Investors Hold Key To Orlando Real Estate Market’s Continued Growth In 2006

U.S. housing markets should remain healthy this year, albeit a bit off last year’s record-setting pace. However, that is conditional on how investors and speculators behave in coming months, experts in Orlando said Wednesday, writes Jack Snyder of the Orlando Sentinel.

Economists at the International Builders’ Show warned that, if investors who have flooded the U.S. market (particularly in places like Florida) in recent years begin selling off properties as appreciation rates decline — or investments such as stocks become more attractive — it could lead to problems in certain parts of the country.

Those markets where investment and speculation have been strongest — such as in the case of Florida real estate - — could see for-sale inventories mushroom.

“I call it the hidden supply or inventory. It remains to be seen how big a deal this [investor inventory] is, but that’s the big question for housing this year.” said David Seiders, chief economist for the National Association of Home Builders, the sponsor of this week’s giant trade show at the Orange County Convention Center.

The home builders’ annual meeting and trade show — the biggest convention on Orlando’s calendar this year — got off to a good start Wednesday, and more than 100,000 people are expected to attend the event through Saturday. The economists at the show Wednesday said that about 20 percent of the new and existing homes sold across the U.S. last year were gobbled up by investors and second-home buyers.

In sizzling housing markets around the country, 31-39 percent of homes sold last year are thought to have been bought by investors or vacationers. Resort homes in the Walt Disney World area, for example, are a huge part of the local housing market and draw both domestic and international buyers. Other hot markets rife with investor/second-home sales last year include, but are not limited to:

• Las Vegas, Nv.
• San Francisco, Ca.
• Phoenix / Tuscon, Az.
• Honolulu, Hi.
• Monterey, Calif.

In addition to Orlando’s rapid investment loan growth, there are three other major metro Florida real estate markets in which sales to investors or second-home owners comprised 25-30 percent of all sales: Miami, Tampa-St. Petersburg and Jacksonville. Fannie Mae, the national mortgage buyer, cited unprecedented investor strength as a big reason home sales soared to a fifth consecutive record year in 2005.

Locally, the Orlando real estate market is thought to have set a 13th consecutive annual record for sales in 2005, as the median home price rose more than 30 percent. But appreciation slowed dramatically during the second half of the year, while the housing inventory available for sale ballooned from fewer than 3,000 in March to more than 9,600 in November.

Freddie Mac, another national mortgage buyer, predicted that the percentage increase in home prices this year would drop to single-digit levels. The foundation for a healthy housing market appears to be in place this year, thanks to low inflation, moderate Florida home mortgage loan rates and strong job creation. But things will likely slow a bit from the meteoric growth of the past five years. Double-digit growth rate in prices — the big draw for investors — isn’t likely to recur in most markets this year.