DAYTONA BEACH — Jared and Maxine Johnson recently sold their home in Ormond Beach because they wanted a bigger one in the area. Instead, they are moving in with Maxine’s parents.
The reason: a shortage of available homes.
“From the time we listed it on Dec. 4, the market went from having a tight housing inventory to not having any,” said the couple’s Realtor, Geri Westfall Adams, referring to the home the Johnsons recently sold in Ormond Beach’s Chelsea Place community.
In February, the number of available existing single-family homes shrank to a new all-time low of just 1,035 in Volusia County, down 60% from the same month a year ago. In Flagler County, the inventory of active listings fell even more, down 70.7% to just 333, according to area Realtor association reports.
The Johnsons, who have an 18-month-old son, said their stay with Maxine’s parents is just temporary but acknowledged it could be a long wait until they can find a home for sale in their price range. They are determined to remain in Ormond Beach where both grew up and where they have family.
“The sad thing is we’re pre-approved for $500,000 and we still can’t find anything,” Adams said of the Johnsons.
Supply falls to record low in Volusia, Flagler
A number of area Realtors reported having their best-ever year for sales in 2020, thanks to a surge in transactions in the last six months of the year. The surge was fueled in large part by the coronavirus pandemic as more people have been moving to the Volusia-Flagler area to get away from more densely populated urban areas both in the Northeastern U.S. as well as from South Florida.
Home sales and home prices so far this year have gotten off to an even hotter start. But that has created a scarcity of available homes never seen before here, even during the so-called “real estate bubble years” of 2004-2006.
The supply of homes for sale in both counties is now down to just 1.2 months, the estimated time it would take to completely sell everything if no new listings were to be added, according to area Realtor association reports.
“We need more inventory and I don’t know where that relief is going to come from,” said John Adams, president of Adams, Cameron & Co. Realtors. “The builders aren’t going to be able to make a significant change to that,” he said referring to the possibility of enough new homes being built to keep up with the growing demand.
Fewer homes on the market is causing double-digit percentage gains in median sale prices as many listings are attracting multiple bids. Some buyers are upping the ante by making all-cash offers to take properties in as-is condition. All-cash sales accounted for nearly one in three homes sold in both Volusia and Flagler counties in February.
That’s making it increasingly difficult for would-be buyers who must rely on taking out either a conventional mortgage loan or a Veterans Affairs loan.
Frustrating experience for first-time buyer
First-time home buyer Caleb Glader said he and his wife Adriana unsuccessfully bid on four other properties before finally purchasing their home in Palm Coast on March 1.
“Some of the homes we took an interest in, by the time we were able to look at them, we’d be informed that they were already under contract,” said Glader, a military veteran who is still serving in the Marine Reserves. He and his wife have a three-month-old daughter.
“Our baby had just been born and we were in a one-bedroom apartment,” he said. “We were under a lot of stress to find a home we could buy.”
Glader said he and his wife went through two other Realtors before finally enlisting the help of husband-wife Realtors Alexandra and Michael Grossholz of A.M. Home Realty in Port Orange. They chose the Grossholzes in part because of their experience in helping veterans buy homes. Michael Grossholz is also a military veteran.
“Alex and Michael suggested we switch lenders to one that had experience working with V.A. loans,” Glader said. “They (the Grossholzes) also have an eye for spotting houses that will or won’t pass approval” under the Veterans Affairs’ strict requirements.
Alex Grossholz said the struggles that Glader and his wife experienced in trying to buy a home in this area has become increasingly common in recent months.
“A lot of sellers are telling us they’ll only take cash,” she said.
Ryan Ford, president of the Flagler County Association of Realtors, said he has never seen housing inventory levels this low before. “We are in an extreme, extreme sellers market,” he said. “We are seeing a lot of frustrated buyers out there. Some are going over asking (price) and yet still not getting their offer accepted.”
Ford is the vice president and managing broker of the Palm Coast office for Watson Realty Corp. “My advice to buyers is to be patient. Stay positive, but be ready to react quickly and focus on properties within your means. If you’re approved for $300,000 and go after a house listed at $300,000, you’ve got no wiggle room to go higher. In a multiple bid situation, if you only meet the asking price, you might not get it.”
Homes selling above appraised values
Bill Navarra, broker/owner of Realty Pros Assured, said the shrinking inventory of available homes is creating another new problem: buyers agreeing to pay well over a property’s actual appraised value.
That’s not an issue for those with the ability to pay in cash, but it creates a big headache for those seeking to buy a house with a conventional loan.
Buyers using a conventional loan can only get around that by agreeing to increase their down payment to make up the difference between the property’s appraised value and the amount needed to make a competitive offer.
Lucy Stewart Desmore, a Realtor with EXP Realty in Daytona Beach, said the tight housing inventory is resulting in multiple offers for even older homes.
