Everyone wants to know if we hit the bottom of the market.  Many “experts” claim that we have and the Real Estate market will show improvement during the last half of 2008.  Other “experts” believe that the improvement will not occur until mid-2009.  Who is correct? 

As we know there really are no experts in predicting when markets have or will reached the bottom and begin to improve.  The best we can do is to review sales data, trends, etc. and make an informed decision.  In this newsletter, I will share information and my opinion to help YOU MAKE YOUR OWN DECISION.  I am also available to discuss any of the contents of this newsletter and answer other questions you may have regarding our Real Estate Market.

As I have noted in previous issues of SPI News, the housing market on South Padre Island is somewhat different, than the national trends, which is what is in the news.  On SPI, most units are not being used as a primary residence, but as a second home or investment property.  Therefore, the general conditions that concern both Buyers and Sellers, in making a decision are not necessarily the same.  Even Texas is doing better than the Nation as a whole.

Even though we hear throughout the Nation about increasing foreclosures, “significant” price reductions, etc., the July issue of Tierra Grande (the Journal of the Real Estate Center at Texas A & M University) states the following:
-    Texas is the second largest housing market in the country
-    Texas has fared much better than most states
-    Annual home sales in Texas fell 6.4% in 2007 (compared to 13% nationwide)
-    New Home Inventory has increased from 6.4 months and is currently about 10 months
-    The Statewide Median Price for 2008 is projected to show a 1.7% increase from 2007

The Tierra Grande attributes the statewide performance to the fact that the State led the country in new job creation during 2007. 

With the above facts in mind let us look at the statistics for South Padre Island.  Varied types of housing, namely Condominiums, Town Homes, Single Family Homes and Multi-Family Homes appeal to different buyers and each type of property is affected by different variables.  All but Single Family Homes generally benefit from Rental Income.  Therefore, if the rental market remains strong, selling prices will usually remain stable or even increase.  A good measuring criteria for this is the Average Sold Price - $/Sq Ft.



In terms of Rental Income, it is important to note that Rental Income is a significant factor when evaluating buying or selling property on SPI.  In fact, preliminary data for the Occupancy Tax (derived from Hotel/Motel/Condo rentals of less than 30 days) for the initial 6 months of 2008 reflects a 4.5% increase over 2007.  This growth provides a solid base for maintaining current prices, which certainly could be considered near or at the bottom!  Hurricane Dolly also had some impact on the number of Rental Units available, thus further increasing rental income for the remaining properties over the next 3 to 6 months when repairs should be completed.

All numbers, for the periods of January 1 to June 30 in both 2007 and 2008, were either obtained from the data base of the Laguna Madre Property Listing Service, or are my comparisons and calculations based upon the data.  The information is considered reliable, but may have errors due to the input by various real estate agents, my transferring data, etc. and therefore cannot be guaranteed to be 100% accurate, but should provide a good basis for making decisions on purchasing or selling property.


CONDOMINIUMS    Column A    Column B    Column C
        01/01 to 06/30/07    01/01 to 06/30/08    08/21/08
        6 Months    6 Months    Inventory
    # of Units Sold    140    78    n/a
    Units Sold/Month    23.3    13.0    n/a
    % Increase or Decrease    n/a    -44.3%    n/a
    Inventory as of 8/21/08    n/a    n/a    400.0
    Inventory in Months    n/a    n/a    30.8
    Average List Price - $/SF    $249.88    $237.94    $238.19
    % Increase or Decrease    n/a    -4.8%    0.1%
    Average Sold Price - $/SF    $240.71    $225.85    n/a
    % Increase or Decrease    n/a    -6.2%    n/a
    Average Sold as % of List    96.3%    94.9%    n/a
    Average Days on Market    209    260    253
    % Increase or Decrease    n/a    24.4%    -2.7%

                   
Based upon the above table, we can see both positive and negative trends for Sellers of Condominiums.  For example, when comparing the period January to June 2008 to the same months in 2007, we find that Sellers experienced a negative trend as evidenced by:  Sales Volume (Units Sold/Month) which decreased 44.3%, Averages for List Prices - $/Sq Ft decreased 4.8%, Sold Price - $/Sq Ft decreased 6.2% and Days on the Market increased 24.4%.  Furthermore, based upon the Inventory in Months as of 08/21/08 there is currently a 30.8 month supply of Condominiums on the Market.



