This week Canadian Wealth magazine had a piece that covered the Florida real estate market. Because they report mostly to Canadians, their view of us if from 1550 miles away. Sometimes that makes for errors, sometimes clarity. But in any case, their reporting is motivating buyers from Canada to come to Florida and purchase real estate.
From the pages of their article, they wrote (and I quote), Florida experienced one of the biggest property booms in America. But lax lending policies coupled with borrower greed led to massive growth in a relatively short period of time. Despite the meteoric rise in prices, many believed that market couldn’t fall. But when the U.S. market imploded, Florida was one of the first states to crash. And, like the rest of the country, many watched helplessly as prices and demand plunged.
As ‘Foreclosure’ and ‘For Sale’ signs popped up like weeds, many Canadians – retired snowbirds and keen investors alike – started taking interest. Florida prices plunged more than 40 per cent peak-to-trough on the FHFA Index and top destinations such as Orlando experienced a 56 per cent drop in prices from an average $258,000 (U.S.) at the peak, down to $113,400 in 2011. Rock bottom prices and a high exchange rate made purchasing U.S. property an attractive proposition for northern neighbors.
According to the National Association of Realtors, nearly a quarter of home sales in the 12 months ending in March 2012 were by Canadians.
Times, however, are changing. A 2012 report from BMO indicates that while the housing market in Florida is relatively stressed, the worst is over. “Florida was one of the epicenters of the housing bubble-bust cycle, but there are mounting signs that a recovery is under way,” it said.
Economists indicate that the Florida economy is recovering at a modest pace with real GDP expected to grow 1.9 per cent in 2013. Unemployment is trending down, but it is still an above-average 8.7 per cent. Certain pockets of the housing market are showing promise, with prices in Miami and Tampa bouncing up 9 per cent from their late-2011 lows. Another positive sign is a reduction in the supply of homes.
There are bidding wars and multiple offers on almost every property. As long as a home is not overpriced, the market has delivered a buyer within the first week of listing and sometimes it’s sold before it even hits the public MLS. Building starts are up and more and more people are paying builder prices for a new home due to the lack of inventory available.
However, it should be noted that the foreclosure rate is still the highest in the U.S. at 13.7 per cent.
Overall, Florida’s housing market is one of the most stressed (second of 50) in the country, behind Nevada, but a draw down in inventories and upward price momentum are positive indications that the worst is over.
We may be seeing the beginning of the end for Florida’s negative market cycle, Florida Home Finders of Canada vice president Brian Ellis, says it’s not too late for Canadians looking to buy.
Most savvy real estate investors will tell you the best time to buy is just when the market has turned a corner and is starting to go up – and that’s where Florida is now. All of the factors that have made U.S. property an attractive real estate proposition still hold true; Florida real estate prices are low, the Canadian dollar is strong, and low interest rates at home make it easier for Canadians to equity out of their home and put cash down on a U.S. property. The only drawback to the Florida market, says Ellis, is that this situation will not last forever.
Canadians have to jump and they have to jump fast if they want to take advantage of this marketplace.
Florida has unique economic advantages that set it apart from other destinations. Florida – which is already the fourth largest state in the country – has long been one of the fastest growing regions in the U.S., and by the next census will surpass New York to become the third largest state in population.
Florida’s attractions make it one of the top tourist destinations in America and its weather will always be a selling point for retirees looking to escape cooler climes. As Jerry Seinfeld quipped, “my parents didn’t want to move to Florida, but they turned 60, and that’s the law.”
There is no state tax for individuals and business structures in the state, making it attractive for entrepreneurial activity. Major changes to the Panama Canal – which will allow container ships to reach Florida in 2014 – will make the state a stopping point for distribution of imports to the Eastern Seaboard. And on top of that, major inter-modal expansion is being planned for Central Florida.
The recovery in Florida is not happening uniformly across the state. As a top tourist destination, Orlando is starting to benefit from a recovery in tourism-related employment and expansions to Disney World’s Magic Kingdom Park, SeaWorld Orlando, and Universal Studios Florida. Meanwhile, Miami is experiencing a turnaround in prices, thanks in large part to foreign investment. The Miami Association of Realtors reported a 34 per cent increase to $160,000 in median sales price of condominiums in Miami-Dade County in 2012 over the previous year.
The hottest market is currently central Florida, from Orlando to the Tampa region, with returns yielding on average 8–12 per cent. In the south Florida market returns are less, ranging from 6–10 per cent, but appreciation and prices are much greater. However, it depends on the investor’s appetite for risk and investment goals.
80 per cent of Canadians buying real estate in Florida are purchasing condos. Condos allow owners to lock the door and walk away and not have to worry about the exterior maintenance. So that’s what most Canadians are buying. Vacation rentals are also a very popular option right now for those not as concerned with the short-term return but are looking to win big on the capital gain over the long run.
Dane Hahn is a real estate professional serving Sarasota and Charlotte counties. You can reach him at firstname.lastname@example.org or by phone at 941-681-0312.