“I’ve got one listing in the 32117 ZIP code area that was built in the 1960s with an asking price of $179,000. We’ve already had three offers in just two days and a showing this afternoon, two more on Saturday and another on Sunday,” she said on March 26. “The way it’s looking it will be gone by Monday.”
All three of the firm offers received as of that day were from buyers from out of the area, she said.
Conversely, it’s become increasingly difficult to help people buy homes, Desmore said.
“I have one buyer who’s now put in offers for three properties and lost out on all of them. We’re skimming over the crumbs. It’s become very competitive,” she said. “You have to put in a great offer and have as few contingencies as possible.”
For aspiring first-time home buyers in the lower income brackets, it’s become almost impossible, said Debora Crane, a mortgage loan originator and reverse-mortgage specialist with Fairway Independent Mortgage in New Smyrna Beach.
“Most of my clients are using Florida Housing (Finance Corporation) for down payment assistance,” she said. “A lot won’t typically qualify for a home above $150,000. It’s very hard to find anything in that price range. Also, when Realtors write ‘down payment assistance’ on the offer, many sellers say ‘no thanks.’ They don’t want to wait that long (for approval) because they know they don’t have to.”
Relief on the horizon?
Some real estate agents believe one of the reasons for the low inventory of available homes is concern on the part of some potential sellers of exposure to COVID-19 from having strangers walk through their home.
Alisa Rogers, board president of the Daytona Beach Area Association of Realtors, said more homes could start to come on the market as more people get their COVID-19 vaccinations.
“I do think that by next year or by the end of this year, we’ll see more homes on the market. We also could see some foreclosure and short-sales,” said Rogers, a broker associate with 1st Florida Realty in Daytona Beach Shores.
Rogers and a number of other area Realtors say they do anticipate a real estate market correction at some point, but said they don’t anticipate one this year. And when it comes, they don’t anticipate a crash like the one that happened beginning in 2007 after the last real estate boom. That’s because lending requirements are considerably tighter now than they were during the real estate bubble years. Also, most home buyers today plan to either either make them their primary residence or keep it as a vacation home.
During the bubble years, many buyers were “flippers” looking to turn a profit by making a quick resale thanks to escalating prices. The popularity of house flipping in the early 2000s even became a source of entertainment by inspiring a number of reality-television shows on the subject.
“The sins of the past are not being repeated today,” said John Adams of Adams, Cameron & Co. Realtors, the Volusia-Flagler area’s largest real estate brokerage with 300 agents and eight offices in both counties. “We’ve learned so much from what happened the last time.”
Toby Tobin, a Realtor with Grand Living Commercial Realty in Palm Coast, also believes the housing inventory situation should start loosening up at some point this year.
“It won’t be like turning on a light switch. It will be gradual,” said Tobin of when more listings will start coming on the market. Tobin writes a blog on the Flagler County real estate market called GoToby.com.
Builders scrambling to keep up with demand
Builders stepped up new home construction activity locally last year despite the pandemic. Volusia County saw 3,564 building permits issued for new homes, up 22% from 2019, according to the county’s economic development division.
In Flagler County, 1,627 permits were issued for new homes last year, up 41% from 1,153 in 2019, according to Toby Tobin.
Both are the most in a single year since before the Great Recession.
That’s still not enough to close the gap between supply and demand any time soon, Tobin said.
“Builders are constrained by shortages in labor and the high cost of building materials,” said Tobin. “Framing lumber has gone up more than 100%.”
A growing backlog of both building materials and appliances is also impeding the growth in new home construction, he said.
Anthony Viscomi isco-owner with his brother Paul of Viscomi Construction in Ormond Beach. “Demand is very strong for us, but one of the biggest issues for us right now is that windows are extremely hard to get,” he said. “Some window manufacturers had to shut down for a while last year because of the pandemic. In some cases, it’s now taking five to six months to get windows while previously it only took half that long.
“Appliances are also an issue, particularly anything coming over from Asia. You’re seeing long delivery times.”
Nevertheless, Viscomi said the strong demand “is wonderful for us. We’re working on 13 residential projects right now that are quite large and a half-dozen commercial projects. We’re working seven days a week.”
Low interest rates helping to fuel demand
To get an idea about how strong the demand for homes both new and used has become, of the 420 existing single-family homes under contract to be sold in Flagler County as of April 1, half were put under contract in less than seven days, according to Tobin. “That’s pretty incredible,” he said.
Although mortgage rates have started to inch higher in recent weeks, they remain extremely low from a historical perspective. That is also helping to fuel demand for homes, said Bill Navarra of Realty Pros Assured.
