Bargain Beach Houses and Driveways to Nowhere


The paved drive turns off Colbert Road--its surface unblemished by any cracks, its curbs as pale and pristine as the day a hot Florida sun dried the cement. Elaborate landscaping--albeit somewhat overgrown--frames the entrance to a short bridge embellished with decorative siderails designed to resemble hand-forged wrought-iron latticework. Crossing over the drainage culvert leads to...nothing.

In a surreal tableau of arrested development, the neighborhood has gently winding paved lanes, road signs, water meters, power boxes, designated parking areas--but no houses, people, or cars. The driveways lead nowhere. The "children at play" notices seemingly refer to someone's imaginary friends. The white bars of painted crosswalks remain unscuffed by the soles of shuffling feet. Two deer munching at some landscaping pause their lunch to evaluate my presence. They appear unafraid, though somewhat annoyed a human creature has disturbed the peaceful serenity of their grazing area.

Such abandoned developments-in-progress pepper the landscape in Flagler County, Florida, where the nationwide housing boom more resembled an euphoric frenzy before its even more dramatic fall.

According to the US Census Bureau, Flagler was the second-fastest growing county in the United States from 2000 to 2008. Its biggest community, Palm Coast, ranked number one in metropolitan area growth during that period, nearly doubling in size since incorporation in 1999 to a current level of 70,000 residents.

Drawn to the pristine beaches between St. Augustine and Daytona, baby boomers nearing retirement flocked to the area over the past decade.  Speculators eying the skyrocketing property values started committing their investment dollars into the Flagler County boom. From 2003 to mid-2006, the pace of new construction could barely keep up with demand.

"It was like the gold rush," says Bradley Duhamel, a now-unemployed construction worker. "Realtors, mortgage brokers, contractors, architects, electricians, plumbers, carpenters, people who bought and flipped properties--everyone was making money. For awhile, it was like you couldn't NOT make money here. Then everything just stopped."

Locals have strong opinions about what sparked the downfall, but the reality of complex and compounding factors makes it impossible to pinpoint a single cause.

Since industrial and business development lagged far behind the housing behemoth, many professionals who relocated to Flagler County commuted 40-60 miles to jobs in St. Augustine or Jacksonville. Faced with spiking gas prices in 2005 and 2006, those people began looking to sell so they could move closer to work. At the same time, some who had overextended themselves in a gamble to ride the housing boom to big profit began feeling the financial pinch of rising gas, utilities, and property taxes. They started trying to unload their properties just as the locomotive engine of real estate development reached full speed on new construction. For the first time in years, supply outpaced demand, resulting in a glut of properties for sale and consequently depressing prices across the market.

Those having to sell for financial reasons were pushed down that dismal tunnel leading to the desperation of short sales and, in the worst cases, foreclosure. The abundance of discounted properties on the market further depressed prices for new builds and other sellers.

New construction slowed to a turtle's pace and the first wave of lay offs began in late 2006. Since the county lacked the economic development that could absorb those released from the housing industry, the newly unemployed couldn't find new jobs, couldn't pay their mortgages and started trying to unload their homes on an already bloated market. Under the circumstances, short sales and foreclosures skyrocketed. "Market value" became an illusion. Regular sales and new construction slowed to the pace of a three-legged turtle on morphine.

As more layoffs expanded the ranks of the unemployed, the cycle perpetuated, on and on. The Department of Labor currently counts the unemployment rate in Flagler County at 14.4%--the worst in the state of Florida--but Bradley reports that figure does not give an accurate impression of the magnitude of job losses. "Two years ago, everyone here was either working to build houses, or working to sell houses. Now, there is no work doing either. That 14 percent is only those who were too lazy or broke to leave, or, like me, who have family here who can take care of them until things get better. Most of the guys I used to work with have moved in search of greener pastures. A few who couldn't sell their houses just turned the keys in to the bank and walked away."

The spiraling housing market didn't want to go alone, so pulled the whole local economy down with it. "Flagler County thrived on growth and needed new people moving in," the county's property appraiser, James E. Gardner, tells me.  "And then it stopped. When the growth stopped, we had nothing else."

To illustrate the halt in growth, Gardner's office shares numbers documenting the trend for completed new builds of single family homes, duplexes, and mobile homes in recent years. From a peak of 3,825 in 2005, this category of new construction dipped to 3,111 in 2006, then dove to 849 in 2007, 437 in 2008, and only 120 so far this year.

The county does not collect statistics on short sales, but the trend in foreclosures evidences the most desperate end of the spectrum in housing losses. According to Tara Seguine of the Flagler County Criminal-Civil Division, the county did not even begin keeping track of foreclosures until the numbers began to spike in late 2006. Prior to that, foreclosure filings averaged about 30 per month, which would make for approximately 360 annually. From October 1, 2006 to September 30, 2007 the county documented 1,048 foreclosures. The numbers rose to 2,508 the following year, continuing on that pace since October 1, 2008 to reach 1,821 by the end of May.

Gardner looks over the horizon with concern, recognizing how the reverberating effects of the market's bust will lead to an inevitable budget shortfall and necessary cutbacks for the county as property tax revenues will track the decline in assessed values. At the moment, Gardner is faced with a $2.8 billion drop in the market value of taxable property. His property assessments do not even take into account the bargain-basement pricing of short sales and foreclosures, since those circumstantial property transfers have always been considered anomalies that shouldn't be included in the calculation. These days, however, the anomalies have become more the norm, with short sells, in foreclosure, or bank-owned properties representing a full 25% of the listings currently on the market, according to county statistics and a survey of the MLS (Multiple Listings Service) database that realtors use.

The upside to all of this bad news--as I am repeatedly reminded during the two days I spend in Florida--is that the market deflation has created good value for those who have any money to buy. Considering the hardship I have seen over the past few weeks, it takes a little creativity for me to imagine people with money to spend. But they do exist, and are apparently starting to take advantage of the deals to be had in Flagler County. According to Gardner and a few real estate agents I talk to, after more than a year of completely crippled stagnancy, things have started to move again.  A few sales trickled in starting in late February and March, with a slow trend continuing to build.

Recovery will not be quick or easy, and the market may never return to its pre-crash levels. For the sake of Bradley and his unemployed friends, I just hope they get the opportunity to finally build the houses at the top of those driveways to nowhere.