Condo Market: What's Sold, Selling, Stalling

Sales, slowed by active hurricane season, are expected to kick back into gear by mid-January
Sunday, November 13, 2005
By KATHY JUMPER Real Estate Editor

Broker Patrick Daily said all but a handful of the 50 condominium units at Bel Sole in West Beach's Little Lagoon have presold at prices from $590,000 to $830,000.
"Have they been easy to sell?" said Daily, owner of REMAX of Orange Beach. "Absolutely not. Nothing is easy right now."
Developer Larry Wireman says eight to 10 more units need to sell in the second tower of Turquoise Place in Orange Beach before construction can begin on that building. The units average $1.5 million and up. There are 882 units planned for the project, and most of the 210 units in the first building are sold and sales are under way on the second tower.
"Our sales have picked back up," Wireman said. "We sold five units prior to the week of Katrina and then after Katrina, it was dead for three to four weeks. But we're not complaining about the market." He plans to seek city approval later this month to build 546 more units at his Caribe Resort development in Orange Beach.
In the summer of 2004, entire condo complexes were selling out in a couple of days, and agents were getting multiple offers on some units, according to Realtors. Little more than a year later, condo sales have slowed to a trickle. Realtors blame an active hurricane season, particularly the devastating Hurricane Katrina on Aug. 29, and last fall's Hurricane Ivan.
Today there are 2,650 condo units listed for sale, most of them existing units, according to the Baldwin County Realtors Association. The average sales price for a condo unit is $393,785. Newer units average $450,000 to $750,000, while many pre construction units are priced in excess of $1 million, agents said.
"Buyers are negotiating harder and we've seen a lot of price reductions in existing inventory," said Sheila Hodges, owner of Meyer Real Estate in Gulf Shores and Orange Beach. "We were in need of a price adjustment to maintain a healthy market. You can't have the kind of appreciation we've had in the last 18 months and stay healthy."
Prices have dropped, agents said. For example, a 50-foot Gulf-front lot on West Beach in Gulf Shores was recently listed for $1 million, while similar lots were selling for $1.3 million or more a year ago.
The market should kick back into gear by mid-January, agents said. Preconstruction prices won't drop, but don't expect projects to sell out in 24 hours, agents said.
Meyer agents did not have any trouble selling developers' preconstruction units whose first buyers backed out on after the hurricane, Hodges said. But people who bought units to "flip" or resell, have not seen much activity on those units, she said.
"The market is weeding out the speculator that doesn't have the financial resources to do this in the first place," Daily said. "We know the existing inventory has gotten a little inflated." Some existing units on the market are listed at prices higher, per square foot, than preconstruction units, which range from $550 to $625 per square foot, he said.
Developers at The Wharf on the Intracoastal Waterway in Orange Beach have called clients to make sure they still wanted to buy units that had been reserved in its Boggy Point building since a third of the buyers were from Mississippi and Louisiana, according to Beason Wilkes, director of development for AIG Baker's The Wharf.
"Katrina dealt a blow to some of these folks," he said. "When you've lost your home, lost your business or a business you worked for, it's hard to be concerned about a second or third home," he said.
Most of the buyers of the 160 units at Boggy Point plan to go through with the purchase, he said. The Wharf's first condo building, Levin's Bend, sold all of its 190 units in 24 hours, he said. But that was several months before Katrina hit.
"I think the good properties will continue to sell. It's those that really don't have amenities that are going to be harder to sell," said Wilkes.
Pricing units under $1 million has helped sales, according to Rick Phillips, one of the partner developers of Mandalay Beach, a 500-unit project in Orange Beach. Phillips also has interest in two Gulf Shores projects, the 251-unit The Lighthouse, which opens in the spring, and 142-unit San Carlos, to open next summer.
In the past nine weeks, agents have sold about 180 units in Mandalay's 249-unit east tower, and almost 60 units in the west tower, Phillips said. The prices average $775,000 to $975,000.
"We're pleased with the level of sales," Phillips said. "There's no question we would've been sold out in pretty short order," if Hurricane Katrina hadn't hit the coast.
The market has slowed, but prices will likely continue to rise, agents said.
"People are looking at the market and, even if it gets slow, they don't see beachfront property going down," said J. Collier Merrill of Merrill Land Co., based in Pensacola. His firm's latest project is The Verandas, a planned 336 units on 1,050 front feet on the Gulf in Perdido Key. The unit prices average $1.3 million
"It won't be open until 2008," Merrill said. Buyers "can get locked in at $595 per square foot now. The Destin market is already $800 to $1,000 per square foot."
Presales on The Verandas will begin in another week, and so far, interest has been "overwhelming," he said. "We haven't officially signed anybody up yet, but a lot of people are picking out units as we speak."