Floridians Optimistic About U.S. Economy

Expectations among Florida residents about the U.S. economy over the next five years reached levels not seen since July 2021.

GAINESVILLE, Fla. – Consumer sentiment among Floridians ticked up 1.3 points in April to 73.3 from March’s revised figure of 72. National sentiment, on the contrary, dropped 2.2 points.

“The rise in consumer sentiment is attributed to Floridians' positive views regarding the nation’s economic outlook. In particular, expectations about the U.S. economy over the next five years reached levels not seen since July 2021. This period coincides with the escalation of inflationary pressures that began in the second quarter of 2021. However, these price hikes were not initially viewed as concerning. While average annual inflation surged from 1.9% to 4.8% between the first and second quarters of 2021, reaching 5.3% in the third quarter, it wasn't until 2022 when the Fed initiated one of the most aggressive tightening cycles in decades by increasing interest rates to control it,” said Hector H. Sandoval, director of the Economic Analysis Program at UF’s Bureau of Economic and Business Research.

Among the five components that make up the index, four increased and one decreased.

Floridians’ opinions about current economic conditions improved in April. Views of personal financial situations now compared with a year ago increased 1.4 points from 59.8 to 61.2. However, opinions varied by demographics with people younger than 60 and people with an annual income under $50,000 reporting less favorable opinions.

Opinions as to whether now is a good time to buy a big-ticket item, such as refrigerators, cars, or furniture increased one point from 62.9 to 63.9. Similarly, opinions were split by demographics, but in this case women, people older than 60, and people with an annual income under $50,000 expressed more pessimistic views.

Future economic expectations portrayed a mixed outlook in April. On the one hand, expectations of personal finances a year from now decreased 1.1 points from 83.7 to 82.6. However, men and people older than 60 reported more positive expectations. On the other, outlooks about the country’s economy were more optimistic.

 Expectations about the U.S. economic conditions over the next year increased 2.9 points from 73.3 to 76.2, while views of U.S. economic conditions over the next five years increased 2.1 points from 80.5 to 82.6. Notably, these expectations were shared by all Floridians, except for people with an annual income under $50,000, who reported less favorable views regarding the latter component.

“Following a robust labor market and rising consumer confidence levels, economic growth remained positive in the first quarter of the year, driven by increases in consumer spending, with an annual rate of 1.6%. However, inflation has risen over the same period, despite the Fed’s efforts to control it. The latest inflation data from both the Department of Labor Consumer Price Index (CPI) — and the Department of Commerce Personal Consumption Expenditure (PCE) Price Index, the Fed’s preferred measure of inflation — suggest a potential trend reversal, with increases observed in March,” said Sandoval.

“Looking ahead, this reversal is likely to deter the Fed from implementing interest rate cuts during the summer, as previously anticipated. Moreover, it could translate into reduced consumer confidence, further exacerbating the risk of a potential downturn and hampering the expectation of reduced inflation without a recession,” Sandoval added.

Conducted March 1 to April 25, the UF study reflects the responses of 250 individuals who were reached on cellphones and 293 individuals reached through an online panel, a total of 543 individuals, representing a demographic cross section of Florida. The index used by UF researchers is benchmarked to 1966, which means a value of 100 represents the same level of confidence for that year. The lowest index possible is a 2, the highest is 150.

Source: University of Florida, Bureau of Economic and Business Research, Elizabeth Lynch

© 2024 Florida Realtors®

Pending Home Sales Increased 3.4% in March

Existing-home sales are forecast to rise by 9% in 2024 to 4.46 million

WASHINGTON – Pending home sales in March climbed 3.4%, according to the National Association of Realtors®. The Northeast, South and West posted monthly gains in transactions while the Midwest recorded a loss. Year-over-year, the Northeast and South registered decreases but the Midwest and West improved.

The Pending Home Sales Index (PHSI) – a forward-looking indicator of home sales based on contract signings – increased to 78.2 in March. Year over year, pending transactions were up 0.1%. An index of 100 is equal to the level of contract activity in 2001.

"March's Pending Home Sales Index – at 78.2 – marks the best performance in a year, but it still remains in a fairly narrow range over the last 12 months without a measurable breakout," said NAR Chief Economist Lawrence Yun. "Meaningful gains will only occur with declining mortgage rates and rising inventory."

Quarterly U.S. economic forecast

NAR forecasts that existing-home sales will rise by 9% in 2024 to 4.46 million (from 4.09 million 2023) and another 13.2% in 2025 to 5.05 million (from 2024). Housing starts are expected to rise by 1.2% in 2024 to 1.43 million (from 1.413 million in 2023) and 4.9% to 1.5 million in 2025 (from 2024).

