University Study: Outlook for Florida Housing Market Not All Bad

Despite a major slowdown in demand for residential Florida home loans, a University of Florida study released today spoke to a positive real estate prognosis for business properties in the state.

Nearly half of industry experts say it’s a poor time to build single-family housing and more than two-thirds say the same about condos, but they are more optimistic about all other types of properties, said Wayne Archer, director of UF’s Bergstrom Center for Real Estate Studies.

“Condominium markets are clearly struggling and single-family markets are softening, although, contrary to some news reports, we don’t see evidence of prices tumbling,” Archer said. “One important indicator of the real estate market is occupancy rates, and these appear to be stable or increasing in most markets, including apartments, office buildings, retail space, and industrial warehouse and distribution space.”

Inside the Florida housing market report

The foundation for the upbeat view about business property is the relative health and growth of Florida’s economy, Archer said.

“Employment is very good and the fundamentals that drive rental income and occupancy are still very strong,” he said. “In addition, interest rates [and Florida mortgage rates] have remained perhaps a little more stable than some people expected.”

The share of respondents expecting future declines in absorption rates – the rate at which properties are able to be leased or sold – remains unchanged for single-family housing at 61 percent since July, Archer said. It inched up slightly for condos, from 69 to 71 percent.

“The main question we focused on is how bad it is,” he said. “There have been so many news reports and rumors flying about how the condo bubble has burst and how the length of time it takes to sell a house has increased dramatically.”

The results were somewhat more sobering for prices. The percentage of respondents expecting single-family residential prices to drop doubled from 24 percent in July to 47 percent in October, he said. This is at least good news for Florida mortgage loan applicants.

For condominiums, the rate of decline was not as dramatic as it was for single-family homes because expectations had already dropped in July, Archer said. Forty-four percent of respondents said they expected condo prices to decline in October, compared with 38 percent in July.

“Condos have always been one of the most volatile markets in real estate,” he said. “They’re a place where naïve investors find it easy to jump in and speculate.”

The increasing cost of homeowners’ insurance in Florida was again a major concern in this survey, as it was in the previous quarterly survey released in September.

“However, the fact that the investment outlook remains stable to positive for most property types and the fact that cap rates remain stable, signaling continued investor confidence, are both indicators that the immediate insurance crisis is not yet being viewed as so bad that it has changed real estate markets,” Archer said.