November Tampa Prices Up 21.7% vs. 2011

Tampa prices showed strong improvement in November with the median price of single-family homes up 21.7% over November 2011. While condos were up only 6.9% in the same period, This follows an October price that was fully 22% above October 2011. Average prices for single-family homes and condos were up a more moderate 16% and 18% respectively.

Click for full statistics report

 

Looking at the long-term price charts shows a definite bottom in the market at January 2011. Prices in 2011 showed considerable gains prior to being eroded by the seasonal retreat at the end of the year. At the end January 2012 showed only a 2.8% improvement for homes and 6.3% for condos over January 2011. Since that time however the numbers have been far more impressive in many cases posting double-digit year-over-year gains. The market has also shown surprising strength in the final months of the year giving up very little if any of its earlier gains and providing a strong foundation For the price growth that typically takes hold in the spring.

 

The numbers in relation to some insular examples are even more impressive. Take for example our most popular building the Quarter atYBOR. In Spring 2011 we commenced buying 600 square-foot one-bedroom units for approximately $40,000 in foreclosure sales. By fall 2012 similar units sold for an excess of $74,000 in foreclosure sales. Still they are a fraction of their 2007 peak price of over $180,000.

 

One point that sticks out from the November statistics appears on the last page or the lender mediated overview. This charts the number of distressed sales of the percentage of the global market and shows a marked decrease in the latter half of 2012. Yet still in November lender-mediated or distressed sales accounted for 36.7% of the global market. While the volume of foreclosure sales was up almost 35% over November 2011 short sales showed only a 13% increase. At the end of December 2012 provisions will expire and forgiven debt will become taxable as income again. It remains unclear what if any effect this will have on the distressed market.

On a more subjective level, a recent trip to Tampa revealed some interesting developments, most notably the amount of construction activity. Similar to Toronto there is a increasing trend towards urbanization and redevelopment of areas in proximity to the downtown core. Unlike Toronto however there is very little high-rise development. Instead areas of older homes are being demolished and replaced with larger, newer models. The older homes that remain seem poised for appreciation and in any case make excellent rentals as they have very low cost attached to them. In many cases we saw older properties with rentable structures for less than the cost of serviced lots.

The building activity did not end in the city. On a trip to Brandon, about 15 minutes southeast of Tampa we noted a lot of construction at site of townhomes being built by Lennar. We went to the sales office and found that the remaining examples were selling briskly in the $100-$110 per square foot range. We then drove around those parts of the complex that were already built and true to the representations made, the units appeared to be all occupied. Well we were somewhat surprised that they were able to build them so inexpensively, we nonetheless continued across the street to inspect the units that had just been purchased for $65 per square foot, built in 2006.

 

 

 If buying at these discounts seems too good to be true, in fact there are several catches involved with it: Firstly, it is extremely competitive, so be prepared for multiple offers on almost everything and having very little choice in which property you end up with. And cash only please. No need to consider offers which are conditional on financing that may or may not happen. The result has been to create a bifurcated market, The typical market for new homes driven by access to credit and the investor (distressed) market which is driven by all cash transactions.

 

Closing the books on 2012, it is been a strong year for our Tampa portfolio, growing to in excess of 50 properties. All indications are for even stronger price growth into 2013http://www.realequity.ca/florida/stats/Nov2012.pdf

Why to Invest in Florida July 2012

Why Florida ?

While Florida has always been a popular vacation and retirement destination, a number of far more practical reasons exist to invest there:

Record Low Prices – Florida real estate was extremely hard-hit by the 2008 meltdown. Properties were off over 50% - 70% from peak value vs 30% in the broader US market. Newer properties are available well below replacement (construction) cost.

Cash Flow – Our rentals produce between 6-9% cash-on-cash return after expenses in addition to any capital appreciation on the property.

Solid Recent Price Increases – The Florida market charts show a bottom in January of 2011. Since the beginning of 2012 the median condo price in Tampa has shown double-digit year over year gains.

Declining Inventories – Active listings and months of supply are down between 30%- 40% from May 2011. (see May 2012 Tampa Statistics From above link – Price Increases.

Active Distressed Market – Even though things are now improving, the prevalence of mortgage defaults is still working its way through the system, providing a good supply of distressed properties at below market price for the foreseeable future.

