This story was originally published in Builder.
The Sunshine State’s housing market is hot. In a recent Lending Tree survey, Florida was rated as the No. 1 place that Americans are moving to. Out of all mortgage requests made during the study, 9.1% were for homes in Florida. Moving companies that worked with out-of-state home buyers reported that 12.4% of all of their requested destinations were for Florida.
The growth has been explosive for the state, which boasts eight of the top 50 housing markets in BUILDER’s Local Leaders list. In 2018 the state’s population was close to 22 million, trailing only Texas at about 28 million and California at nearly 40 million. In 1950, less than 3 million people lived in Florida. Now more than 6 million call the Miami metro area home.
It’s tempting to think of the Sunshine State as a northern extension of Miami-Dade, Broward, and Palm Beach counties but that oversimplifies things. Market data research firm Metrostudy breaks Florida into five distinct housing markets: Jacksonville, Central Florida, Tampa/Sarasota, Southwest (including Ft. Myers and Naples), and South Florida, which includes Miami-Dade, Broward, and Palm Beach counties. Although each market has similarities and most of the state is dominated by large production builders, they are also unique in terms of who is moving there and economic conditions.
“In southwest Florida you have a lot of retirees. In central Florida you have retirees and international buyers,” says Tony Polito, Metrostudy’s regional director for the Tampa area. “In south Florida you have a lot of international buyers.”
Here is a roundup of current housing market conditions in the top five regions in the state:
Jacksonville
Jacksonville is the largest and most populated city in Florida. It offers plentiful opportunities for outdoor recreation, including fishing and golf.
When compared to other MSAs in the state, Jacksonville’s economic outlook is only moderate, says Metrostudy regional director Toby Hoff. There were just under 100,000 net new jobs added since August of 2010, employment growth is expected to average 2.2% and unemployment is expected to remain low at 3.6% One bright spot is Jacksonville’s average annual wage. At $57,300 it’s one of the highest in Florida, he says.
Housing starts have been gradually increasing over the past five years but the growth between 2017 and 2018 was just 2%. There’s a 31 month supply of vacant lots in Jacksonville, which is an average number as compared to the rest of the country. Units under construction are up 17% from last year.
“The bottom line is that the risk, which is not unique to Jacksonville, is that while demand is still good, affordability is rapidly diminishing,” says Hoff. The largest pool of buyers in Jacksonville are first-time and entry-level buyers who are impacted by a lack of choices and affordability. Combining limited options with higher prices concerns Hoff, despite the city’s higher-than-average wages. The three biggest builders in town according to BUILDER’s Local Leaders data for 2018 are D. R. Horton with 24% market share, Dream Finders at 10.9%, and Lennar at 9.5% (Lennar’s market share will likely rise for 2019 numbers, as Lennar has combined its operations with CalAtlantic.)
Central Florida
Home to Orlando and mega theme parks like the Magic Kingdom and Sea World, Central Florida is a unique market, thanks to its strong sales activity across all multiple buyer segments, says Hoff. In addition to local demand there is a diversified base of buyers that includes investors, seasonal residents, international and vacation home buyers.
High demand and a low amount of inventory is pushing prices up, Hoff adds. “Although prices continued to climb, 2018 sales are down -3% when compared to 2017,” says Hoff. “This means buyers are unable or unwilling to pay what sellers are asking. This should cool the pricing trend we’ve seen over the past couple of years, which is good news for buyers.”
To escape the heat, buyers are pushing farther out into the suburbs to get more house for their money. “Builders moving out of the core areas of Central Florida have been able to bring more affordable homes online,” says Hoff. “Buyers in this supply constrained market are now willing to deal with longer commutes or less than desirable schools in order to find something that is both new and in their price range.” The big guns in town for 2018 were production builders Lennar with 12% market share, D.R Horton at 8.3%, and CalAtlantic with 8% (which merged with Lennar early in 2018).
Tampa /Sarasota
Although Tampa, Sarasota, and St. Petersburg are all interconnected, they are very different housing markets. In case you haven’t been paying attention, Tampa is booming, which is helping to generate those jobs that the housing market depends on. Things were kicked off when Tampa Bay Lightning hockey team owner Jeffrey Vinik partnered with Bill Gates on the Water Street District, the $3 billion mixed-use development that is transforming downtown.
