Government plans stimulate hope for Florida’s real estate markets
May 13, 2009
GAINESVILLE, Fla. – May 13, 2009 – The first signs of confidence in Florida real estate are starting to appear, along with hopes that government stimulus plans will unfreeze markets and reinvigorate business, the latest University of Florida (UF) survey finds.
“Positive responses to several questions lead us to believe there is light at the end of the tunnel,” says Timothy Becker, director of UF’s Bergstrom Center for Real Estate Studies, which conducts the quarterly survey.
Perhaps most significant is that respondents’ perception of their own business outlook has improved after three years of steady decline.
“If real estate investors think there are opportunities out there for their firms to make money, that means there are deals that will be getting done. And when deals start getting done, various participants in the transactions make money, and it’s almost like a snowball effect,” Becker says.
Another positive finding was the perceived availability of capital, which jumped to its highest level in the survey’s history. Respondents expect some money that has sat in treasury funds to start trickling back into real estate as investors gain confidence with the steps banks are taking to rid their balance sheets of bad assets, Becker says – though the fact that capital is not yet available is still a concern. If loans come due for shopping centers, for example, and there is no capital in the marketplace to refinance these loans, it will slow the recovery.
Retail is worse off than any other real estate sector because consumers are buying less, Becker says. Job losses mean the office rental market is not doing well either as owners try to fill newly vacated space. Apartment occupancy also fell, with confidence declining more in the most recent survey.
“In talking to people, it appears as their houses are foreclosing, they’re not necessarily going into rental apartments,” Becker notes. “They’ve moving in with family or friends in the short term.”
Single-family housing prices are expected to continue to drop, especially in areas with a glut of foreclosures, Becker says. Because banks want to get these properties off their books as they hit the market, housing prices are likely to fall as these properties are sold.
“In the short term, I think we will have more downward pressure on prices, particularly in places where foreclosures have been pretty high,” says Becker. The most notably hard hit area in the state is Lee County in southwest Florida, with places such as Miami and even Jacksonville hurting to some extent.
The combination of low prices and interest rates has boosted the number of houses being sold, particularly in some areas; and new construction is competing unusually well against foreclosed homes.
According to Becker, lower interest rates and construction costs make new homes more affordable, creating an attractive option for would-be buyers. “With the number of distressed houses on the market, you would think that buyers would typically lean toward those because they would be cheaper,” he says. “But in many cases, foreclosed homes have been sitting on the market for long periods of time, not being maintained, and people aren’t willing to invest the money it takes to fix them back up.”
The latest statewide survey of Florida real estate trends, completed in March, is based on 335 responses from leaders and professional advisers in the industry. It follows the December survey, which showed that confidence in real estate markets had sunk to its lowest level since the survey began in July 2006.
© 2009 FLORIDA ASSOCIATION OF REALTORS®