Rapidly Improving Economy / Fundamentals – Florida’s economy in one of the fastest improving in the U.S. and has recovered from one of the worst unemployment rates in the country to come in line with national averages as of late

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Strong net migration – Florida has always experiences strong net migration and is regarded as one of the most desirable places to work and live as well as vacation and retire.

High rental demand – The effects of the crash on credit and public sentiment towards homeownership make renting either a necessity or the preferred choice of many Floridians. Rental demand is high.

Tax benefits – Real estate benefits from favourable tax treatment both here and in the US. Redeveloping foreclosures is particularly attractive as most of the development costs are immediately deductible.

Why RealEquity ?

We Act for You –We are not agents acting for developers trying to offload product in Canada. We represent our investors to find the best deals that suit their criteria.

Fully managed Investment - RealEquity clients enjoy all the benefits of a fully managed investment while retaining individual title to the properties for ultimate liquidity and control. While most clients will travel to Florida to see their portfolio, the entire process goes on without the clients ever having to leave Ontario.

Experience – RealEquity has been acting for Canadian investors in Florida for over a 18 months. We have successfully redeveloped dozens of distressed properties for clients, turning them into top performing rental investments or in some cases selling them for substantial profit.

Specialization – Acting for clients in Canada, Asia and South America, we are specifically focussed on issues applicable to non-resident investors. We offer basic information on tax and cross border issues as well as referrals to qualified professional advisors.

Proven Results – While past performance does not guarantee future results it remains one of the better indicators.

View some of our recent projects

Tampa may Condo prices up 14%. Employment strong.

May closed sales for the Tampa area continued to show strong growth with the median condo price up 14.0% from May 2011, Single family median price up 8% and sales up 14.4% from a year previous. Inventories continue to trend down with a 30.7% reduction in homes for sale. Click for full report

One economic driver behind the recent price increases has been employment: Florida is adding private sector jobs. While the US economy produced only 69,000 jobs in April, 16,800 or 24% of them were in Florida. Florida represents only 6.1% of the US population. Since December 2011 the Florida economy has produced an average of 17,320 jobs per month notwithstanding a reduction in government jobs and the continued battering of construction and related sectors. Statewide unemployment was 8.6% in May, down from 8.7% in April and a steady decline from the 9.9% recorded in December, 2011.

From our perspective the historical rates are most relevant as Florida has suffered some of the highest unemployment rates in the Country since 2009. Poor employment prospects were but one factor leading to the wholesale reduction in Florida housing values: While house prices are off some 30% nationally we are still buying in some areas for 60% off peak price.

While employment is but one indicator of economic health is seems a fairly logical predictor of real estate values as people tend to live near economic opportunity. It seems equally logical that real estate values would lag employment as it takes time for persons to migrate, establish themselves in a new area and ultimately decide to buy a home.

While Florida was “overbuilt” it continues to experience strong population growth. Inventories of homes are now returning to more balanced levels and much of the existing inventory is still priced well below replacement cost. The improved employment outlook is but one factor that will continue to fuel the real estate recovery which is well underway.

Florida Employment Rebounds, Leading Indicators Strong

While the latest US Jobs data paints a bleak picture for the broader economy,  local employment in Florida has been flourishing: Having experienced some of the highest unemployment rates in the country since 2008, Florida is now in line with national average. In April 2012 the unemployment rate was 8.3%, down from 8.6% in March and 10.2% a year earlier.  

While the employment outlook is in line with national rates, housing has only just started to recover from the effects of the previous malaise. While the average home price is down some 30% nationally from peak, we are still buying properties for 30% of their peak value in prime locations. The housing market lags employment as it takes time for people to migrate to new areas, settle in and ultimately decide to buy a home.

Another good leading indicator for housing comes from the equities markets where US Homebuilders have posted some of the strongest sector gains this year. People are ordering and building new homes again for the first time since pre 2008 and many builders are seeing a return to profitability.

Prices in the underlying real estate have also started to move solidly off their January 2011 lows with the median price for Tampa condos up 13% over April 2011. Unlike the stocks which pay no dividends, single family rentals yield between 6-8% cash on cash in addition significant upside potential. Distressed sales offer an opportunity to buy at discount with short sales selling an average of 21% below the price of non-distressed properties.

