Pensacola Housing Market is Booming, but Are Prices Too High for Buyers?
As a result of the skyrocketing prices of existing homes in Pensacola, builders of new homes attempted to stimulate their own sales by offering incentives. Following the devastations of two hurricanes within twelve months and the necessity of finding shelter quickly, sales of existing homes and construction of new homes made the area a realtor’s paradise. A year after Hurricane Dennis, however, most of those who hit the area to buy for investment purposes have hit the road in search of other opportunities. In doing so, they have left Pensacola with a housing inventory glut. While market forces indicate that with a situation in which you have a huge inventory combined with low demand would equal bargain prices, that isn’t the case.
Why aren’t buyers able to take advantage of the fact that house sales in Pensacola are down an impressive 14% from last year? Isn’t it just common sense to think that when over 6,000 homes are available to buyers that those sellers would be forced to lower their price? You would think so.
Unfortunately, the ugly little engine of free enterprise that drives capitalism but is usually conveniently overlooked by theorists and proponents is alive and kicking in Pensacola. Following Hurricane Ivan, parts of Pensacola resembled southern Lebanon as it looks today. In some places, house after house was gone or partially destroyed. In other places, every house on the street had been under several feet of water. Lives were upended and homes destroyed. And remember: Hurricane Ivan was a minor hurricane, a mere blip on the radar when compared to Hurricane Katrina. Nonetheless, many houses in Pensacola were declare inhabitable and condemned. Others didn’t need to be declared as such as they were no longer anywhere to be found. With so many people displaced and nowhere to put them, it was only natural that people who had been looking to sell would cash in on this real estate bonanza.
In some neighborhoods, houses that would have been sold for under $100,000 just the year before were going now being snapped up for $150,000. It was probably hard to find anyone in Pensacola who didn’t have a story about a neighbor or someone down the road selling a house for an absolutely outrageous amount of money. The idea of quickly cashing in on human suffering spread like wildfire. People who might never have thought of selling a house were now contemplating making a quick buck, living with relatives until the craziness subsided and then picking up a new house on the cheap when the demand ran dry.
Well, the demand has run dry. The day of reckoning has come. And yet the Pensacola housing market seems to be stuck in a time warp. Those very same people who chose to sell their houses at inflated market prices are refusing to coming down on those same inflated prices. How inflated are those market prices in Pensacola? You have to understand first of all that this city prides itself on being one of the most affordable cities in America. Although our gasoline prices tend to be higher than the surrounding areas, in most cases that is because those surrounding areas are out of state and so don’t have Florida’s high gas taxes. Otherwise, however, Pensacola is really rather affordable. As an example, the average price of a house in 2004, one year before Hurricane Ivan hit, was only $115,000. One year later, following Hurricane Ivan, the average cost of a house in Pensacola had risen to $150,000. Today that average cost is up to $190,000.
It’s very difficult to blame homeowners for holding out for that kind of money when they’ve sat around watching their neighbors making such huge profits on houses that they may consider not even as nice as the one they are offering for sale. And since everyone they know who has sold a house in the last two years in Pensacola has also grabbed a tidy little profit, the psychological obstacle of coming down on those kinds of home prices is just too much for most. The result is that Pensacola currently has far more houses for sale than willing buyers.
Something has to give, of course. Either those who are still holding out hope for a big profit on their home sale will find a buyer willing to pay those inflated prices, or they will come down. And once one buyer is willing to come down, it’s not hard to imagine a domino effect will take place and eventually the average cost of a house in Pensacola will return to more realistic figures. Of course, once that happens, this place will become a boom market for buyers looking to make a bargain. Demand will rise. It may even rise enough to satisfy supply and then some and those willing to hold out long enough will see things through to their profit dreams.
Of course, we could always get hit by another hurricane and see the process begin all over again. Hopefully, those looking to sell this time around won’t find themselves in the opposite position next time around: No house to sell and unable to afford any houses being sold by their neighbors.