While the above facts may appear that the Buyer can find some bargains, a more detailed review of the numbers indicates that although the Volume of Units Sold is significantly lower, the Average Sold Price - $/Sq Ft has only decreased 6.2%.  The large difference between percentages changes in Volume and Average Sold Price - $/Sq Ft indicates that Sellers may have established their bottom line.  Further evidence that Sellers are “not panicking” is seen in the fact that the Average List Price - $/Sq Ft is consistent with the properties which sold during the initial 6 months of 2008, and actually shows a slight increase 0.1%.

Based upon the above analysis, it appears that the “Bottom” of the Condominium market may be here and Buyers would be best served by beginning to search for the opportunities, even if they decide to buy in the near future.


TOWNHOMES    Column A    Column B    Column C
        01/01 to 06/30/07    01/01 to 06/30/08    08/21/08
        6 Months    6 Months    Inventory
    # of Units Sold    7    8    n/a
    Units Sold/Month    1.2    1.3    n/a
    % Increase or Decrease    n/a    14.3%    n/a
    Inventory as of 8/21/08    n/a    n/a    46.0
    Inventory in Months    n/a    n/a    34.5
    Average List Price - $/SF    $155.63    $228.92    $296.77
    % Increase or Decrease    n/a    47.1%    29.6%
    Average Sold Price - $/SF    $144.74    $205.09    n/a
    % Increase or Decrease    n/a    41.7%    n/a
    Average Sold as % of List    93.0%    89.6%    n/a
    Average Days on Market    231    363    297
    % Increase or Decrease    n/a    57.1%    -18.2%


Townhomes often function as Rental Properties, but are also comparable to Single Family Homes, and are reflecting a stronger position for Sellers.  A review of the data for Townhomes shows that Volume (Units Sold/Month) has increased 14.3% in the first 6 months of 2008.  In addition, other than the Number of Days on the Market which reflects an 57.1% increase, Sellers obtained higher prices in every category used to measure improvement for the Sellers Average List Price - $/Sq. increased 47.1% and Average Sold Price - $/Sq Ft increased 41.7%.    These indicate that Townhomes are moving in a positive trend, even though there is currently a 34.5 Month Inventory on the Market.


Since the Volume in both 2007 and 2008 was limited, currently impressions need to be substantiated in the next study which will be done after September using 9 month comparisons.  In the meantime, Buyers can still find Townhomes to meet their needs, but should expect to find negotiating a bit more challenging.


SINGLE FAMILY HOMES    Column A    Column B    Column C
        01/01 to 06/30/07    01/01 to 06/30/08    08/21/08
        6 Months    6 Months    Inventory
    # of Units Sold    10    14    n/a
    Units Sold/Month    1.7    2.3    n/a
    % Increase or Decrease    n/a    40.0%    n/a
    Inventory as of 8/21/08    n/a    n/a    72.0
    Inventory in Months    n/a    n/a    30.9
    Average List Price - $/SF    $281.45    $252.39    $302.11
    % Increase or Decrease    n/a    -10.3%    19.7%
    Average Sold Price - $/SF    $236.11    $229.62    n/a
    % Increase or Decrease    n/a    -2.8%    n/a
    Average Sold as % of List    83.9%    91.0%    n/a
    Average Days on Market    203    385    260
    % Increase or Decrease    n/a    89.7%    -32.5%


Single Family Homes are generally not considered when a Buyer is seeking to generate Rental Income of any significance.   Therefore, the decision to purchase this type of property is not influenced by the same factors.  LOCATION! LOCATION! LOCATION! is still the standard when considering a Single Family Home.

The data indicates Single Family Homes now has a 30.9 month Inventory on the market.  While this could appear to indicate that bargains might be available, the reality much of the other data supports a good market for Sellers of Single Family Homes.  Specifically, Volume of Sales (Units Sold/Month) increased 40.0% from the prior year, Average Sold Prices - $/Sq Ft, only decreased 2.8%, even though the Average List Price - $/Sq Ft decreased 10.3%.  The primary reason for these positive supports is that many Single Family Homes are either second homes or occupied by families who are not “being pressured” to sell due to job transfers, etc. as is the “traditional” home owner/seller.  Therefore, Sellers view today’s market as a temporary situation, and are not prepared to have a “fire sale” even though the Days on Market increased 89.7%.  In spite of this increase, the Average Number of Days is slightly over 1 year (385 days).  The Average List Price - $/Sq Ft increased 19.7% which indicates that Seller’s believe the market has improved for Single Family Homes.