"Home sales have lingered at 30-year lows, and since 70 million more Americans live in the country now compared to three decades ago, it's inevitable that sales will rise in coming years," explained Yun. "Inventory will grow steadily from more home construction, and various life-changing events will require people to trade up, trade down or move to another location."

NAR expects that median home prices will increase by 1.8% in 2024 to a record of $396,800 (from $389,800 in 2023) and another 1.8% in 2025 to $403,800 (from 2024). NAR forecasts a modest reduction – 0.6% – in the median new home price to $426,100 in 2024 (from $428,600 in 2023), reflecting the building of smaller-sized homes. The association anticipates the median new home price will jump 3.4% to $440,500 in 2025 (from 2024).

"Home prices are expected to rise roughly in line with consumer price inflation and wage growth over the next two years," added Yun. "Most homeowners are on strong financial footing in current market conditions, with only 2% of sales classified as being distressed."

NAR expects home sales to steadily improve while home prices continue to hit record highs.

"Job gains, steady mortgage rates and the release of inventory from pent-up home sellers will lead to more sales," explained Yun. "Given the lingering housing shortage, home prices will march higher, albeit much more slowly than in the past."

Pending home sales regional breakdown

The Northeast PHSI increased 2.7% from last month to 65.1, a decline of 0.3% from March 2023. The Midwest index fell 4.3% to 78.1 in March, up 1.3% from one year ago.

The South PHSI improved 7.0% to 95.8 in March, dropping 1.5% from the prior year. The West index rose 6.8% in March to 61.0, up 3.6% from March 2023.

 "Home prices rising faster than income growth is not healthy and adds challenges for first-time buyers," said Yun.

Yun further noted, "Inventory will gradually rise from recent growth in home building. Additionally, many sellers who delayed listing in the past two years will start putting their homes on the market to move to a different home that better fits their new life circumstances – such as changes in family composition, jobs, commuting patterns and retirees wanting to be closer to their grandkids."

The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

Pending contracts are good early indicators of upcoming sales closings. However, the amount of time between pending contracts and completed sales is not identical for all home sales. Variations in the length of the process from pending contract to closed sale can be caused by issues such as buyer difficulties with obtaining mortgage financing, home inspection problems, or appraisal issues.

The index is based on a sample that covers about 40% of multiple listing service data each month. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population.

© 2024 National Association of Realtors® (NAR)

Florida Market: Listings and Median Price Up in March

 By Marla Martin

Single-family median sales prices are up 3.9% over March 2023 and new listings increased 7.7%. The condo-townhouse median prices increased 3.1%.

ORLANDO, Fla. – Florida’s housing market in March and the first quarter (1Q) of 2024 reported more new listings, higher median sales prices and increased for-sale inventory (active listings) compared to a year ago, according to Florida Realtors®’ latest housing data.

“Persistently high mortgage interest rates hovering well above 6% continue to challenge buyers in Florida, especially first-time buyers,” said 2024 Florida Realtors® President Gia Arvin, broker-owner with Matchmaker Realty in Gainesville. “While we are seeing an increase in new listings and in for-sale inventory, home sellers thinking of moving – whether it’s downsizing or needing a larger home – are also impacted by the higher rates when considering their next home purchase.

Last month, closed sales of existing single-family homes statewide totaled 23,435, down 10.4% year-over-year, while existing condo-townhouse sales totaled 9,332, down 16.6% over March 2023. Closed sales may occur from 30- to 90-plus days after sales contracts are written.

For 1Q 2024, statewide existing single-family home sales totaled 57,326, down 3.7% from 1Q 2023, while statewide existing condo-townhouse sales totaled 22,811, down 8.5% from the same quarter a year ago.

The statewide median sales price for single-family existing homes in March was $420,600, up 3.9% from the previous year, according to data from Florida Realtors Research Department in partnership with local Realtor boards/associations. Last month’s statewide median price for condo-townhouse units was $330,000, up 3.1% over the year-ago figure. The median is the midpoint; half the homes sold for more, half for less.

“Home price growth remained fairly calm by recent standards during the month of March,” said Florida Realtors Chief Economist Dr. Brad O’Connor. “Also, more homes were listed on Florida’s multiple listing services this March than in March 2023, but the year-over-year changes were more modest than what we saw in January and February. New listings of single-family homes were up 7.7% in March, well off the pace of nearly 17% in January and over 28% in February. In the townhouse and condo category, year-over-year growth in new listings in March was 11%, compared to over 31% in January and about 30% in February.”

