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Palm Coast, FL Area Local Market Report, Second Quarter 2013

Today's Market‌ Median Price (Red Line) and One-year Price Growth $145,000

25%

$140,000

20%

$135,000 $130,000

15%

$125,000 10%

$120,000 $115,000

5%

$110,000 $105,000

0% 2004 Q4 2005 Q4 2006 Q4 2007 Q4 2008 Q4 2009 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2

Local Price Trends Palm Coast

U.S.

Local Trend

$141,000 19.5% NA

$203,033 12.2% 15.0%

Price growth in the Palm Coast area lagged the U.S. average over the past 12 months

3-year (12-quarter) Housing Equity Gain*

NA

$26,433

7-year (28 quarters) Housing Equity Gain*

NA

-$23,767

9-year (36 quarters) Housing Equity Gain*

NA

$9,067

Palm Coast $417,000 $287,500 34%

U.S.

Price Activity Current Median Home Price (2013 Q2) 1-year (4-quarter) Appreciation (2013 Q2) 3-year (12-quarter) Appreciation (2013 Q2)

Information on the long-term trend is not available

*Note: Equity gain reflects price appreciation only

Conforming Loan Limit** $625,500 Most buyers in this market have access FHA Loan Limit $729,250 to government-backed financing Local Median to Conforming Limit Ratio not comparable Note: limits are current and include the changes made in November of 2012 and extended in November of 2013

Local NAR Leadership

The Palm Coast, FL market is part of region 5 in the NAR governance system, which includes all of Georgia, Florida, Alabama, Mississippi, Virgin Islands, and Puerto Rico. The 2013 NAR Regional Vice President representing region 5 is Frank E. Kowalski.


Drivers of Local Supply and Demand‌ Palm Coast

Local Economic Outlook 12-month Job Change (Jun)

-400

12-month Job Change (May)

300

36-month Job Change (Jun)

700

U.S. Not Comparable Not Comparable Not Comparable

Current Unemployment Rate (Jun)

10.2%

7.6%

Year-ago Unemployment Rate

11.9%

8.2%

1-year (12 month) Job Growth Rate

-2.0%

1.6%

Emplyoment continues to decline and will weigh on demand in some areas Palm Coast's unemployment rate lags the national average, but has improved relative to the same period last year Local employment growth is poor and needs to improve

Share of Total Employment by Industry U.S.

Palm Coast, FL Area Natural Resour

5.1%

#N/A

#N/A

#N/A

#N/A Governmen t Manufacturing 16.2% 4.0%

Trade/Tran sportation/U tilities 18.2%

Trade/Transpo Other Services Information 7.1%

18.2%

3.6

4.0%

0.8

Financial Act

4.0%

0.8

Prof. Leisure & Busin&

12.1%

2.4

13.1%

2.6

Leisure & Ho Other Service

16.2% 7.1% Educ. &

Government

Health 16.2% Services #N/A 13.1% #N/A

3.2 1.4 Prof. & Business 3.2 Services 94.9% 12.1%

Hospitality 16.2% Educ. & Heal

#N/A #N/A Goods Producing

Natural Resources/ #N/A #N/A Mining/Con struct Governme #N/A #N/A 5.1% Other nt Manufac 8.9%15.2% Services 4.1% Trade/T Leisure & 19.1% Hospitality Informa2.0% 11.0% Natural 5.1%

Natural1 Resources/ Mining/Con struct Manufacturi 5.1% ng 0.8 4.0%

Trade/Tran sportation/ Utilities 19.1%

Financi 5.9%

Information 4.0%

Profess13.8% Educat 15.0%

Financial Activities 4.0%

Educational

Leisure11.0% & Health Other S4.1% Services 15.0%

Govern15.2% #N/A #N/A #N/A #N/A

Profession al & 100.0% Business Services 13.8%

12-month Employment Change by Industry in the Palm Coast, FL Area (Jun - 2013) NA Information

Natural Resources/Mining/Construction

Manufacturi ng 8.9%

100

Information Financial 2.0% Activities 5.9%

-100

Financial Activities

0

Natural Resources and Mining

NA

Prof. & Business Services

0

Construction

NA

Educ. & Health Services

0

Manufacturing Service Providing Excluding Government Trade/Transportation/Utilities

State Economic Activity Index 12-month change (2013 - Jun) 36-month change (2013 - Jun)

0 NA -100

Leisure & Hospitality

-100

Other Services

-100

Government

-100

Florida

U.S.

1.9%

2.9%

5.2%

8.5%

Florida's economy is growing, but decelerated from last month's 1.98% change and lags the rest of the nation


New Housing Construction Local Fundamentals

Palm Coast

U.S.

