Job market key to Florida real estate market resurgence, study shows

August 11, 2009

Audio

GAINESVILLE, Fla. — Florida real estate won’t rebound until the job market improves, but investor confidence in the outlook for business and availability of money are reasons for cautious optimism, according to the latest survey.

“I think we’re on the road to recovery and even though most markets report they’ve seen the bottom, it’s going to be a long climb, because as long as we continue to lose jobs, the real estate market will be depressed,” said , director of UF’s Bergstrom Center for Real Estate Studies, which conducts the .

The retail and office sectors of the Florida’s real estate market are suffering the most because the large number of people out of work or uneasy about their jobs are spending less money, Becker said. Unless consumer buying patterns change dramatically, national retailers will continue to pull back with more store closings and fewer store openings, he said.

There is some good news, though: The first signs of confidence respondents expressed in the last survey in March about the outlook for their own business and the availability of money for real estate investment have grown stronger, he said. That optimism is spreading to other types of property.

“As more capital becomes available, more transactions happen in the marketplace and that’s how most of our respondents get their income,” he said.

Often, real estate investors have had to change their line of business in order to make money in the uncertain economic climate, Becker said. “We’re seeing companies that used to do nothing but development getting out of developing and going into property management, or folks that buy shopping centers or office buildings focusing on buying distressed mortgage notes,” he said.

A drop in survey participation may be yet another sign of the market’s instability, Becker said. The latest statewide survey of leaders and professional advisers in the industry about Florida real estate trends, which was completed in July, is the third consecutive survey where there has been a decline in the number of responses, down to 309 from 381 in December.

“I think that’s reflective of what is happening in the real estate industry as a whole,” he said. “Participants are leaving the industry because they couldn’t survive, and those people who are left may have no data available to base a response on.”

Florida’s housing market continues to be one of the most depressed in the nation, Becker said. The worst part of the state by far is southwest Florida, with its huge number of foreclosures, and the region’s lack of a diverse economic base makes a recovery unlikely anytime soon, he said.

Although survey respondents said they expect housing prices to stabilize and perhaps even rise, current conditions, which include the availability of low interest rates, are creating increased demand, Becker. “In most parts of Florida, the housing market has gone gangbusters because of all the foreclosed homes on the market and extremely low prices,” he said.

The investment outlook for single family development increased to its highest level since the survey began, with more respondents than ever believing it is a good time to buy, Becker said. “As more land comes onto the marketplace at highly distressed prices, the builders can buy up, and that enhances their position of being able to build a house that’s reasonably priced in today’s market,” he said.

Builders are building smaller houses to satisfy buyers’ preference for lower utility bills and home maintenance costs, Becker said. “I think the energy crisis has got them thinking, ‘Do I really need something so big?” he said.

While the outlook for apartment occupancy has been quite volatile over the previous five quarters, expectations have taken a positive jump, Becker said. As housing foreclosures continue to be processed and apartment complexes offer deep discounts in rent, more people will leave their homes for apartments, he said.

“In the last quarter, we found that homeowners going through foreclosure either continued staying in their homes because they weren’t getting kicked out right away or they moved in with friends and relatives,” he said. “We’re starting to see some of these people rent apartments.”