He noted, “This slowdown in the rate of new listing growth meant that while inventory increased from the end of February to the end of March, it increased more slowly than it did in most recent prior months. Still, in a normal market, we usually expect inventory levels to decline from the end of February to the end of March.”

For 1Q 2024, the statewide median price for single-family homes was $415,000, up 3.8% year-over-year; the statewide median price for condo-townhouse properties was $325,500, up 2.8% year-over-year.

On the supply side of the market, inventory (active listings) rose in March as well as for 1Q 2024. Single-family existing homes were at a 4.1-months’ supply while condo-townhouse properties were at a 6.6-months’ supply for both timeframes.

To see the full statewide housing activity reports, go to the Florida Realtors Newsroom and look under Latest Releases or download the March 2024 and 1Q 2024 data report PDFs under Market Data.

© 2024 Florida Realtors®

Rents Stabilizing, Affordability Challenging

 By Amber Bonefont

Researchers said rent prices nationwide are becoming more balanced. In some areas of Florida, rental costs have declined slightly.  

BOCA RATON – Rent growth in the United States has returned back to the typical yearly increase for the most part, though many households are still struggling to afford rents, according to researchers at Florida Atlantic University and two other schools.

Nationally, rents rose 3.53% year-over-year, in line with the typical rental increase usually seen in a more balanced market, February data from the Waller, Weeks and Johnson Rental Index shows.

This trend is reflected in many parts of the country. Forty-three metropolitan areas either saw year-over-year declines or rent increases of less than the current national average of 3.53%. Five metros saw rents drop: in Austin, rents declined 3% year-over-year; Cape Coral, rents declined almost 2%; San Antonio, Texas, a .54% decline; North Port, a .20% decline; and Portland, a .15% decline.

“A rental increase of between 3% and 5% is seen as normal, so these numbers suggest that the rental crisis is over in most parts of the country,” said Ken H. Johnson, Ph.D., a real estate economist with FAU’s College of Business. “In some areas in the North and Midwest, rent growth is still increasing, but the growth is nowhere near as rapid as years prior. All in all, this suggests that rent appreciation is cooling and rental markets around the country are beginning to normalize.”

The Waller, Weeks, and Johnson Rental Index, part of FAU’s Real Estate Initiative, measures where the average rent is in the 100 most populated metropolitan areas in the United States and compares it to where rents should be in these metros based on statistical modeling of historic rental prices. Johnson, along with fellow researchers, Shelton Weeks, Ph.D., of Florida Gulf Coast University, and Bennie Waller, Ph.D., of the University of Alabama, also measure average yearly increases, monthly increases and how much money the typical household needs to make to avoid paying more than 30% of their income toward rent.

Renters should brace themselves for a prolonged affordability crisis until incomes increase to compensate for rising rents, researchers said. Ten metropolitan areas, including South Florida, require households to make well over $100,000 to avoid paying more than 30% of their income to rent.

“Rarely do we see major dips in rent, so households should not wait for the possibility of rents to fall dramatically,” Waller said. “Incomes need to rise to match current rents so renters can no longer feel the sting of the affordability crisis.”

Until then, many households will be forced to either pair up or consume less to pay rent.

"One of the repercussions will be more density – the average number of people living in a unit,” Weeks said. “Historically, you will see more people room or live together during periods characterized by unaffordable housing, like multigenerational families living together or college roommates choosing to continue rooming together. As incomes catch up to current rent prices, density numbers will decline once again.”

© 2024 Florida Atlantic University

Florida Home Values Skyrocket

 By Jennifer Torres

The average Florida home value doubled in six years. Tampa and Miami tied for having the third-fastest price doubling among large U.S. cities.

MIAMI – The national median home price is twice what it was ten years ago. Molded by a storm of inflation, tight supply and surging demand, the average home price in the U.S. went from around $200,000 to $400,000, according to a new study from Point2.

However, in Florida, it took much less than a decade for home prices to achieve a twofold increase.

Average home values across Florida have undergone a seismic transformation, doubling in value within the short span of just six years. This surge, saw Miami’s average home price soar from around $290,000 in 2018 to the current median of $583,000. In Tampa, homes went from $213,500 in 2018 to $430,000.

For their study, analysts looked at historical data to calculate how many years it took for home prices in the 100 largest U.S. cities to double — and Tampa tied with Miami for having the third fastest price doubling among the country’s largest cities.