On April 1, Freddie Mac reported that the average rate for a 30-year fixed-rate mortgage loan was 3.17%, up from 2.65% in early January. That’s still less than the 3.33% average rate the same week a year ago.
“It’s still a very good rate compared with a few years ago,” said Paul Wagner, branch manager for Freedom Mortgage in Ormond Beach. “I remember buying a house with a mortgage loan that had a 12% rate in 1986.”
Realtors out-number available listings
Home buyers aren’t the only ones scrambling to compete for available homes.
Realtors in the Volusia-Flagler area now outnumber the amount of active property listings by a ratio of at least 3-to-1, according to Geri Westfall Adams, the broker/owner of Geri Westfall Real Estate in Ormond Beach. Adams is not related to John Adams.
At last count, the Daytona Beach Area Association of Realtors had 2,700 members, and the Flagler County Association of Realtors had close to 1,300. And that’s not counting the West Volusia Association of Realtors and New Smyrna Beach Board of Realtors.
When the last real estate boom crashed with the onset of the Great Recession in 2007, the number of members belonging to the Daytona Beach Area Association of Realtors plunged from 3,600 to just 1,200, recalled Geri Westfall Adams.
While she doesn’t anticipate a sudden real estate market collapse this time around, she said she would not be surprised to see a large number of Realtors decide to drop out.
“A lot of agents don’t even have a listing right now,” she said. “If they’re not doing any sales and not getting any new listings, they don’t want to pay their dues and end up giving up their license.”
Owen Chittenden left his longtime job as director of catering and conference services at The Shores Resort & Spa in Daytona Beach Shores a year ago to become a Realtor. He became an agent with Geri Westfall Real Estate in July after earning his real estate license.
“I was just ready for a change and a new challenge,” he said. “I also felt that my customer relations skills and ability to help people have the perfect event would carry over into real estate by helping people find the perfect home.”
Realtors only get paid a commission when they successfully close a transaction. Chittenden didn’t receive his first commission check until November, when he helped a client sell a house. His commission check was just under what he would have earned in a month at his old job even though he was able to sell the house for $8,000 above the listed asking price.
Since then, he helped a client buy a home in January and helped another sell a house that is expected to close soon.
All things considered, Chittenden said he is doing better than expected so far because he knew going in that it would take time to become established as a Realtor.
Still, in order to ensure that he still has a source of steady income, Chittenden this past week agreed to take on a part-time job as director of events of the new Oil & Vinegar gourmet food shop at the Latitude Landings shopping center next to Latitude Margaritaville.
“Because it’s part-time, I still have the flexibility if a real estate call were to come in,” he said.
Priscilla Chanfrau became a Realtor with Adams, Cameron in January. This is her first time as a real estate agent after having worked for many years as a buyer for major department store chains in New York City. She has been a fundraiser for nonprofit organizations since returning here a few years ago. She was born and raised in Volusia County where her family has lived for several generations.
“I have my first closing on April 1,” said Chanfrau last week. She’s helping a client buy a vacant lot in Flagler Beach. The client was a friend of hers who lives in Chicago but eventually wants to build a home here.
Even buying vacant land is extremely competitive, she said.
“I’m doing better than I expected at this stage,” said Chanfrau. “I’ve got a couple of other prospects as well. There are so many Realtors right now, it’s crazy. I’ve heard that some are buying listings. A lot are getting into real estate because the market’s so hot, but I know the market’s going to go down eventually. I intend to stay in it for the long haul. Honestly, this is the time for me to learn.”
Chanfrau said she is encouraged that she made the right decision to become a Realtor even if the area could see a slight correction in the next year or two.
“Just driving around I see so many (car) license plates from other states,” she said of the growing influx of newcomers.
While there have been many reports of homes being put under contract the same day they were put on the market, Jared and Maxine Johnson wound up waiting 85 days to finally get an acceptable offer on their 3-bedroom, 2-bath home. The big challenge was the fact that it sits on a small lot behind the Panera Bread-anchored shopping center next door.
“We had more than one offer, but not at the same time,” said their Realtor, Geri Westfall Adams.
The Johnsons wound up selling their home for $385,000, down from their original asking price of $410,000. They bought the house brand new in 2017 for $350,000.
“They essentially broke even after closing costs,” said Adams.
The problem for the Johnsons was that they couldn’t afford to buy a new home until they sold their current one. In the nearly three months it took for them to sell, the area’s housing inventory tightened dramatically. As a result, they’ve had to alter their game plan by temporarily moving in with Maxine’s parents.
Until the area starts seeing a significant increase in new listings, Adams said she expects to see more young couples like the Johnsons wind up having to temporarily move in with their parents.
“It’s discouraging,” she said. “There are very few listings coming on to the market, it’s like a vicious circle that’s feeding the fire. Yes, I can sell my house and make good money, but what if I can’t find another home?”