Josephine Godinez, PA
home prices bottoming

Outlook for Florida Real Estate: The Sun will Shine Again

May 5, 2009 by Josephine · Leave a Comment 

There is so much data making its way around that it’s quite easy for those looking to either buy or sell property to suffer from analysis paralysis. Let’s see if I can sum things up a bit and set some minds at ease.

Before we take a look forward, let’s take a quick peek into the past. In addition to widespread speculation and irresponsible lending practices (on the part of both the lenders and the borrowers), a contributor to the inevitable bursting bubble that was real estate in Florida was the lack of employment and income levels needed to support such lofty mortgage payments. The idea that home values would continue to escalate at double-digit rates in turn supported the notion that properties would be perpetually capable of supporting such unrealistic lifestyles. According to the U.S. Government’s American Community Survey, Florida ranked 36th in average household income - 7% below the median and 49% below the highest ranked state. In spite of the relatively low HHI levels documented in the mid-2000’s, Florida consistently ranked in the Top 5 in terms of increases in property costs during the same period. Simply put, something had to give.

Now for the good news. According to the recently released Annual Survey of Best Places to Do Business (produced by Joel Kotkin of Forbes and Michael Shires of Pepperdine University), “We can even be cautiously optimistic about some of these former superstars. After all, observes Phoenix-based economist Elliot Pollack, the existing reasons for moving to Arizona, Nevada or Florida–warm weather, relatively low taxes and generally pro-business governments–have not disappeared. Once the economy stabilizes, Pollack says he expects the flow of people and companies from the Northeast and California to former hot spots (Ft. Lauderdale, West Palm Beach and Jacksonville, FL included) will resume, once again lured by inexpensive real estate, better conditions for business and a generally more up-to-date infrastructure.”

Additionally, the study points to a shift in reliance on the tourism industry which is typically low paying and subject to even moderate economic shifts. “Instead of waiting for the real estate bubble to return, these areas will choose to focus on boosting employment in fields like medical services, business services and light manufacturing.”

As for the housing market, itself, the Commerce Department yesterday reported a surprisingly positive 0.3% increase in March construction spending. Another ray of sunshine, the National Association of Realtors reported that home buyers taking advantage of bargain prices, low interest rates and a tax credit for first-time buyers pushed the seasonally adjusted index of pending sales up by 3.2 percent to 84.6 in March. The results not only beat analysts’ flat expectations, but were also 1.1 percent above last year’s levels, the first time that has happened since December 2008.

In Broward County, existing home sales increased 47% amidst declining prices in March 2009 (vs. March 2008). Many analysts feel that we are finally reaching the bottom of what has been a nearly 40-month slide in home prices. “After nearly three years of free fall, housing activity may have found a floor,” wrote Paul Dales, U.S. economist with Capital Economics in Toronto.

Heck, even Buffet and Bernanke are getting in on the act these past few days with their cautiously optimistic comments about the state of the housing market and overall economy. “In the last few months you’ve seen a real pickup in activity although at much lower prices,” Mr. Buffett said, citing data from Berkshire’s real-estate brokerage business, HomeServices of America Inc., which is one of the largest in the U.S. “We see something close to stability at these much-reduced prices in the medium to lower part of the market.”

Federal Reserve Chairman Ben Bernanke told Congress Tuesday the economy should start growing again later this year, his most optimistic assessment of the country’s financial health since the recession struck with force last year. The housing market, which has been in a slump for three years, has shown some signs of bottoming, Bernanke said. Consumer spending, which collapsed in the second half of last year, came back to life in the first quarter.

So, does this mean that the nightmare is over? Perhaps not entirely, but it does mean that those of you who have been hiding under the covers should come out and enjoy a bit of Florida’s sunshine. As I’ve said time and again these past few months, if you are in the market and in the proper financial shape to purchase a home, you should begin the process now. With the number of short sales and REO’s on the market, it will take some time to find and actually close on your new home. Be sure to take advantage of the available tax credits (if applicable), the historically low interest-rate environment and affordable home prices available today. Once the economy begins to pick up steam in late 2009 and into 2010, these opportunities will begin to fade quickly.

Josephine Godinez, PA