The trend of rapid price doubling extended to other big Florida cities, with home prices in St. Petersburg, Orlando and Jacksonville, increasing twofold in the past six to eight years.

Median home prices in St. Petersburg doubled within 6.6 years. In Orlando home prices doubled within 7.5 years — and in Jacksonville it took 7.9 years to see a twofold increase.

The research notes that, “Fluctuating mortgage rates, steep property prices, or supply deficits are no new challenges. But they have never unleashed such a rapid-fire onslaught on homebuyers in the U.S. as they have in today’s housing market.”

Orlando and Tampa also secured spots among the top 10 hottest markets in 2024, according to Zillow’s latest report, which reveals they boast a blend of swiftly selling homes on the market, an abundance of potential buyers, the expectation of stable home values and job growth relative to new construction.

Among the top 10 states attracting new construction buyers, Florida draws significant attention, with approximately one in every eight new construction buyers opting to purchase their homes in the Sunshine State. In November, the U.S. Census Bureau reported that for the year, more than 1.5 million new residential construction projects broke ground across the state — a 9.3% increase from the year prior.

But across the country, what state doubled its median home price the fastest? That would be Detroit, Michigan, where it took just 4.9 years for home prices to increase twofold. At the start of 2019, you could buy a home in the Motor City for $40,000 — but as of March 2024, the median sale price of homes there is $80,163.

Similarly, in the second-place spot, data shows that prices also doubled quickly in Spokane, Washington, where not that long ago, in March 2018, a home cost just $184,500 as compared to $371,000 today.

©2024 Advance Local Media LLC. Visit gulflive.com. Distributed by Tribune Content Agency, LLC.

The Basics of Home Flipping

 Potential flippers should understand the process of home flipping before jumping in. Some of the common unknowns include the tax benefits.

NEW YORK -- In recent years, home sellers have experienced record profits as the value of real estate has risen dramatically. Bankrate indicates the median home price across the United States is around $486,000. Flipping homes gained popularity prior to the spike in real estate prices, but that increase has led some novices to consider flipping more closely.

Though it's true the chances at turning a large profit are substantial in a market where high prices are the norm, potential flippers may benefit from a rundown of the practice before they decide if it's something they want to do.

What is flipping?

Flipping works when an investor purchases a property with the intention of selling the home (or business) for profit without actually using it. The basic premise of flipping is to find a property at a low price and sell it at a much higher price, typically after renovating the home. Investopedia says it is important to complete this transaction as quickly as possible to reap the greatest return on investment.

Don't underestimate the necessary investment of time and money

Many new flippers overestimate their skills and knowledge and lose money in the process. Common mistakes include thinking that a project will cost less or the home will be turned around quickly. It can take months to find the right property, and then there will be time needed to renovate. Costs involved include the initial sale, renovations, holding costs and capital gains tax when the sale goes through. All of these can eat into profits.

Limited inventory makes things tougher

It can be challenging to find a good deal as everyone seemingly wants to be in real estate these days. With fierce competition in a low-inventory market, flipping can be like finding a needle in a haystack.

Know the tax benefits vs. tax risks

According to Tresa Todd, founder of the Women's Real Estate Investors Network, flipping may be less tax-efficient in the United States than getting into investment properties. Flippers will be paying short-term capital gains instead of long-term capital gains.

According to NerdWallet, capital gains taxes are paid when one sells an asset for profit. The rate at which capital gains is taxed is based on whether you hold an asset for less than a year or longer than a year. Long-term capital gains tax rates are generally lower than short-term capital gains tax rates.

Abide by the "golden rule"

Most home flippers follow the 70% rule. This says one should pay no more than 70% of what the house's estimated ARV (after-repair value) will be, minus the cost of the repairs necessary to renovate the home, says Rocket Mortgage.

The ARV is calculated by adding the current property value plus the added value of any renovations. 

The formula boils down to: ARV x .70 - Estimated repair costs = Maximum buying price.

Flipping may seem like a good idea, but prospective flippers should fully understand the process, including the financial commitments it requires, prior to purchasing a home.

Copyright © 2024 Smokey Mountain Times, Community Newspapers, Inc. All rights reserved.

Fannie Mae: Consumers Adjust to Higher Rates

 By Amy Connolly

One economist said consumers appear to be adjusting their expectations for the housing market to better accommodate higher mortgage rates and home pricing.

WASHINGTON – While a growing number of consumers think mortgage rates will increase in the coming year, their optimism about the home buying and selling market ticked up, according to Fannie Mae’s Home Purchase Sentiment Index (HPSI).

