South Padre Island Median Price Report - October 2007

Median Price:
The median price is the price that is midway between the least expensive and most expensive home sold in an area during a given period of time. During that time, half the buyers bought homes that cost more than the median price and half bought homes for less than the median price.

Changes in median price measure changes in market activity. When there are more buyers buying less expensive homes than there are buyers buying more expensive homes, the median price falls. Conversely, when there are more buyers buying more expensive homes than there are buyers buying less expensive homes, the median price rises.

The median price indicates which price range is most active. Not all price ranges experience the same market activity at any given time.
When you look at median prices for all property in the South Padre Island area you can see a dramatic fluctuation from month to month. Once you narrow it down to condominiums, which is the main property type sold on the Island, the median prices stable out. Even though the number of condominiums sold has dropped, they still make up the highest percentage of property type being sold.

Ever since June 2007 and up to October 2007 the median price for condominiums has been between the 230K and 250K mark for condominiums. This means that buyers have felt the most comfortable paying between those two quantities during the past five months even though there must have been some properties selling for less and some selling for more.

The number of sales has gone down since last year. In the past five months the number of condos sold totaled 110, while the same months last year generated a total of 203 sales. The high number of inventory available in the area and the low number of sales occurring have made this a strong buyer’s market.

According to Patty Nuckols, a real estate agent at Alice Donahue Real Estate for South Padre Island, this is a great time for investors to purchase property. There are real deals out there now with a large inventory available and sellers willing to lower prices.

Judy Parker, another agent at Alice Donahue Real Estate, says that she has been noticing a change in the last couple of months. Interested buyers have been contacting her regarding property on the island and she predicts the market will pick up considerably next year.

Now is a good time to buy the newer products at pre-construction prices or to look for bargains on South Padre's older buildings. Without the land track sales, the overall sales volume for 2007 is much lower than 2005 and 2006 - clearly a side effect of the national woes prompting buyer hesitancy in our market. While the newer products are selling well, we are having more trouble selling the older products which is where buyers can find some great bargains if they know what to look for. South Padre’s average spread was $34,770, the highest on the Texas Coast. Sellers have had to reduce prices in order to close sales.

On the other hand, many investors and retirees have shown interest on the north-end of the Island. 700 acres were just purchased on the north-end for over $38 million in an auction. Several new developments are scheduled for the area and new north-end residential lots are selling out as fast as they are put on the market.

The current buyers include investors and retirees. We are seeing many buyers in our sales pipeline which are first members of the baby boomer generation retiring in 2008. They have sold their first home and are interested in retiring to warmer climates. A strong Texas economy due to federal spending and other capital investments in the region is increasing the number of people with disposable income to purchase beachfront property or second homes. The federal government funded 3 billion to develop the southern border security fence and Texas' exports to China's booming economy are skyrocketing. These are just two factors that influence the second home real estate market in Texas.

Good News For Investors
We’ve all heard about the recent problems with mortgages referred to as subprime loans. The current and more importantly future defaults on these loans could push many homeowners into the rental market. In a nutshell, subprime loans are issued to borrowers with a low credit rating. A typical loan starts out at low interest rate and then adjusts in 2-5 years to a significantly higher rate. On a $300,000 loan the payment could increase by $1000 when the interest rate adjusts. The already cash-strapped borrower simply can’t come up with the extra funds.

Another factor investment property owners should closely consider is softening prices in the real estate market. There are some great deals out there. I’ve come across many stories of huge price drops. Last month, Hovnanian Enterprises Inc., one of the largest homebuilding companies in the U.S. kicked off a 72-hour promotion, in which it slashed prices by as much as $100,000. If you are not seeing good deals close to home, look further, there are many great property managers that can help the absentee owner with their property management needs.

If you are an investment property owner this could be a great time to expand your holdings. You should benefit from the stronger rental market and lower housing prices. Of course, it takes someone with the financial resources and, perhaps more importantly, the courage to ride out these turbulent times!

NAHB Economic Forecast
Tighter lending standards and reduced availability of credit will complicate - but not derail - a national recovery in the housing market, according to the National Association of Home Builders' (NAHB) state and metro economic forecast, which is available through NAHB's HousingEconomics.com.

The impact on housing markets will come in two forms, said NAHB Chief Economist David Seiders. First, tightened lending standards have already reduced the availability of loans overall and raised the price to riskier borrowers. A second effect, with the potential for a vicious cycle of defaults and price declines, will depend on the level of exposure to these loans, the current house price environment and the strength of the local economy.

While national trends tend to be dominated by some of the larger and more troubled markets, it is worth noting that many markets around the country have less subprime exposure, experienced modest and sustainable house price appreciation during the boom and have relatively strong local economies. These markets are positioned to out-perform the national trends with earlier and stronger recoveries than the more troubled markets, according to NAHB's forecast.

Clustered mainly in the Southeast, Texas, Pacific Northwest and Mountain states, these markets are currently recording single-family permits at or above pre-boom levels. The contrast between the strongest and weakest markets across the country points out substantial regional variation and suggests that steep nationwide house price declines and mortgage defaults are unlikely.

Top 10 reasons why the Texas Coast real estate market will boom to record levels in early 2008
Oceanfront property has not lost its appeal and with the East and West Coast prices becoming less affordable, the Gulf Coast has become the most affordable alternative. Below are the top ten reasons why Texas is getting ready to experience a real estate market boom in 2008.
Click here to read the full article.

1. Baby Boomers from thriving Houston/Dallas/San Antonio/Austin are coming in mass starting in 2008
2. Investors from California/Florida are now turning to Texas
3. Huge capital projects in Beaumont area for energy plants - 3.6 billion
4. Federal Spending on the Border Security Fence – 3 billion, construction starts in fall 2007 for Texas
5. Strong rental demand for coastal properties for massive local and growing populations within driving distance to the coast.
6. Texas Exports to Booming China’s economy are skyrocketing.
7. New high-end developments transforming the resort markets to accommodate all the new and different buyer profiles.
8. State expenditures to improve and protect the coastlines with beach replenishment, geo-tubes and other major coastal initiatives already funded or soon to be funded.
9. The affordable prices for Texas coastal property and steady appreciation rates. We are 1/3 of California’s and half price of Florida’s median pricing for ocean front property and our newer products are on par.
10. Consumer Confidence Index Climbs to a Six-Year High and Insurance companies are now returning to the Texas Coastal markets.