Florida real estate markets slip amid economic worries, political infighting
GAINESVILLE, Fla. — Economic worries and continued acrimony among lawmakers have claimed yet another casualty: The outlook for real estate markets in Florida declined slightly through the second quarter of 2011, according to a new University of Florida survey.
The Survey of Emerging Market Conditions, conducted quarterly by the Kelley A. Bergstrom Center for Real Estate Studies at the Warrington College of Business Administration, concluded that economic and political worries were key components in the decline.
“Uncertainty in the direction of the economy and the political gridlock in Washington weigh[ed] on respondents’ minds,” said Tim Becker, director of the Bergstrom Center. “This prevents companies — making record profits — from investing in personnel. Consumers, uneasy about their own jobs and the slow economic growth, continue to limit spending, which drives a significant portion of gross domestic product. Resolution to the government spending issues in the short and mid-term would help provide more certainty to the marketplace, and is a needed component for meaning improvement in the real estate markets.”
Those doubts affected UF’s Commercial Real Estate Sentiment Index, which declined for the first time since the third quarter of 2009, and high unemployment figures played a role in that decline.
“Even though unemployment in Florida improved in many markets, the pace of change and the still-high levels are affecting the pace of improvements in the real estate markets,” Becker said. “Consumers continue to be cautious and pessimistic about their own spending, which is also affecting the rate of fundamental improvement.”
One of the measures used to gauge the health of the residential real estate market is the absorption rate, which is the rate at which the inventory of homes for sale is being sold. The higher the rate, the more active the market. In the latest UF survey, the outlook for new single-family home absorption declined because of the struggling economy, but the outlook for condominium absorption increased for the third consecutive quarter to a new survey high. Becker said a large influx of foreign investment in Florida’s condo sector is a reason for the improvement.
The outlook for prices of new single-family homes and condominiums increased this quarter, as did expectations for occupancy for apartments and condo conversions. Respondents believe current occupancy levels warrant price increases in line with inflation despite a sharp drop in apartment investment, Becker said.
The outlook for industrial occupancy declined for both warehouse and flex space, but the outlook for investment in warehouse space increased. The outlooks for occupancy in office and retail space also declined, but respondents believe occupancy levels will stabilize. Land investment and capital availability also declined, Becker said.
The apartment market continues to be the best performing asset class, Becker said, driven by changing demographics and continued home foreclosures, which has increased growth both in supply and rental rates.
“The race is already on to find new development opportunities to address the coming shortage of quality units in major markets,” Becker said.
The hospitality sector also has been healthy as an improving tourism market has improved hotel performance as seen by increasing occupancy and daily rates, Becker said. The number of visitors to Florida in the first quarter rose by 3.3 percent to more than 23 million, Becker said. He also said the dollar’s weakness against foreign currencies is driving more foreign tourism, which is leading to an increase in investment from foreign investors into Florida.
“Overall the future remains uncertain and will continue to depend on policies from Washington that effect both spending and job growth over the coming quarters,” Becker said. “Positive steps in either or both of those areas with have a positive impact on real estate markets.”
The survey is the most extensive of Florida professional real estate analysts and investors conducted on an ongoing basis. The total number of participants in the current survey is 172, who represent 13 urban regions and up to 15 property types.