12-month Sum of 1-unit Building Permits through Jun 2013

345

not comparable

8-year average for 12-month Sum of 1-Unit Building Permits

234

not comparable

Single-Family Housing Permits (Jun 2013) 12-month sum vs. a year ago

93.8%

27.4%

The current level of construction is 47.6% above the long-term average Production above trend for an extended period of time could cause prices to moderate as inventory is built Construction is on the rise relative to last year, suggesting that the local inventory has stabilized

Construction: 12-month Sum of Local Housing Permits (Historical Average Shown in Red Dashed Line)

600 500 400 300 200 100 0

While new construction is the traditional driver of supply in real estate, foreclosures and short-sales now have a strong impact on inventories, particularly at the local level. Rising inventories, through construction or distressed sales, place downward pressure on the median home prices.

State Total Foreclosure Rate vs. U.S Average (U.S. Average in Blue Dashed Line)

16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0%

Source: Mortgage Bankers' Association


Affordability Long-Term Trend: Ratio of Local Mortgage Servicing Cost to Income (Local Historical Average Shown in Red, U.S. Average in Green)

30% 25% 20% 15% 10% 5% 0% 1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

Palm Coast

U.S.

Ratio for 2012

7.6%

13.2%

Ratio for 2013 Q2

8.8%

14.9%

Weak by local standards and could weigh on demand

Historical Average

7.6%

20.7%

More affordable than most markets

Monthly Mortgage Payment to Income

Recent Trend - Local Mortgage Servicing Cost to Income (Historical Average Shown in Red Dashed Line)

10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 2011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3 2012 Q4 2013 Q1 2013 Q2

Median Home Price to Income

Palm Coast

U.S.

Ratio for 2012

1.4

2.4

Ratio for 2013 Q2 Historical Average

1.6 1.4

2.7 2.7

The price-to-income ratio is high by historic standards and getting worse Affordable compared to most markets


Ratio of Local Median Home Price to Local Average Income (Local Historical Average Shown in Red, U.S. Average in Green)

4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

The Mortgage Market 30-year Fixed Mortgage Rate and Treasury Bond Yield 280

7.0%

240

6.0%

200

5.0%

160

4.0%

120

3.0%

80

2.0%

40

1.0%

0

2008 Q2

Q4

2009 Q2

Spread (left axis)

Q4

2010 Q2

Q4

2011 Q2

30-Year FRM (Right axis)

Q4

2012 Q2

Q4

2013 Q2

0.0%

10-Year Treasury Bond (Right Axis)

The average rate for the 30-year fixed rate mortgage rose 20 basis points to 3.7% in the second quarter of 2013. However, the headline figure does not illuminate the dramatic shift in rates at the tail-end of this period. The spread between the 10-year Treasury and 30-year fixed rose over the second quarter by about 14 basis points (0.14%), likely a reflection of the growing strength in the housing market and suggestions of an early exit of the Fed from purchases of mortgage backed securities. Ben Bernanke hinted at just such a move in the middle of June, which sent Treasury and mortgage rates up more than one percentage point above their mid-May lows. This spike in rates is largely not reflected in the second quarter figures, but will show up in the third quarter. The sharp rise in rates had the effect of delaying some home purchases as potential buyers paused to take stock of affordability conditions in the wake of strong price appreciation combined with the jump in rates. Sales were brisk for the majority of the quarter as record low mortgage rates which bottomed at 3.3% in May pushed affordability to all-time highs.


A Closer Look‌Homeownership State and National (red) Homeownership Rates Over Time 74% 72% 70% 68% 66% 64% 62% 60% 58%

Source: FHFA Homeownership Rate

Florida

U.S.

Q2 2013 Q2 2012

66.0% 67.6%

65.0% 65.5%

2004

72.2%

69.0%

The weakness since the local peak of 2006 has continued over the last 12 months

The national homeownership rate has fallen dramatically in the wake of the housing bubble. Homeownership peaked at 69.0% in 2004 after averaging 65.2% over the prior two decades. The national figure eased to 65.0% in the first quarter of 2013 where it remained for the second quarter. A dramatic increase in foreclosures and shortsales that resulted from a sharp drop in prices, weak lending standards, and a surge of layoffs contributed to the decline. Furthermore, weak household formation, tepid job growth, and tight lending standards have exacerbated the problem. This sea change has moved many former owners into rentals or into multi-family living situations with family members or friends. In Florida, the annual homeownership rate peaked at 72.4% in 2006 after averaging 67.5% from 1993 through 2003. The homeownership rate reached 66% in the second quarter of 2013, 1.6 percentage points below the level from the second quarter of 2012. While an expanding economy and rate of household formation will increase home sales over the coming decade, the homeownership rate is likely to fluctuate around an equilibrium much lower than the peak of the boom reflecting a more healthy balance between renting and owning.

Geographic Coverage for this Report The Palm Coast area referred to in this report covers the geographic area of the Palm Coast, FL metro area as officially defined by the Office of Management and Budget of the U.S. Government. The official coverage area includes the following counties:

Flagler County

More information on the OMB's geographic definitions can be found at http://www.whitehouse.gov/omb/inforeg_statpolicy/

REALTOR Report For Palm Coast, Florida  

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