Home Prices Squeeze Central Floridians, Too

While we’ve talked at length about South Florida home prices, the American dream is also fading fast for the Central Florida middle class, according to a report in today’s Orlando Sentinel.

Recent data shows that the booming Central Florida housing market is making more and more households with incomes of $75,000 unable to afford a home. Earlier this month, Orange County Mayor Rich Crotty asked a task force to tackle what housing experts and elected officials say is a crisis.

Would-be first-time home buyers such as Matt Oliver, a Kissimmee police officer, the issue is already on their (rented) doorsteps.

“My dad was a welder and worked hard, and we had a house growing up. I have a college degree, and it seems out of reach to afford a house and live a decent life,” said Oliver, who’s been trying to buy a home for 18 months, even though he and his fiancee earn nearly $70,000 combined.

Local economic indicators don’t fully explain why many Central Floridians have been squeezed out of the biggest housing boom in the nation’s history. Regional and Florida unemployment rates are lower than the national average, and job growth is strong. But wages have not kept pace with the record rise in home prices, in the Orlando area or nationally.

• Locally, median household income has risen about 16 percent since 2000
• The median existing-home sales price, meanwhile, has jumped 138 percent.

About half of the households in Orange County have annual incomes in the $25,000-$75,000 range — one measure of an area’s middle class — and about half of those households don’t own their homes. A household earning $25,000 generally can’t afford a home that costs more than $90,000, while one with an income of $75,000 tops out at a home price of about $265,000.

Yet in March, the local median sales price was $259,700, according to the Florida Association of Realtors. Until recently, there weren’t enough homes for sale overall to satisfy the growing region, said Mark Vitner, a senior economist with Wachovia Corp. Vitner advocates easing the area’s land-use restrictions designed to curb sprawl, believing that only a big jump in the number of homes available will cool rising prices.

“Part of the reason unemployment is so low is a lot of people cannot afford to come to these areas to work. It’s amazing the pickle we’ve gotten ourselves into,” he said.

WANTING TO STAY IN THE AREA, BUT STRUGGLING

Oliver and his fiancee, Dari Ocasio, grew up in the Orlando area and want to stay close to family as they plan their new life. At first, that meant making do with a condo or townhouse as their starter home. But those prices weren’t much better. They were set to buy a condo in need of “TLC” until they calculated that, with maintenance fees and insurance, the payments would still be out of reach.

Besides, what they really wanted was a house with a yard, a dream that leaves them even further out in the cold.

“We hear about how much cheaper houses are in South Carolina, North Carolina, Georgia. I don’t want to move just because I can’t afford a house here, but we have really thought about it,” Ocasio said.

Central Florida has many appealing traits, yet the region is facing more-competitive pressure from other parts of the nation in terms of housing affordability, said Charles Sloan, executive vice president of the Metro Orlando Economic Development Commission.

“We no longer have a competitive advantage” in attracting workers and companies looking to relocate, he said.

Corporate recruiters also are admitting there is a crisis. Metro Orlando is one of the least affordable [regions] in the country. Jim Lewis, senior V.P. and general manager of Disney Vacation Development Inc., says it is becoming difficult for him to recruit talent.

Laura Boisvert, Progress Energy Florida regional vice president, says the electric company is worried because it has trouble finding housing for key workers such as linemen, who have to act fast to restore power and string lines. Having those employees commute farther to work from less-expensive neighborhoods in outlying areas is impractical, as they should be within 30-40 minutes of work in order to perform optimally.

THE TEACHER CRISIS

We’ve seen Palm Beach and Broward Counties address the need for affordable housing to maintain working-class professionals such as teachers. But it’s not just a problem for the South Florida housing market any longer. Grace Lias, Director of Human Resources for Orange County Public Schools, is in competition for teachers with areas as far away as New York. But New York helps subsidize housing for its teachers.

Lias said most teachers in Orange County — 62 percent — have less than 10 years’ experience and are mobile, as in able to pick up and move more easily than longer-term employees can. The average salary of those 62 percent is $35,000 — not enough to buy a decent home.

On the flip side, few experts are predicting a slowdown in people looking to relocate to Central Florida, especially moderate-income workers who are attracted to Disney World and the hospitality industry. One thing Orlando and vicinity can do is the same thing other cities and regions have done when faced with finite land and growing populations: Build upward.

Michael Pyatok, an architect and affordable-housing expert with Arizona State University, says that greater density is the closest thing to a single solution in dealing with affordability. There just isn’t enough Central Florida real estate to go around, so people must share it. But it takes changing the mindset of residents accustomed to space, governments bound by red tape, and homeowners who fear strangers.

Central Florida leaders better learn fast how to pull this off or more pain is sure to come. The ultra-expensive Broward County housing market and other areas of South Florida — where workers are bused in and out each day — are already facing those challenges. A breakdown of South Florida real estate costs should illustrate this loud and clear.

With smaller lots, clusters of mixed-price units, auto-free courtyards and higher and smarter housing, housing in Florida can be affordable. Without these changes, it could be a thing of the past.

A BETTER 2007?

Perhaps the best hope for relief, short of government intervention, is the economy now that residential housing markets are, at long last, beginning to favor the buyer. Some economists predict that home prices will look a whole lot better in 2007. Prices rose so fast for so long, and are now adjusting to historic norms.

But the problem of affordability may not go away. The nation’s biggest home builders are consolidating. The top 10 now control record levels of homes and land, and command higher prices for that reason alone. Plus, the big builders are the only ones with the kind of money needed to pay soaring development costs.

The outcome of the affordability crisis is unclear, but experts agree that, for high-growth areas such as Central Florida, the pressure will continue to build. For prospective buyers hindered by soaring prices, and now the increasing borrowing costs of a Florida home loan, only time will tell if the crisis will ease.