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Saint Augustine Real Estate -- Houses, Land, Community, and More
The blog at staugy.com |
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As previously stated, I tend to believe that the housing market moves from the bottom up, from lower priced to to higher priced. And locally, here in St. Augustine, it seems that in the last few weeks there has been increased interest in the most affordable homes. If this is true, and the interest translates into sales, it could mean that the St. Augustine market as a whole will emerge from stagnation in 2008.
This makes sense economically in that low-end buyers are somewhat smarter about price, or at least more price sensitive, than buyers in other segments of the market (drop the price on a $600,000 home by $5,000 and you won't see much change in buyer attitude, drop a $135,000 home to $129,000 and you will see people doing the math and figuring out if their monthly payment just became affordable. And that $5,000 can make all the difference when qualifying for a loan. Almost by definition, someone who has to make their money go as far as possible is going to be more sensitive to price than someone who tends to work in round numbers.
The theory goes that, as homes in the lower price brackets sell, this will enable some buyers in the next bracket to buy, and so on. Let's see if it works out that way.
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| Posted by Stephen Cobb at | | | |
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Well, the affordable housing market has been a heck of a ride. We are now closing out our current inventory of 4 homes for a new low price of $12X,XXX at a special event on November 17. Click here for more details.
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| Posted by Stephen Cobb at | | | |
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From all the "sub-prime crisis" and "real estate bust" headlines lately you would think this just happened. But those of us in the trenches have been fighting this for a year or more already, at least here in North East Florida. (Like the saying goes "all real estate is local" and so your mileage may vary).
I subscribe to the theory that the real estate market is bottom driven. In other words, movement at the lower end of the price scale drives market as people move up to bigger and better houses. This makes room for people entering the market. If this was not true then all new build would be higher end. In fact, there is a case for saying too much new build is higher end than it should be, hence the shortage of affordable new homes.
People sell their "seems too small" houses for larger houses, in better locations or rather, locations they like better (possibly closer to work, an easier commute, more amenities, etc.). That enables the owners of "bigger and better homes" to sell and move to even bigger and better, and so on. If this bottom driven theory is true then a slowdown in the real estate market should appear first at the low end. With hindsight, this is true of the recent slowdown in St. Augustine. Of course, hindsight is hard to acquire early in the game.
Consider what happened, or rather, what did not happen, when we started building six affordable homes early in 2006. Normally, defined as the years 2003/4/5 the builder, Don Davino, would have received offers on the homes even as they were being built. Don has a great reputation in the area and is know for building good houses. He cuts no corners and takes a lot of pride in the finished product. The spec homes he built in the preceding years had been snapped up pretty much as soon as his trucks started appearing on the job site. But not in 2006.
Compare that with the condo I sold over on Salt Run in the first quarter of 2006. It went for a record [for that building] and a premium of 40% over what I paid for it less than two years earlier. In other words, the high end had not cooled off in Q1 of 2006 but the low end had, we just couldn't see it. So we went ahead with the houses. We took our time because as the year wore on it was clear the market was slowing down. But we couldn't stretch it out forever. In order to avoid a huge increase in county impact fees a lot of builders [us included] had rushed projects through the permitting phase in 2005, potentially saving our customers $4000 per house. In order to keep that savings, the houses had to be built in 2006. This created a mini-glut of houses coming onto the market.
By August of 2006 it was clear the entire market had come to a halt, from top to bottom, just as the
first rumors of a sub-prime fiasco were emerging.
We lowered prices and pushed out the marketing. We sold the first home in February of 2007. The second was occupied this month.
I have a feeling St. Augustine came to a halt before a lot of other markets. Hopefully that means it will revive earlier as well. Only hindsight will tell!
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| Posted by Stephen Cobb at | | | |
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Pardon the pun, but if you're looking for an easy lot in life, don't become a home builder. When I first partnered up with Don Davino, a well-established master contractor here in St. John's County, Florida, I had visions of houses popping up like cabbages on the 7 lots we had identified in what was then a little known and under-developed backwater of an otherwise hot real estate market.
This backwater had good drainage and no standing water, a major "must-check" item on the Florida land scout's checklist. There was a good road, but it was not a through road, creating a very nice cul-de-sac ideal for family homes. This positive fact was obscured from outsiders by the county GIS system which shows way more roads in Saint Augustine than actually exist (I call these extra 'virtual' roads 'webways' and woe betide anyone who relies on GPS to navigate them).
