REALTORS OPTIMISTIC ABOUT BEACH MARKET PROSPECTS

Closings on Gulf-front condo projects are being closely watched
Sunday, July 02, 2006
By KATHY JUMPER
Real Estate Editor

The buyers of the 251 condominium units at The Lighthouse in Gulf Shores started closing on their units two weeks ago, and everybody's watching.

In today's sluggish condo market, how many will buy and how many will bail?

The project presold within 24 hours in August 2003 at prices from $215,000 to $485,000. Some units flipped, or were sold several times at ever-increasing prices, with totals reaching the high $600,000s and into $700,000s, according to agents.

So far, 50 units have closed, according to Rick Phillips, one of the developers of The Lighthouse.

"We're overwhelmed with our buyers trying to come to close," he said, noting that scheduling the 251 closings is difficult since so many owners want to use their units this summer.

"We have not had a single person say they are not going to close," Phillips said. "We've had a couple of buyers say they would not like to close, but they plan to close unless they find a buyer."

Phillips said he gets calls from investors looking for a good deal on a unit, and puts them on a list. So far, he added, he hasn't had to use it.

Watching the Lighthouse and other preconstruction projects close "gives me a whole lot of optimism that everything will close," said Paul Wesch of The Mitchell Company. "Most of the people are buying the unit, will furnish it and not flip it."

"The flippers have gone away," said Frank Malone of ERA Class.com in Gulf Shores. "It was a fun game, though. But we have to remember that flipping is not real estate, that's securities. We're in the real estate business."

Real estate sales at the Gulf have been sluggish since Hurricane Katrina hit last August, though this summer is finally seeing more tourists at the beach, according to agents.

Realtors are hoping buyers will follow and knock out some of the inventory. There were 3,488 condo units listed for sale in Baldwin County as of June 1, according to the Baldwin County Association of Realtors. The average sales prices was $453,312.

"It's difficult selling existing inventory when there are good deals on preconstruction projects that are closing out," said Patrick Daily of REMAX of Orange Beach. "There are seven or more projects closing out their units, and investors are getting some awesome deals. They are picking units up at prices of two to three years ago. You can't build condos at those prices."

A two-bedroom, two-bath unit directly on the Gulf that is in good condition used to sell for $650,000 to $750,000, he said. Today, it's $550,000 to $625,000, according to agents.

Other condo projects scheduled to close this summer or by the end of the year include Caribe Resort's phase 3 in Orange Beach, 200 units; Bella Luna, 132 units on Old River in Perdido Key; and Crystal Tower, 170 units, and San Carlos, 150 units, both in Gulf Shores.

'Buyer's market'

"The people that had been priced out of the market are now coming back," said Chuck Norwood of REMAX of Gulf Shores. "They see it as a buyer's market."

Sales have picked up a bit, Norwood said. "But most of the people want to see us go through a season without a big hurricane."

"I can remember 10 or 11 years ago you would put something on the market and it would take eight or 10 months to sell," Norwood said. "In the last three years we've gotten very spoiled. The time on the market was short and it was a huge seller's market."

This market always creates its own opportunities, Daily said. "Now it's picking up a deal because of excess inventory."

Overpriced inventory

At least half of the current inventory is overpriced, according to Phillips.

"There are sellers that have their units priced at what was going on a year ago," he said. "We aren't there. It's giving a distorted view of what's truly available for sale. Those that want to sell are meeting the prices that buyers want."

/cut/2/cJOHN DAVID MERCER/ Staff PhotographerConstruction proceeds on the Mustique Condos on West beach in Gulf Shores. Real estate sales at the Gulf have been sluggish since Hurricane Katrina hit last August, though agents say more tourists are showing up at the beach this summer, fueling hopes that buyers will follow and knock out some of the inventory.