The purpose of this newsletter is to demonstrate that our current home pricing is reasonable and sustainable and that there is no need to worry about the potential for a real estate bubble anytime soon. To do this, we researched the sale of single-family homes (2-4 bedroom) from 2002 to 2023 within a 4-mile radius of Sunnyside Beach on the west end of Panama City Beach.
First, we gathered the median sales price of these homes for 20+ consecutive years. Then, importantly, we have adjusted the median sales price for inflation each year: one dollar in 2002 had the buying power of $1.74 in 2023. The table on the right shows the median sales price of homes from 2002 to 2024 (column 2). If we only review that column, it would appear that home prices have increased dramatically, however, when adjusting for inflation (column 3) we can conclude that that the price increases have been reasonable. Much of the hype heard in the past two years about a real estate bubble is linked to the misconception derived from not adjusting data for inflation. Failing to adjust for inflation over such a long period is tantamount to comparing apples to oranges. The line graph below gives you a better view. The red line is the median sales price and the gold line represents the median sales price adjusted for inflation. We can see the bubble in 2005, followed by a general stall from 2006 until 2012. Then, the gradual increases in pricing until 2020. In 2021, a solid upwards trend that continues into 2024.
Key Conclusions
- This is Good News! For homeowners and potential homebuyers in the far west end of Panama City Beach, it’s reassuring to see steady growth in home values, signaling a secure investment.
- Adjusting for Inflation Shows Stability: When adjusting for inflation, the apparent increase in home prices is less dramatic. For instance, while the nominal median sales price in 2023 is $550,000 the adjusted price reflects only a modest increase to $566,500 from 2004’s $547,500.
- There is Market Stability Post-2012: The real estate crash of 2008-2009 significantly lowered home prices, with the median sales price dropping to $147,900 in 2012 ($202,650 adjusted). However, the market has steadily recovered since then, with prices gradually increasing each year.
- Current Market Prices Are Sustainable: The adjusted prices indicate that the current market prices, though higher than previous years, have not skyrocketed to unsustainable levels when inflation is considered. The adjusted 2023 price of $566,500 is consistent with a steady growth pattern rather than a bubble.
- Strong History of Growth: Prior to 2010, this area of Panama City Beach was largely undeveloped consisting primarily of small beach cottages surrounded by unimproved land. This changed dramatically as HOA neighborhoods were developed starting in 2010 and continuing today. Building lots here have a much higher value today than a decade ago.