The HPSI decreased 0.9 points in March to 71.9, its first decline since November 2023, primarily due to increased pessimism about mortgage rates. Fannie Mae said 34% of consumers believe mortgage rates will go up over the next 12 months – up from 32% last month. Twenty-nine percent believe rates will go down.

At the same time, consumer perceptions of buying and selling conditions ticked up slightly again in March. Both measures have now risen multiple months in a row.  However, only 21% of those surveyed believe that it’s a good time to buy, underscoring the continued concern about the lack of affordable housing. The full index is up 10.6 points year over year.

“The HPSI remained relatively flat in March, but we're seeing signs that consumers may be adjusting their expectations for the housing market to better accommodate the higher mortgage rate and home price environment,” said Doug Duncan, Fannie Mae senior vice president and chief economist.

"Both our 'good time to buy' and 'good time to sell' measures continued their slow upward drift this month. However, consumers took a slightly more pessimistic view on the likely direction of mortgage rates, likely reflecting the fact that actual mortgage rates have moved upward since the start of the year,” he said.

“With the historically low rates of the pandemic era now firmly behind us, some households appear to be moving past the hurdle of last year's sharp jump in rates, an adjustment that we think could help further thaw the housing market. We noted in our latest monthly forecast that we expect to see a gradual increase in home listings and sales transactions in the coming year. We believe this will be driven not only by those coming off the sidelines due to a rate-related recalibration, but also by households who may need to move for other life reasons,” he said.

Home Purchase Sentiment Index component highlights

• Good/bad time to buy: The percentage of respondents who say it is a good time to buy a home increased from 19% to 21%, while the percentage who say it is a bad time to buy decreased from 81% to 79%. As a result, the net share of those who say it is a good time to buy increased 4 percentage points month over month.
• Good/bad time to sell: The percentage of respondents who say it is a good time to sell a home increased from 65% to 66%, while the percentage who say it's a bad time to sell decreased from 35% to 34%. As a result, the net share of those who say it is a good time to sell increased 2 percentage points month over month.
• Home price expectations: The percentage of respondents who say home prices will go up in the next 12 months decreased from 42% to 40%, while the percentage who say home prices will go down decreased from 23% to 20%. The share who thinks home prices will stay the same increased from 34% to 38%. As a result, the net share of those who say home prices will go up in the next 12 months increased 1 percentage point month over month.
• Mortgage rate expectations: The percentage of respondents who say mortgage rates will go down in the next 12 months decreased from 35% to 29%, while the percentage who expect mortgage rates to go up increased from 32% to 34%. The share who thinks mortgage rates will stay the same increased from 32% to 36%. As a result, the net share of those who say mortgage rates will go down over the next 12 months decreased 8 percentage points month over month.
• Job loss concern: The percentage of respondents who say they are not concerned about losing their job in the next 12 months decreased from 78% to 77%, while the percentage who say they are concerned increased from 22% to 23%. As a result, the net share of those who say they are not concerned about losing their job decreased 2 percentage points month over month.
• Household income: The percentage of respondents who say their household income is significantly higher than it was 12 months ago remained unchanged at 19%, while the percentage who say their household income is significantly lower increased from 11% to 12%. The percentage who say their household income is about the same decreased from 70% to 68%. As a result, the net share of those who say their household income is significantly higher than it was 12 months ago decreased 2 percentage points month over month.

The HPSI distills information about consumers' home purchase sentiment from Fannie Mae's National Housing Survey (NHS) into a single number. The HPSI reflects consumers' current views and forward-looking expectations of housing market conditions and complements existing data sources to inform housing-related analysis and decision making. The HPSI is constructed from answers to six NHS questions that solicit consumers' evaluations of housing market conditions and address topics that are related to their home purchase decisions. The questions ask consumers whether they think that it is a good or bad time to buy or to sell a house, what direction they expect home prices and mortgage interest rates to move, how concerned they are about losing their jobs, and whether their incomes are higher than they were a year earlier.

The National Housing Survey (NHS) is a monthly attitudinal survey, launched in 2010, which polls the adult general population of the United States to assess their attitudes toward owning and renting a home, purchase and rental prices, household finances and overall confidence in the economy. Each respondent is asked more than 100 questions, making the NHS one of the most detailed attitudinal longitudinal surveys of its kind, to track attitudinal shifts, six of which are used to construct the HPSI (findings are compared with the same survey conducted monthly beginning June 2010).

The March 2024 National Housing Survey was conducted between March 1, 2024, and March 19, 2024.

© 2024 Florida Realtors®