Thursday, 20 November 2014

Tampa Sales Surge 21% in October

October market statistics released today show continued strengthening in sales activity with prices now starting to follow suit. Sales volume was up 21.5% over the same period last year while new pending sales were also up over 13% in the same period. Average and median price were up 6.6% and 7% on the year respectively for single family. Townhomes and condos showed massive gains of 15% and 17% on the median and average price. .  The October figures continue the trend that we noted in September where there was a sharp increase in sales.

The historical bar graphs on the report lend further relevance: After being one of the hardest hit markets in the U.S. Tampa saw double digit price increases in 2013. For the most part 2014 saw marginal gains in sales and prices over the record pace of the year before. One trend that did emerge was sharply lower cash sales as a more “normalized” market took over from one dominated by investors.

In September of 2014 however we noted a sharp increase in sales while prices remained flat. October brings a massive increase in sales volume and prices also starting to move higher. We will see if this trend continues to form a true “second wind”.

Saturday, 8 November 2014

Tampa Sales Surge in Sept 2014

While I have not written anything for awhile here there has been little to write about.

After the huge price increases the year before sales and prices held flat over the majority of the spring and summer of 2013. Another trend that seemed particularly prevalent was the reduced number of cash sales (normally attributed to investors). However even with double digit declines in this group the overall sales volume held firm.

September 2014 Florida Realtors Report

Of note in the September report is the sharp increase in sales volumes. Sales are up more than 10% over the previous year and new pending sales are up more than 11%. Even the cash sales are up 6.5% due largely to an increase in REO sales clearing through the system.

Meanwhile both the workforce and employment numbers continue to set new records.

Tuesday, 22 October 2013

Tampa Employment Reaches Record High

After considerable delay due to the government shutdown jobs report was released today showing 148,000 jobs created nationally in September and falling short of analyst estimates of 180,000. In addition a substantial amount of the increase was due to seasonal government hiring including school teachers and staff.

Tampa Reaches New High in August 2013

While the Tampa numbers for September have yet to be released the numbers for August numbers have just been made available: Employment reached a new high at 1,264,590. The previous high of 1,262,967 was reached in July 2007. In addition the unemployment rate dropped to 7.0% from the 7.3% recorded in July. Tampa unemployment follows a seasonal trend with August marking the beginning of the winter cycle. From July 2012 to April 2013 the unemployment rate fell from 9.3% to 6.7% before rebounding back to the 7.3% in the summer

Graph of uneployment showing consistent mid-year seasonal spike.
The September numbers are still to come and should be unaffected by the shutdown. Thereafter it is unclear how the numbers will be affected moving forward. We do note however that government employment has been trending down in Tampa generally and that the recent gains are entirely due to the private-sector. 

Wednesday, 16 October 2013

Tampa Home Prices Remain Affordable

Despite a strong recovery Tampa home prices remain affordable to the majority of middle-class buyers according to a new study byTrulia. The study sites affordability concerns in several markets as a result of recent price increases. In Tampa however 73% of middle-class families can afford an average price home costing a maximum of $216,000. 

Among the locations where homes are most affordable Tampa also stands out as one of the most desirable places to live. Consider that in Miami for example, only 51% of families can afford to own a home and West Palm Beach where the percentage is 58%. Of major Florida centres Orlando seems the closest competitor where 69% of families can afford an average home of $222,000.

Tampa also shows relative strength among affordable markets in terms of economic development. We recently compared the Toronto to Tampa market in terms of a number of benchmarks including average price to average household income. In Tampa it took the average family earning $58,000 approximately 3.58 years to save for the average detached house costing approximately $204,000. In Toronto by contrast it would take the average family making $68,000 some 9.3 years to purchase an average home costing 635,000.

Monday, 14 October 2013

Flood Insurance Increases Pose New Opportnities

On October 1, 2013 changes to FEMA flood insurance program took place which are expected to have dramatic effect on real estate values in Florida and other States where there are a number of flood zones.

This writing summarizes the effect of the changes, it's effect on the current portfolio, and identification of opportunities moving forward.

Identification of issue.

