Posted on Friday, April 1, 2011
Florida v. U.S.: Primary Distinction: Above U.S.supply (5 years) but also demand
Supply Side: Credit to boom, higher than U.S. for construction and investors.
• Statistical Indicators: Now exceed U.S. in foreclosures, negative equity (45% v. U.S. 27%), adverse feedback and price decreases (50% from peak v. U.S. 30%), higher unemployment than U.S. (Miami 12% v. U.S. 8.9%) due in large part to construction industry.
• Additionally: Among states with most bank closures (FDIC Loss Shares), longest foreclosure process, ground zero for robo-signers. All dragging out recovery – last week Florida courts almost ran out of money. Tried mediation – not working.
• Among Highest for Fraud: (“flopping”) due to folks desperate to get out.
• Uncertainty. Like rest of nation, uncertainty and sense no one knows how to fix things is biggest problem.
Demand Side: Higher than U.S. for certain factors;
• Vacation and Investment Mecca: Vacation homes are 10% of sales, investment even more. Over 1/3 are in the South. Many (1/3 vacation and 10% investment) plan to hold for 10 to 13 years and eventually use as primary residence meaning long – term investment approach. These numbers add up: 7.9 million vacation homes. 41.6 million investment. Compared to 74.8 million owner occupied. Primary demographic for second home (age 40 to 50) is growing meaning this demand will continue.
• Retirement, Affordability and Heathcare: Favored destination. Home price to income & rent to own ratio both below national averages One of fastest growing industries with solid future.
• Tourism: Up. Hotel business up. Especially foreign visitors.
• Growth: In Census data top 10 fastest growing States for past 7 decades.
Problem: Demand (Sales) Are Strong, Why Are Prices Still Moving Down?
• Discounts: Vacation and investment homes both selling a bigger discounts than owner occupied. Discount in general also growing. Means more distressed sales at bigger price cuts.
• Carry Costs: Real estate taxes and insurance notoriously high.