The State of the State’s Residential Real Estate Market

Written by Posted On Wednesday, 17 February 2016 12:21

 By Clark W. Toole III

 

President, Florida

Coldwell Banker Residential Real Estate

Coldwell Banker Commercial NRT

 

I recently attended the Governor’s State of the State address, in which he announced the addition of one million new jobs in Florida. As it always does, my mind turned to the residential real estate market, and what, if any, impact we’re seeing there as a result of those new jobs.

 

Job growth can affect residential real estate in a number of ways. As new businesses move to our state, they bring employees in need of housing. And a stronger job market can boost consumer confidence, which can motivate people to buy their first home or sell their existing place and move up to a bigger and better one.

 

So, did Florida’s residential real estate market actually benefit from the state’s job growth in 2015? Yes, though the market wasn’t without its challenges.

 

Let’s take a look at how the year ended:

 

Property Sales:  307,111 in 2015 vs. 284,199 in 2014, an increase of 8.1%*

Average Sales Price:  $282,574 Dec. 2015 vs. $263,984 Dec. 2014, an increase of 7%*

Property Inventory:  111,461 Dec. 2015 vs. 131,989 Dec. 2014, a decrease of 15.6%*

 

We saw strong demand but lower-than-normal supply (the number of homes listed for sale), both of which resulted in appropriately priced homes selling at a healthy pace. Whether or not these trends will continue in 2016 or the market moves in another direction depends on a lot of different factors. Here are some areas I’ll be keeping my eye on:

 

Global Economies – Florida is truly a global state and is tied to the economies of countries like Venezuela, Brazil, China, Russia, the U.K. and Canada like no other state. In fact, according to the 2015 National Association of Realtors® Profile of Home Buying Activity of International Clients, 21% of international buyers purchasing homes in America chose Florida, more than any other state. Many of those foreign regions are experiencing economic softening or even turmoil right now. While that could spur even greater investment in Florida real estate as a safe and stable alternative to their domestic investment options, it could also reduce the number of international investors and their available funds.

 

Tightening Luxury Market – The luxury category is a key component of Florida’s residential real estate market, with the Miami area especially dominated by high-end property sales. Recent regulations have been enacted that will impact luxury home sales, though. Citing concern about the origin of funds used for all-cash purchases of luxury real estate, the Financial Crimes Enforcement Network, a division of the U.S. Treasury Department, announced that it will temporarily require title insurance companies to identify individuals behind the companies paying cash for high-end residential properties in Manhattan and Miami-Dade County. Additional scrutiny is the way of our world today and isn’t necessarily a bad thing, but it could slow the pace of luxury real estate transactions.

 

Right Pricing – Building activity has been steadily ramping back up post-recession and homeowners who were once underwater on their mortgages are starting to build equity and get in position to sell, both of which could bring more homes onto the market. On top of that, mortgage rates are starting to rise again, which will make buyers increasingly sensitive to prices. Sellers will need to make sure their homes are priced appropriately in order to maximize buyer interest and minimize days on the market.

 

The Stock Market – Though the stock market has made great gains since the recession, recent dips have many people concerned about their investments and looking for something less volatile. Even taking into account the recent housing crash, real estate remains a stable investment over time. Housing is both a tangible asset and a necessity, and longtime homeowners typically enjoy both tax benefits and increasing value. All of which makes real estate a very attractive investment option, and just might motivate people to sell their stocks and buy homes instead.

 

Election Year – As the practically non-stop media coverages makes it impossible to forget, 2016 is a presidential election year. It might seem like that has nothing to do with residential real estate, but it does in one very significant way: consumer behavior. When faced with uncertainty, some people respond by holding onto their assets, reluctant to make a big investment when they’re not sure how the election could impact their finances. In fact, a 2014 study by Princeton economist Brandice Canes-Wrone and Jee-Kwang Park of Nazarbayev University found that the closer the race, the more pronounced the effect. It’s still too early to tell what, if any, actual impact the election will have on Florida’s real estate market, but it’s worth keeping in mind.

 

There are other areas worth watching, as well – mortgage rates, corporate relocations, the rental market and so on. While any one of these factors wouldn’t be enough to move the residential real estate market on its own, the right (or wrong) combination could be significant. Real estate is an ever-changing business, and no one can know for sure what might happen next. I’m looking forward to 2016, though, whatever it might bring.

 

*Based on sales and listing data from Alachua, Brevard, Broward, Charlotte, Citrus, Clay, Collier, DeSoto, Duval, Flagler, Hardee, Hernando, Highlands, Hillsborough, Indian River, Lake, Lee, Manatee, Marion, Martin, Miami-Dade, Orange, Osceola, Palm Beach, Pasco, Pinellas, Polk, Sarasota, St. Johns, St. Lucie, Seminole, Sumter and Volusia counties for properties listed or sold in all price ranges as reported by MarketQuest on January 19, 2016, for the period of October 1-December 31, 2015. Source data is deemed reliable but not guaranteed. May not reflect all relevant real estate activity.

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