Gulf Shores - More Gulf Bargains?

This article confirms there are deals out there.
One thing it left out is that I was the selling agent for the Gulf Front lot:>)

Published By Mobile Press Register
Sunday, January 07, 2007
By KATHY JUMPER
Real Estate Editor

A75-front-foot beachfront lot on Fort Morgan was purchased for $800,000 at the end of December -- less than half the price commanded by similar lots that changed hands in June 2005.

Three adjacent lots of the same size on Ponce de Leon Court sold for $1.675 million each, according to Larry Powell of Meyer Real Estate on Fort Morgan. The 75-foot by 400-foot lots are zoned for duplexes.

Does this beachfront sale signal more bargains at the Gulf? Yes and no, say Realtors.

With so much inventory on the market, it's a buyer's market. But what had been a falling market has leveled off, and unless a seller is desperate, most owners are holding on until values increase, Realtors said.

Powell's seller made a $250,000 profit on the Fort Morgan lot, which the seller had purchased about four years earlier, he said.

"My seller smiled at the end of the year," said Powell. "He freed his half a million dollars up and put a quarter of a million in the bank."

"I don't think this is where the market is," Powell said. "People are ready to buy, but are waiting on the market to bottom out. If something is $200,000 to $400,000 undervalued, someone is going to take it off the market.

"I think the real price (for the lot) is somewhere closer between $1 million and $1.3 million. The guys who paid $1.675 million got caught holding."

Pricing property at the Gulf today is often a moving target, according to appraisers and Realtors. Waterfront prices in Gulf Shores and Orange Beach averaged $10,000 to $12,000 a front foot in the spring of 2005, and agents estimate those prices have dropped about 20 percent.

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

In November there were 3,008 condo units on the market and the average sales price was $623,457, according to the Baldwin County Realtors Association.

"It's great that we have buyers coming into the market, but now is one of the worst times to sell," said Bob Shallow, owner of REMAX Paradise in Orange Beach. "People that are looking for deals are finding them. Some say it's a terrible market, but if you're a buyer it's a great market because there's so much inventory."

For example, there are 300 three-bedroom, three-bath gulffront condo units for sale at the Gulf, and 13 of those are under contract, he said. "In the spring, hopefully 100 of those will be sold."

Some areas of the market have seen price increases and demand, according to Shallow, who offered rent-restricted units and higher-end, new units as examples.

Other segments have yet to find a demand, include Gulf-front housing and rental condos, he said. But that should change when the spring and summer season starts, he said.

Last year a lot of large, new condo projects came on the market, but in 2007 there are mostly small projects coming on line, according to Patrick Daily, owner of REMAX of Orange Beach. That should help sales of some of the existing inventory, he said.

"But if you're looking to sell at 2004 or 2005 prices, then your price is out of whack and you're not going to sell it," he said.

A total of 1,611 condo units were scheduled to open at the Gulf in 2006, but several hundred did not come on the market, according to the Alabama Gulf Coast Convention & Visitors Bureau. About 1,081 new units are scheduled to open in 2007, according to the bureau.

The Fort Morgan sale is an isolated incident, said Allen Cox Jr. of Ono Realty. "You'll see those people that need to get out or want to get out," he said, "but I don't think that's the norm."

The home prices on Ono Island have dropped about 25 percent since Hurricane Katrina hit in August 2005, according to Cox. There are 100 homes and almost 30 lots for sale on the island, he said. The average price for homes on the main waters of the island range from $1.6 million to $2.2 million, and homes on the canals average $1 million to $1.2 million, he said.

"The advantage we have on the island is that we're not dealing with 4,000 condo units," Cox said. "These people aren't strapped for cash and have a lot more staying power. They are sophisticated sellers and have seen this happen before and are willing to wait two or three years."

Market prices may be leveling out, said appraiser Claud Clark in Magnolia Springs, who added that the "bottom feeders" or dealmakers have already hit town.

He knows of several instances where investors bought up 30 houses in Foley and a builder unloaded a bunch of houses at a 20 percent discount in Fairhope.

Realtors may rattle off predictions about when the market will improve or some of the huge inventory sell off. But those are just guesses, according to Shallow.

"All we can say is what's happening today," Shallow said. "Interest rates are very low. The buyers coming into the market are a little nervous and looking for deals or necessity units. Developers are building better buildings and buyers are seeing the improvements in the quality of construction, and that will make a big difference in the market."

And no one can dispute that the Fort Morgan lot sale was a good deal for both parties.

"The seller still made a quarter of a million dollars," Clark said. "And you can't go broke with that kind of profit."