NUMBERS ARE SHOUTING: REAL ESTATE IS HEALTHY IN DESTIN!
The purpose of this article is to demonstrate that our current pricing is sustainable, and that we do not anticipate a real estate price bubble any time soon. To do so, we have researched the Median Sales Prices of Beachfront Condominiums located in Destin, for every year since 2002. Consequently, our scope includes the years preceding the 2005-2006 Bubble, the 2005-2006 Bubble itself, the years of stalling (when no one exactly knew where the market was), the long valley of stabilization, and the recovery experienced since 2018.
When taking a historical perspective, a factor often overlooked is inflation. One dollar in 2002 had the buying power of $1.66 of today.
We have consequently adjusted the Median Sales Prices for each year to account for the compounded inflation rate until now. Since 2002, the compounded inflation multiplier has been 1.66. Since 2010, the factor has been 1.36. When applying inflation factors to the ‘Actual’ Median Price, the evolution that we see is quite different from the one witnessed when we look at the ‘actual’ numbers only. Yet, we will all agree that comparing the 2002 raw data with 2022’s is tantamount to comparing apples and oranges.
The double-entry table displays the annual inflation rate, the accumulated inflation rate (second column), the Actual Median Sales Price (third column), (4th blue column), and ‘adjusted-for- inflation’ (5th orange column), of the Median Sales Prices of beachfront condominiums in Destin, FL. The blue curve (on the chart below) displays the evolution of ‘raw’ values. The orange curve visualizes what the same data looks like when adjusted for inflation.
There is no need for a long explanation to point out the obvious:
- The blue curve (‘raw’ data) registers a pre-2005-2006 Bubble jump from $290,000 in 2002 to a peak of $1,087,500 in 2006. It is followed by a stall from 2007 until 2010 when val- ues reached the bottom at $278,500. Then, a gradual creeping upwards to reach $390,000 in 2018. In 2019 began a solid upwards trend with $494,750 that year, followed by $497,250 in 2020. Then, prices jumped to a Median of $605,000 in 2021, to reach $670,000 in 2022.
- The orange curve evidences that the 2006 peak ($1,606,237.50) was 124% higher than today’s price ($718,575.00) – when inflation is taken into consideration. In other words, today’s market stands at less than half of where it was in 2006 after adjustment for inflation are made. One could not define…
- The market stands today almost 40% below the peak of 2005 – this is roughly half-way between its bottom and its peak. One could not define a more stable and sustainable situation.
- Both the unadjusted (blue) and adjusted-for-inflation (orange) values demonstrate that the 2005 – 2006 pricing was substantially higher than 2022’s. This is wonderful news because risks of a pricing bubble seem non-existent. To further our opinion, you will note that, when adjusting the median sales price for inflation, the discrepancy grows even farther. This offers further confirmation that our market is stable and most likely to continue to increase in value.
What factors should we also consider? In 2005, most buyers were (1) flippers and (2) highly leveraged. Furthermore, (3) only a small pool of investors, primarily from N. Florida, Georgia and Alabama, was involved in these buy-and-flip transactions. Since 2019, driven by the new trends of remote work and immigration from other states, the pool of buyers has become wider and stronger, originating from most of the eastern half of the United States. These buyers favor cash purchases. They also are end-users. The attention given since 2019 to NW Florida by large investment funds, such as BlackRock, has compounded the demand and improved the buyers’ solvency.
In addition to the factors outlined above pointing at the financial stability of the new buyers, the market has gradually recuperated from the abysses of the 2011-2017 era, and stabilized at a price level that we deem reasonable, even affordable considering the demand. In comparison to other Florida markets such as Tampa Bay, South Florida, we are a steal!
We hope that this data-driven analysis has provided you with a deeper understanding of our local real estate market and dispelled any worries about an impending bubble. We remain confident in the sustainable growth and stability of our beachfront condominium market in Destin, FL, and we are committed to providing you with the most accurate and up-to-date information to support your investment decisions.
We also invite you to reach out to us directly with any further questions or for personalized advice. Our experienced team is always here to help you navigate the real estate market.
As always, thank you for your trust in our services. We look forward to continuing to serve you.