One of the characteristics of real estate market is that it is slow to respond. It takes time for people to devise and implement real estate decisions. Hence while the market may lag these indicators it seems destined to predictably follow them.

US Real Estate Turnaround Takes Hold

For those following the US Real estate Market the news has taken a dramatic turnaround as of late: This week markets surged as April sales released by the National Association of Realtors showed a dramatic 10% increase in year over year prices, the strongest gains since pre-crisis. Shares of US Homebuilders have seen dramatic gains over recent months on reports showing increased orders. Most call for a moderate price increase in 2012 followed by strong price increases in 2013.

In Tampa the statistics are even more encouraging as the median condo sales price was up 13% over April, 2011. Median single family homes price is up 8% and inventories are 41% lower than April last year both in condos and singles. Tampa has posted solid year / year price gains in the last 4 months with the charts showing a bottom to the market in January 2011.

With the market heavily influenced by foreclosures, how and where you buy the units is critical. Trading distressed sales in select complexes it is possible to easily outperform the broader market: Some downtown complexes are selling for 140% of what we paid last year. In one case we sold a unit for 140% of what we had paid for it within 2 months.  While the downtown market continues to post impressive gains the lack of inventory has become an issue.

Meanwhile in newer complexes outside the core the supply of foreclosures remains strong and the prices continue to be adversely affected. Relatively new properties can be bought far below replacement (construction) cost. When the inventory of distressed properties is absorbed the prices should rise in the same manner as it has done downtown. Longer term, prices will have to exceed construction cost before it becomes economical to build again.

ABC News May 22^nd, 2012 : U.S. April resale housing numbers released by NAR show 10% jump in median price over April 2011. Markets surge on optimistic outlook for US housing.

Washington Post May 15^th: Homebuilder confidence at 5 year high. Building permit applications highest in 3 ½ years.

Time Business, May 15^th, 2012: Housing recovery has officially begun. Investors play crucial role in first stage of recovery.

Florida Properties “Off the Shelf”

Canadians are by far the largest purchases of Florida real estate, accounting for 38% of the 25% of all Florida homes sold to non-residents.

Still one of the largest barriers to investing is the uncertainty of investing at a distance. Another is coming up with the right team to pull your project together: Converting distressed sales to top performing investments takes a whole team of professionals, from Realtors to contractors, rental agents and managers and tax professionals.

We have been privileged to have built portfolios in a number of properties in Tampa representing a mix of everything from student housing to luxury homes. In the majority of cases we have purchased from banks and fully renovated the units prior to renting them (Such as this 1 bedroom unit below)

This allows Clients to buy similar deals “Off the Shelf” with a greater degree of certainty as to the results they will obtain, not only in terms of the property and rents, but also the performance of contractors and other professionals involved in the deal

Any agent can tell you what they think it will cost to renovate a unit or what they believe it might rent for or how long it will take. If they are not responsible for the whole project or have never done one before, how would they really know ?

In providing project management we are accountable for the entire process from acquisition to rental. The whole process flows seamlessly and efficiently, providing excellent times from acquisition to occupancy.

Here is the same unit which had basic renovations and which secured a leading rent of $ 975. within a month of acquisition.

Florida Rents Show Steady Growth

While Florida real estate prices have been something of a roller coaster, rents tell a different story and show consistent growth over time.

Take for example this graph of Tampa “Fair Market Rents” used for the purpose of calculating housing allowance from 1983 to present (Link to base data)



Analysis of the base data shows more consistent growth than the chart: The apparent “fall off” in 2006 is not due to decreasing rents but to changing the basis for the calculation (from the 50^th to the 40^th percentile).

While HUD projects a drop of over 3% in 2012 our experience has been the opposite with the same units renting for 5% more today than they did just last summer. One explanation is that the units we are renting are considerably more expensive than the 40th percentile rents represented by the chart.

In running credit checks on prospective tenants we have noted that a large number of residents could well afford to buy the units they are living in. The demand for higher end rentals is extremely strong, particularly in the larger units. 

This luxury TH rented for $1,650 on the day we closed: December  29th, 2011.