BusinessReport.com

Stop me if you think you’ve heard this one before: Large numbers of people decide the real estate in a given area is undervalued. The word gets out and the speculators show up and start buying and flipping, sometimes with borrowed money and turning around big profits in short time frames.

But then higher interest rates, a glut of inventory or other factors cool the market down, prices plummet, and suddenly people are selling because they have to, not because they want to.

The story has unfolded in numerous housing markets across the country in recent years, including the condominium market along the Alabama and Florida gulf coasts, from Gulf Shores to Panama City Beach. A handful of Realtors say prices have come way down, creating a buyer’s market, but another spike may be around the corner.

It’s hard to say exactly what started the boom. It may have been a collective realization that Northwest Florida was largely undeveloped compared to teeming South Florida.

Kevin Corcoran with Re/Max of Gulf Shores says his area saw an uptick in prices after getting pounded by Hurricane Ivan in September 2004, knocking a good bit of the condo supply right off the market.

“Maybe it put us one the map. A lot of people didn’t know about our area,” Corcoran says. “I guess any publicity is good publicity.”

The price peaked in the summer of 2005. Corcoran says Gulf Shores had about 1,200 condos on the market then, and about 150 to 160 were selling per month. Many people were borrowing money or dipping into the retirement fund to buy, with no intention of holding on to the property for any length of time.

“Some of the wrong people sold to the wrong people for the wrong reasons,” Corcoran says.

Two years later, there are about 2,800 condo units on the market, and only about 50 are selling each month, he says. Three-bedroom units at the Caribe Resort, a popular complex in Orange Beach, were selling in summer 2005 for as high as $975,000, Corcoran says. Those same units are now going for about $675,000—about a 31% drop. A one-bedroom that was going for $520,000 may sell for $340,000 today, he says.

When someone calls Corcoran looking to sell, he asks them if they need to sell, or just want to. If they need to sell, and many do, he tells them to be prepared to take a big loss. If they just want to, he advises them to hold.

Corcoran’s a salesman, of course, so take this with a pillar of salt, but he says a savvy buyer can have the “pick of the litter” for 65 cents on the dollar compared to two years ago. He says now is an excellent time to buy if you’re looking for a vacation home or something you can hold on to for a few years.

“If you’re looking to flip, which was the sexy thing to do two years ago, this is not the time to do it,” Corcoran says.

Carmela Bell, a Destin-based Realtor and broker with ResortQuest, says the number of condos for sale in her area has gone from 1,309 on June 1, 2005 to 2,502 two years later. And despite the dip in prices, new construction is ongoing she says. Buyers have a lot to choose from, so they obviously have most of the leverage. But Bell didn’t want to guess whether prices have stabilized or not.

The speculators, the ones Realtor Blake Morar calls “the day traders of real estate,” are the ones who ruined things for everyone else, he says. They “gutted the golden goose” by turning what should have been a stable, profitable market into one that was dangerously overvalued.

Morar is a Baton Rouge native and the owner of Destin Real Estate Company, an 11-agent company that deals largely with south Walton County, between Destin and Panama City Beach. He estimates prices are down an average of 20 to 25 percent in his area and throughout the Panhandle.

He says “it feels like we’re scraping along bottom right now” and entering a neutral market phase where neither buyers nor sellers hold all the cards, but adds the caveat that it’s hard to tell for sure.

Meanwhile, a giant X factor is looming over the horizon: a $300 million-plus airport planned for the West Bay area near Panama City, about 30 minutes by car from Destin. Ground is supposed to be broken by fall, with the first takeoffs and landings by late 2009 or early 2010. Developers are hoping it draws more and wealthier visitors to an area only half-jokingly referred to as the “Redneck Riviera.”

Baton Rouge native Hunter Harmon with Beach Properties of Florida, based in Grayton Beach just east of Destin, says by the time the airport opens, the housing market could be near the peak of another big upswing.

“This area has never seen the economic stimulus we’re about to see in the next six months,” he says.