising. Doug Cook, whose company, Cook Development, is currently working on five planned luxury oceanfront condominiums in Daytona Beach Shores, calls talk of the bubble bursting hogwash.

“The demand is still very strong. We normally sell out our buildings before they break ground . . . This area is still a bargain.”

Cook’s units sell from $500,000 to $2 million. Since 65 percent of his customers are buyers who pay cash for second homes, he is not worried that rising interest rates on Florida home loans will quell demand.

“We do not do business with most speculators . . . I weed out people who can’t close,” said the developer, referring to “flippers.” It is an increasingly common practice for people to put down payments of 10 percent into a unit during construction with the sole intention of reselling at a big profit before investing any additional funds.

Karin Udolf, a local RE/MAX agent who specializes in luxury condos, agrees with Cook’s assessment.

“There’s not going to be a cooling down. [The market] is hotter than ever. I believe we will be in a great position for many years to come. Central Florida real estate is at the beginning of being discovered. I invest all my money in real estate,” she said.

Some analysts still say the housing boom nationwide shows signs of lessening, and that it’s becoming a buyer’s rather than a seller’s market. Properties are staying on the market longer, and is greater inventory from which to choose. Gloria Weimer, president of the New Smyrna Beach Board of Realtors, acknowledges that she has seen a slowdown, but not a decrease in values. Activity tapering off this time of year is hardly unusual, she added.

“The market here for upscale property is being fueled by well-off baby boomers from other parts of the country who can afford two or three homes or investment properties, and they’re going to keep coming,” Weimer predicted. “We’re just catching up with the rest of Florida.”

Wayne Archer, an associate professor at the Center for Real Estate Studies at the University of Florida in Gainesville, points out that real estate has always been cyclical. People are as committed as ever to migration to Florida, and with the exception of a huge economic downturn or markedly sharp increase in Florida home loan rates, the demand for high-end housing here should remain solid.

Although inventories are up, sales remain strong in the Daytona Beach vicinity. Higher home prices have even priced some working people of modest means out of the market. The median price of a resale is now more than $220,000 in the Volusia-Flagler area, which local real estate agents predict will slow the market until incomes start catching up to prices. As we are also seeing with Orlando real estate, buyers are finally seeing openings.

While views differ on the immediate impact of rising rates and inventory, analysts all agree that investment in the area’s real estate still makes good financial sense. The population of the area is predicted to double within the next 20 years, and as we know, real estate is all about supply and demand. With Florida home loan rates still low, and prices levelling off, this could be the best time in years to get in the game.