Email administers a mandatory national insurance program for properties in high-risk flood areas. This is accompanied by a complex series of flood maps and surveying elevations for any given area which dictate the amount of risk. When building new homes in the flood area it is possible to simply adhere to the FEMA guidelines and thereby reduce the amount of risk and has the rate of insurance payable. Below is a picture of a stem-wall  upon which new home is to be built in the flood area.

The system has only been implemented however since the mid-1970s and continued through the 1980s. Living by the water has always been popular and many of the homes in flood risk areas were constructed well before that time. The map view below shows new houses built on a stem-wall on the one side of the street with older houses built at road level on the other (see height of door/entrance).

View Tampa Port Land Lots in a larger map

As can be seen the stem-wall is almost as high as the first floor of the house without one so that the older house would be almost underwater before the newer one were even affected. On a purely risk-adjusted basis the market rate of insurance for the older house would be in excess of $10,000 per year. To compensate for this a series of subsidies has been put in place for older homes to normalize insurance rates. However as a result of several recent natural disasters which severely depleted the fund the subsidies were legislated to be phased out effective October 1, 2013. The phaseout is gradual for most homeowners except in cases where the homes have been recently sold. Nevertheless even homeowners who remain in their homes have complained of rates doubling wild new purchasers (of older homes) have seen rates increase up to 3000%.

The obvious effect of this is to diminish the economic value of these older homes as the flood insurance premium alone would be sufficient to otherwise carry a much newer or larger property. As a result there have been several political initiatives by governors of affected states including Florida to cause amendments or reversal of these policies. It seems unlikely however that they would be entirely reversed as a result of funding constraints.

Effect on Current Portfolio

The units in the rental portfolio were all newly constructed so as to avoid the subsidized premiums. Other than normal rate increases they should not be affected.

New Opportunities

Assuming that the increased rates remain in force, they also present some unique opportunities: many of the properties affected by the increased rates are in desirable waterfront areas where there is a lot of new construction activity. The factors outlined in this paper may be responsible for causing yet more transformative change  as old properties are replaced with new.

A further opportunity lies in the exemption from the mandatory insurance for properties which are owned free and clear. This would include properties which are purchased with funds borrowed from another country provided that there is no US mortgage registered against the property. The majority of rental investments are financed in this manner as limited other options exist. 

As the properties can be purchased for a nominal premium over the cost of comparable vacant land and are in good areas, they produce excellent income during the hold. At the same time this income gives the investor far more flexibility than with the raw land.

As with many strategies the trick is not just identifying the opportunity but also having the resources to implement. Check out our websites and blog for information on our rental management and construction activities.

Left: Picture of one of our current new builds showing height of stem wall.

Saturday, 21 September 2013

Tampa Prices, Sales Continue Strong Growth

Tampa home prices continued to show strong growth in August 2013 with the median price of 23.1% over August 2012. The average price was up 15% and close sales improved 10% over the previous year. At 4.4 months supply inventories are starting to creep back into the system but still down 22.5% from the almost 6 months of inventory in August 2012.

These statistics are particularly positive as they come in three months after major interest rate increases. There was further good news on the interest rate front this week as the Fed indicated no intention to clawback its bond and mortgage-backed securities buying.

One of the major underlying reasons for the strong real estate recovery in Tampa has been employment. After seeing rates peak of over 12 1/2% in 2012, Tampa has staged a remarkable recovery. Unemployment has returned to national average rates and was under 7% for most of the spring and summer of 2013. Well the August unemployment rate has not been published the total nonfarm employment is the highest it has been in a six-month period After a brief pullback in June and July. Construction activity has also been a strong performer recently where it had been virtually non-existent after the housing crash. Tampa is the 16th most active new construction market in the United States in 2013.


Saturday, 17 August 2013

Construction Underway at Port Tampa Beach Homes

Construction is underway at our new development of beach homes in the Port of Tampa where we have joined and number of premiere local and national builders in developing this exiting downtown area less than 2 miles from the beach.  

Stem wall picture July 2013
Our own designs follow the "coastal vernacular" style that has recently gained popularity elsewhere in Florida. The main theme combines traditional design elements with the latest in construction materials and technology.The model home depicted above is located at 7220 Mascotte St. and should be completed by year end.

For further information on this or our other models please contact me.