Three years after my 2017 Preconstruction Condo Sales in Panama City article, not much has changed. We are still years away from new preconstruction condo projects breaking ground in Panama City Beach. Recent sales include a Calypso 2 bedroom + bunk floor plan for $477,000, and a Palazzo 2 bedroom + bunk floor plan for $465,000. It will be quite some time before we see enough buyers willing to pay $570,000 for the same floor plan in a preconstruction project. That is roughly the price point needed for preconstruction to be profitable. I believe resale pricing needs to increase at least another 20% before we see any measurable preconstruction reservation and contract demand. It is also important to understand Calypso and Palazzo are on the west side of Panama City Beach.
There have been many recent news stories about preconstruction condos in Panama City Beach. While the condo market has made a nice recovery, it is a little premature to forecast another preconstruction boom.
Shores of Panama’s December 2019 auction advertised 99 Luxury Condominiums being auctioned off on December 4, 2019; 20 selling absolute with no reserve. All 20 of the absolute units had final bids as shown below. As of 1/19/2020 only 16 of the 20 absolute condos have sold and 20 other bulk owner units have been recorded as sold in Bay County Records. So out of the 99 advertised condos, it looks like 36 have sold to date. We will follow up later and update this number.
Following an increase of 10% in 2018, we are already up by 6.9% in 2019. Compared to the same period last year, the sales volume is down by 21%, but still higher than we expected. Since 2011, we have been able to see a healthy balance with our sales volume performance. I am not seeing any signs of what would be considered as a ‘real’ pre-construction supply. As such, sales price increases and a steady volume all reflect the fact that Panama City Beach is continuing to improve, mature, and grow as a vacation destination.
As times change, so do condominium loans in Panama City Beach. The reason is because most buyers are people who purchase these properties as secondary residences or investment properties. The type of loans that banks grant for secondary residences are different from those offered for primary residences especially after the mortgage meltdown of 2008. Before the mortgage crisis, most lenders sold their condominium loans to Fannie Mae, Freddie Mac and any other bank or financial institution that was willing to take them on the secondary market.
Shores of Panama conveyed in 2007 at the same time as the Financial crisis of 2007-2008. The 307 unsold preconstruction condos went back to Silverton Bank which was promptly taken over by the FDIC in 2010. The FDIC began selling the units individually. The absorption rate was slow. Then they put the entire block of remaining condos up for auction in 2011. A bulk buyer purchased the inventory in 2012. I don’t believe the bulk inventory rented or sold as the bulk buyer expected. Owners get control of the board in 2014. The association wins a 12-million-dollar judgement in 2016 against several directors. Then releases the directors from the judgement in 2018 while purchasing the pool and club amenities from the bulk owner. The association chose to take out a loan to make the purchase. The bank put budget requirements on the association that shed some light on glaring financial issues. 2019 dues went up again as Shores of Panama begins to face their financial reality.