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Florida Market Update

Millionacres logo Millionacres 6/3/2020 Motley Fool Staff
a palm tree in front of a body of water: Florida Market Update © Provided by The Motley Fool Florida Market Update

New data points to Florida being a healthy real estate market despite tough times caused by the pandemic and the challenges it imposed on short-term rentals. Despite this, Florida has seen year-over-year appreciation jumps, even with a drop in foreign buyers. Florida is also seeing the beginning of a strong return of domestic travelers.

Further, tight inventory across the board will keep the housing market buoyed in the medium term, assuming no further economic disruptions are experienced. Here's an overview of the current trends in Florida real estate and what real estate investors need to know about this market.

Florida real estate: The data

According to the recent Q1 2020 Housing Price Index (HPI) published by the Federal Housing Finance Agency (FHFA), Florida ranks No. 12 in U.S. states with year-over-year price growth, sitting at 7.1%. Nationally, the housing appreciation rate sat at 5.7% for the same period. Looking at the FHFA's five-year trend for Florida, the appreciation rate sits at 48%.

When looking at the FHFA HPI top 100 metro area rankings, Florida markets occupy four of the top 20 slots for year-over-year appreciation: No. 7 Jacksonville at 9.1%, No. 8 Orlando at 8.9%, No. 13 Fort Lauderdale at 8.3%, and No. 18 Tampa-St. Petersburg-Clearwater at 7.9%.

New Q1 2020 data from the Florida Realtors reveal the following statistics about the real estate market in the sunshine state:

  • Single-family home sales have increased by 10% between Q1 2020 and Q1 2019.
  • Median sales prices have increased by 6.7% over the same time period from $253,000 to $270,000. For townhomes and condos, prices increased by 10.5%.
  • Sales volume increased a staggering 19% year over year for single-family homes, and 15% for condos and townhomes, despite a drop in foreign buyers (more on that below).
  • New listings are down across the board, 6% and 4% lower for condos/townhomes and single-family homes, respectively.
  • The single-family home inventory is down 14% and months of supply down 19% to just 3.4 months.
  • Condo and townhome inventory are likewise down almost 22%, with a 12% drop in monthly supply of inventory to 5.5 months.

Across the state, real estate prices are on a steady upward trajectory with an increasingly limited supply of inventory. This reality will likely keep prices buoyed so long as we continue reopening businesses and the economy in Q2-Q3 2020.

According to the newest rent data from Apartment List, rents in Florida have been following a flattening trend, like many other states.

  • Florida: The month-over-month rent change statewide for May is -0.3%, whereas the year-over-year change is 0.6%.
  • Orlando: Rent growth in Orlando saw a year-over-year drop of 1.5%
  • Miami: Rent growth in Miami year over year remained flat at 0.2%.
  • Fort Lauderdale: Rent growth in Fort Lauderdale saw a year-over-year increase of 1.1%.
  • Jacksonville: Rent growth in Jacksonville stood at 0.8% year over year in May.

International demand declining

According to a recently released report from the National Association of Realtors (NAR), the latest reporting period under research (August 2018 to July 2019) shows a 30% drop in international buyer interest in Florida. Specifically, in the previous reporting period, there was almost $23 billion in transactions from foreign buyers. For the current period, this investment amount sits at $16 billion.

Canadians continued to be the primary foreign purchaser of Florida real estate ($3.3 billion), buying double the volume amount than the second on the list, Brazil ($1.6 billion). NAR notes that "Displaced from last year's top five were China and the United Kingdom. The decline in Florida's Chinese buyers is reflective of the decline in Chinese buyers nationally. During April 2018-March 2019, the fraction of Chinese buyers to all foreign buyers fell to 11% from 15% in the prior period."

A full 53% of foreign buyers went to the Miami, Fort Lauderdale, and West Palm Beach markets, with 11% choosing the Orlando area. The average purchase price for foreign buyers sat at $288,600, and 67% of the purchases were made using all cash.

Short-term rentals

It's no secret that the short-term rental and travel industry were hit hard this spring. And for Florida, that can be particularly difficult given that according to a University of Central Florida study, the economic impact of Florida's vacation rentals totals approximately $27 billion dollars and directly supports some 115,000 jobs.

But businesses are starting to open up again, including vacation rentals. As of the week of May 26, Governor DeSantis gave approval to 42 of Florida's 67 counties to reopen vacation rentals.

We are also seeing an uptick in travel bookings for domestic travelers. Short-term rental analytics firm AirDNA reported last week on a surge in domestic travel. Specifically, as of April 6, 2020, domestic travelers to U.S. cities increased by 92%. When looking only at leisure destinations such as many Florida cities, we are seeing a rebound rate of 322% for domestic travelers.

Key Data Dashboard found similar data for short-term rental bookings on the Memorial Day weekend. Reportedly, on May 19 when many northeast Florida counties were given the green light to reopen, bookings doubled when compared to the day before. And of the reservations made between May 19 and 25, 60% were for arrivals over the next 30 days.

Real estate investors may be able to find opportunities in Florida's real estate post-pandemic. Some short-term rental companies and boutique hotels were hit particularly hard by the economic shutdown. Businesses that weren't well-capitalized may be now looking to offload poorly-producing assets. Think about the possibilities of repositioning these assets to medium- or long-term rentals in the medium term until we have fully recovered from the pandemic.

Bottom line

There is clearly a demand for Florida real estate, whether it's single-family homes, condos, or short-term rentals. Housing prices have increased, supply and inventory continue to drop, and we haven't seen a dramatic drop in rents across the state.

With summer just around the corner, Disney World reopening in July, and already an uptick in domestic travel bookings, the Florida real estate market is poised to maintain its robustness over the medium term.

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