Investor appetite fuels Florida housing recovery
Will the rally lead to a healthy transition?
It’s no doubt the Sunshine State is posting impressive gains in statewide closed sales, new listings and pending sales.
The Florida housing market can attribute the 19th consecutive month year-over-year increases to a specific group of individuals sweeping in to pick up the low-hanging fruit: investors.
Roughly 50% of single-family unit transactions are cash, evidence that there’s a significant role for investors in the recovery, specifically hedge funds and private equity firms, explained University of Central Florida economist Sean Snaith.
"I think the private equity money sees a good return on their investment because even with higher prices, they are buying these properties on relatively depressed levels and turning around and renting them, leading to a nice yield on their investment," Snaith said.
The potential fly in the ointment is how to pass the baton from an investor-led recovery to something more traditional.
The goal is to normalize Florida’s housing recovery to something more traditional so the state does not have to rely on investors to bring the market back on its feet.
Statewide closed sales of existing single-family homes totaled 21,238, up 20.9% from year-ago figures, according to data from Florida Realtors.
Meanwhile, pending sales for existing single-family homes rose 25.9% from the previous July. The statewide median sales price for single-family existing homes hit $177,500, up 18.7% from last year.
"We're seeing double-digit gains in statewide closed sales, new listings, pending sales and higher median prices," said 2013 Florida Realtors President Dean Asher.
He added, "And these increases are happening in both the single-family and the townhome-condo markets. Florida's housing market is growing and that's good news for our economy."
Investment activity has been the primary driver in Florida, pushing demand up and reviving the market to get it back to where it is now.
The amount of inventory at discounted rates, historically low interest rates, coupled with significant employment increases has pushed buyers back into the market, explained Florida Realtors chief economist John Truccillo.
"There is a big demand in the market and people are buying in at the higher ranges," Truccillo stated.
He continued, "All of those things are coming about, and people realize it’s a good time to get in before those bargains have completely disappeared."
It’s no doubt that the shadow inventory has decreased over the past five years as investors have taken up distressed properties from lenders in bulk, while the judicial foreclosure pipeline is moving along steadily.
While sales are up across the board, the biggest increases are coming in short sales – particularly distressed short sales where the homeowner is in foreclosure when selling – and also sales at the foreclosure auction, according to RealtyTrac data.
"This certainly suggests the increases we’ve seen in foreclosure starts and scheduled foreclosure auctions in Florida over the past 18 months are now starting to translate into more previously shadow inventory available for sale, both in the form of short sales and foreclosure auction sales," concluded RealtyTrac vice president Daren Blomquist.