One additional note of interest is that Townhomes Average List Price - $/Sq Ft ($296.77), is almost the same as that for Single Family Homes ($302.11).  Since many people prefer the greater freedom of a Single Family Home (see the Average number of Units Sold/Month: Townhomes 1.3 and Single Family Homes 2.3), the closeness of the dollars provides more support for Single Family Homes.

Based upon the above, it appears that Single Family Homes may also be at or near bottom.  Again, as with Townhomes, since the Volume is somewhat limited, this needs to be substantiated in the next study which will be done after September using 9 month comparisons.  However, Buyers should start evaluating options now.


MULTI-FAMILY HOMES    Column A    Column B    Column C
        01/01 to 06/30/07    01/01 to 06/30/08    08/21/08
        6 Months    6 Months    Inventory
    # of Units Sold    2    2    n/a
    Units Sold/Month    0.3    0.3    n/a
    % Increase or Decrease    n/a    0.0%    n/a
    Inventory as of 8/21/08    n/a    n/a    29.0
    Inventory in Months    n/a    n/a    87.0
    Average List Price - $/SF    $175.57    $169.08    $192.53
    % Increase or Decrease    n/a    -3.7%    13.9%
    Average Sold Price - $/SF    $160.10    $151.99    n/a
    % Increase or Decrease    n/a    -5.1%    n/a
    Average Sold as % of List    91.2%    89.9%    n/a
    Average Days on Market    103    304    383
    % Increase or Decrease    n/a    195.2%    26.0%


Multi-Family Homes are primarily considered Investment Property for Rental Income and/or Appreciation in Property Value.  There is limited data for this type of property, since there were only 2 sales in the initial 6 months of both 2007 and 2008.  Therefore, I am not prepared to provide any analysis or comment, but you can review the data, form your own opinions, or contact me to discuss any questions or conduct more detailed research.








SUMMARY


Overall, the data discussed in the SPI News, reflects that the Bottom may have been reached on SPI.  Certainly, if we are not there right now, in my opinion, it is just around the corner (the next 3 to 6 months).  So, for Buyers who have been “waiting for the right time”, I would suggest start looking.  For Sellers, take heart.  I do not believe we will see dramatic changes during the next 6 months, but I do not see prices dropping in any noticeable manner.  There will always be some Sellers who will offer bargains, but on SPI, I would expect these to be few and far between. 

While the statistics included in this letter only reflect SPI, some of the surrounding areas, which are in easy commuting distance to the Island, have also been fairly stable for the reasons stated herein.  However, this may not be true for primary homes in areas such as Brownsville, Laguna Vista, Port Isabel and Bayview.  This Newsletter does not report on these areas, but if you request information on these areas, I will obtain the data for you.

Lastly, since many of you have expressed interest in purchasing Bank Foreclosures, I have purchased memberships in a number of services specializing in providing lists of such properties. 

While these may be excellent buys at times, please be aware that many of the current foreclosures were financed at or near 100% and therefore, the amount owed to the banks may be equal to or greater than the current market value.  However, if you are interested in Bank Foreclosures, in any area of the country, please contact me. 

If you have any questions about how these data applies to your situation, whether you plan to buy or sell, I will be happy to discuss it further with you.  You can either contact me by email or telephone.  Also if you know anyone who would like to be added to my regular mailings please have them contact me.

Lastly, I would appreciate any comments you have about this newsletter, and if you would like other features to be included in future editions.

Marvin Herschberg – REALTOR
(956) 492-3031 (mobile)
marvin739@sbcglobal.net/ (email)

REMINDER:  In addition to my ability to assist you in Buying or Selling your real Estate for personal or Investment use, my office can offer you  short as well as long term rentals and property management (for Home Owner Associations).  These services will enable me to assist you more fully if you wish to buy, sell or rent your property.

If you wish to be removed from any future mailings, please request this by contacting me at marvin739@sbcglobal.net