Friday, 22 June 2012

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.

Saturday, 9 June 2012

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.