“We had been adding 30,000 new jobs on an annual basis in Tampa,” says Polito. “We ended the year in Tampa with our housing start number at 11,618. Which is right where we should be. We started 3,028 units in the fourth quarter, the prior fourth quarter was 2,563 so we saw an 18% jump in the fourth quarter in housing starts.”
County lines hold the keys to the local market. “We have two counties that account for 90% of the housing activity. Hillsborough which the city of Tampa sits in, and Pasco County to the north,” says Polito. “Between Pasco and Hillsborough County, today we have a 14.8 month supply of vacant lots. Market equilibrium in this market is 24 to 36 months. Anything below 24 months means land prices are still rising. You can’t even find a small orange grove to develop.”
Things were going great in Sarasota before the crash as home prices were climbing 15% to 25% a year, which unfortunately resulted in a lot of speculative buying. Things eventually fell back to earth and some builders and developers are still picking up the pieces.
“We’re now at 80% values of our prior median peak,” says Polito. “New home prices are even higher. But if you’re coming down from New York or Chicago, $400,000 for a house sounds like a bargain. Sixty percent of the new sales are to baby boomers or older. Lot supply is very low because there’s not a lot of big land pieces available that aren’t already in play. That’s the issue - but we’re still seeing growth.” As in other markets, housing here was dominated last year by Lennar with 23.2% and D.R. Horton with 10.2%. CalAtlantic Group has 9.7%.
Southwest
All the economic markets in south Florida took a hit from Hurricane Irma late in the summer of 2017 as people were knocked out of work in the service and hospitality industry. Since then things have bounced back and are now showing low unemployment levels. The main dividing line in the Southwest is the one that runs in between Lee and Collier counties.
“Lee County is much more affordable than Collier,” says David Cobb, regional director for Metrostudy. “Most of the housing activity out there is between the $200,000 to $400,000 range.” In Lee County starts are up 25% year after yearbut Collier has seen near recession-like conditions since 2016. Inventory is high and prices for new homes are in the $450,000 to $500,000 range. As a result, sales are off.
Overall Cobb says the current start pace of about 5,000 units a year in master planned communities in the Southwest is about average, land inventory is somewhat constrained with stronger growth in the affordable, $200,000 to $400,000 range. Homes priced in the $600,000’s and up are a tougher sell. The affordability index is better in the Southwest as compared to the Southeast and once again, the market here was dominated by Lennar in 2018 with 27.8% of the market.
South Florida
Metrostudy considers south Florida to be a tale of two coasts: the Treasure Coast which includes Vero, Port St. Lucia, and Jupiter, and the Gold Coast that starts just south and runs all the way to Key Largo. “The Treasure Coast is lightly populated and that is where our most affordable housing is,” says Cobb. “The Gold Coast is comprised of Broward, Palm Beach, and Miami-Dade and 90% of the housing starts and population are in that area.”
The Gold Coast has culture, deep pockets of wealth, and panache. Unfortunately for builders, land is hard to come by and competition is tough. “Single family starts and closings, excluding condos, used to average about 22,000 per year around the turn of the century in South Florida,” says Cobb. After a run-up to even higher levels in the early 2000’s things started to head south in the first quarter of 2007 and they’ve never fully recovered. “Starts are now are around 8,000 a year, due to the land constraint situation particularly in Broward, Palm Beach, and Miami-Dade,” says Cobb.
The condo market which used to be a bright spot in the area has problems of its own as Cobb indicates that it has “bottomed out,” despite a small uptick in the past two quarters. Developers are now striking unconventional partnerships to gain access to land. “Condo developers have reached out to churches, buying church property, building towers on it and giving the churches some space inside,” says Cobb. “There’s at least a dozen of these going on right now.”
Cobb also notes that the condo rental market is stronger than the condo sales market. Besides the battle for buildable land, it’s hard for a smaller player to crack into the market. “Lennar is the largest builder in South Florida, they’ve had their headquarters in Miami since 1954,” says Cobb. The home building giant had a 23.5% market share in this region last year, followed by the Related Group at 14.2%, and D.R. Horton with 7.9%.
This story was originally published in Builder.