Sure, there was a lot of vegetation on the lots but we figured we could clear plenty of space for our houses while preserving plenty of trees. Besides, there was a huge wooded area across the street, giving a nice country feel to a place that was less than two miles the center of one of Florida's hottest tourist destinations, the oldest continuously occupied European settlement in America (forget Jamestown--that's the oldest English town, St. Augustine was around decades before that).
The goal was to put up 7 affordable houses on 7 lots, each 40x100 feet. The people in local government housing agencies were telling us 'any single family home you can out on the market for less than $145,000 will sell ten times over.' The official affordable bar was then set at $150,000 (80% of median home prices in the area). In other words, if we came in under that number we could tap a huge demand for affordable housing in a region where nurses and teachers and deputies were having to commute from neighboring counties because local prices in St. Augustine had risen so fast. We would make money filling a need neglected by many other builders who were obsessed with the beach front custom home bonanza.
Sounds like a slam dunk, right? No, not really. It could only sound like a slam dunk to someone who has never tried to build a bunch of houses around here. I'm going to use other posts to document the trials and tribulations between that starting point in 2004 and the first sale (in 2007). Right now, with several houses still empty and not selling like the hot cakes the County and just about everyone else predicted they would be, I just want to draw your attention to two ends of just one of the spectrums today's builder/developer has to deal with.
Greenspan stands for all the utterances of so-called experts on the housing market and the economy in general. He recently said he didn't think the sub-prime screw-up would screw up the entire economy. Thanks mate, but the typically anal banking industry over-reaction to the sub-prime debacle has been to deny loans to anyone who ever stole a candy bar or missed paying for an over-billed aspirin. That is definitely making it harder to sell houses in the 'affordable' market.
Building Codes is code for all the paperwork required to build a house and in our county that adds up to way more paperwork than it takes to get a patent. For example, I helped patent a "System and method for rule-based processing of electronic mail messages." That was a breeze compared to the paperwork required to build one small (1000 square foot) house. If it were not for the amazing paperwork skills of my partner in this project I would be dead in the water and so would the project. And even so, as we come to the point where we sell a house and have to get the final inspection, bureaucracy can strike.
Take Friday, sitting in a mortgage office, about to sign a lease-with-option-to-buy with a couple who have been living, with two sons, in a motel for two months, awaiting things like power and water to be turned on at the house we have set aside for them (power and water is another psoting). Phone call. The house failed final inspection because the power line was too close to the roof. Who installed the power line? Florida Power and Light. So who violated code? FPL. So, should that force the desparate home-buyers to spend another week in a motel while the desparate home builders try to get FPL to acknowledge and rectify its mistake?
Stay tuned...
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| Posted by Stephen Cobb at | | | |
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Okay, I'm going to try and fill in some blanks here, give some background on the projects described on the staugy.com web site, namely the affordable homes and the large parcel of land. I'm typing this on the back porch of the house on Atlantic Avenue that overlooks the marsh grasses and private pond that is the hub of wildlife in our neighborhood. Not "wild life" as in bars and clubbing, but wildlife as in wild creatures, from squirrels and raccoons to the more exotic, tortoises, armadillos, and land crabs, not to mention all manner of birds.
Even as I am writing this there's a whoosh of big white wings as a stork glides into the big pine closest to the pond. This upsets the osprey who love to use that pine for spotting fish in the pond, but my trusty Springer Spaniel at my feet barely moves as the osprey go into one of their whining sessions. I am always surprised that a bird so magnificent in action makes such a shrill noise. We often see them flying by with fish in their talons, aligned head-to-toe, for better grip and aerodynamics I suppose. If you're really lucky you can see one hit a fish right there in the pond, a truly unforgettable sight. The osprey roam this whole marsh area, which extends to the Atlantic Intracoastal and the Matanzas River. If I was really ambitious I could put my kayak into the water at the end of the road and paddle to Jacksonville. Several of my neighbors have seen manatee up that way.
But I digress...the basic story line here is that I got involved in three real estate projects here in St. Johns County, starting in 2004, not counting a couple of properties I bought and then sold without developing them. Of the three projects, one was a group of six 'affordable homes' in an up-and-coming area of St. Augustine, less than two miles from the town center; the second was a large piece of unplatted land adjoining my house (a total of 5 acres, again less than two miles from the middle of town). The third was a beach front project that turned out to be run by a scam artist (as in 'currently residing in federal prison camp' scam artist).
In the coming posts I will describe these projects with a view to sharing what they have taught me, which is quite a lot, to say the least.
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| Posted by Stephen Cobb at | | | |
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