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Monday, May 23, 2022

Florida ranked one of the best states in the country for taxes

 

by Liz Hughes 

 

Friday, May 20, 2022

Florida Has Top 5 Hottest Commercial Markets in the U.S.

 NAR's Commercial Real Estate Metro Market Conditions Index for the first quarter of 2022 shows that Florida held the top five hottest commercial real estate metro markets: Orlando, Miami, Palm Beach, Fort Lauderdale, and Fort Myers. The South region is the hottest commercial real estate region, accounting for 11 of the top 16 commercial real estate markets, including the Florida markets (Savannah, Austin, Atlanta, Asheville, Charleston, Nashville) followed by the West region with four markets (Riverside, Las Vegas, Bend, Provo), and the Northeast with one market (Boston).  

NAR's Commercial Real Estate Market Conditions Index is calculated using 25 variables pertaining to the metro area's economic conditions (job growth, unemployment rate, wage growth), demographic conditions (net domestic migration, population growth), commercial market conditions for multifamily, office, industrial, and retail property sectors (vacancy rate, absorption, rent growth, cap rate, professional/business services, and retail trade job growth) and employment conditions in the hotel/lodging industry (job growth, share of leisure and hospitality workers to total employment).

The index is calculated using the ratio of the number of variables where a metro area's condition is stronger compared nationally to the total number of indicators used in calculating the index (25 if all are available). An index above 50 means market conditions are stronger than nationally, and an index below 50 means local market conditions are weaker than nationally. An index of 80 means that the metro area is outperforming the U.S. indicators on 20 of the 25 indicators. Commercial market data is from CoStar and economic and demographic data are from the U.S. Census Bureau and the U.S. Bureau of Labor Statistics. Some CoStar metro area delineations could be submarkets or may not exactly match the U.S. Census Bureau or Bureau of Labor Statistics delineation1.

Top Commercial Real Estate Markets

Orlando-Kissimmee-Sanford, Florida

Orlando's economic and commercial market conditions are all stronger than national levels, garnering an index of 84 (meaning Orlando is outpacing the U.S. on 21 out of 25 indicators). Wages are rising 9% in Orlando compared to 4% nationally. In 2020, 10,000 people migrated to Orlando from other states. The multifamily asking rents are up 26% compared to 11.4% nationally. The office vacancy rate is just 8% compared to 12.2% nationally. The industrial vacancy rate is 3.6% compared to 4.1% nationally. The retail vacancy rate is at 3.8% compared to 4.5% nationally. Orlando is a vacation destination, with 19% of the workforce employed in hotel/lodging compared to 10% nationally.

The main risk area in Orlando's commercial market is the hotel/lodging sector, as rising airfare and gasoline prices make travel costlier.

Miami-Miami Beach-Kendall, Florida

The Miami metro area's economic and commercial market conditions are stronger than national levels and about the same as national levels regarding the hotel/lodging market. It garnered a score of 76 (so it outperformed the U.S. on 19 indicators). Wages are rising at par nationally, at 4.7%. In 2020, the combined Miami-Fort Lauderdale-West Palm Beach metro area (based on U.S. Census Bureau delineation) experienced net domestic outmigration, with 46,000 people leaving the area for other states. Still, the commercial market is performing well. Multifamily asking rents are up 19% compared to 11.4% nationally. The office vacancy rate is at 10% compared to 12.2% nationally. The industrial vacancy rate is 2.7% compared to 4.1% nationally. The retail vacancy rate is at 3.3% compared to 4.5%. It has a higher share of the workforce in retail/lodging, at 11.3% compared to 10% nationally.

The main risk area in the multifamily sector, given the area's high asking rent of $2,120, compared to $1,587 nationally, equivalent to 24.3% of a 2-earner household income, compared to 16.5% nationally.

West Palm Beach-Boca Raton-Delray Beach, Florida

The Palm Beach metro area's economic and commercial market conditions are stronger than national levels except for the hotel/lodging industry, garnering an index of 76 (so it outperformed the U.S. on 19 indicators), like the Miami area. Wages are growing faster, at 8.4% compared to 4.7% nationally. In 2020, the combined Miami-Fort Lauderdale-West Palm Beach metro area (based on U.S. Census Bureau delineation) experienced net domestic outmigration, with 46,000 people leaving the area for other states. Still, the commercial market is performing well. Multifamily asking rents are up 26.8% compared to 11.4% nationally. The office vacancy rate is at 8.9% compared to 12.2% nationally. The industrial vacancy rate is 2.8% compared to 4.1% nationally. The retail vacancy rate is at 3.9% compared to 4.5%. It has a higher share of the workforce in retail/lodging, at 13.8% compared to 10% nationally.

The main risk area is in the multifamily market, given the area's high asking rent of $2,317, compared to $1,587 nationally, equivalent to 26.3% of a 2-earner household income, compared to 16.5% nationally.

Fort Lauderdale-Pompano Beach-Deerfield Beach, Florida

The Fort Lauderdale metro area's economic and commercial market conditions are stronger than nationally except for the hotel/lodging industry which is at par with national conditions, garnering an index of 72 (so it outperformed the U.S. on 18 indicators). Wages are growing faster, at 9.1% compared to 4.7% nationally. In 2020, the combined Miami-Fort Lauderdale-West Palm Beach metro area (based on U.S. Census Bureau delineation) experienced net domestic outmigration, with 46,000 people leaving the area for other states. Still, the commercial market is performing well. Multifamily asking rents are up 22.9% compared to 11.4% nationally. The office vacancy rate is at 10.5% compared to 12.2% nationally. The industrial vacancy rate is 3.8% compared to 4.1% nationally, but industrial rents rose 16.4%. The retail vacancy rate is at 3.9% compared to 4.5%. It has a slightly higher share of the workforce in retail/lodging, at 10.5% compared to 10% nationally.

The main risk area is in the multifamily market, given the area's high asking rent of $2,182, compared to $1,587 nationally, equivalent to 23.5% of a 2-earner household income, compared to 16.5% nationally.

Fort Myers, Florida

The Fort Myers metro area's economic and commercial market conditions are stronger than nationally except for the hotel/lodging industry, which is at par with national conditions, garnering an index of 72 (so it outperformed the U.S. on 18 indicators). Wages are growing faster, at 12% compared to 4.7% nationally. In 2020, 18,500 people moved into the area from other states. Multifamily asking rents are up 29.6% compared to 11.4% nationally. The office vacancy rate is a low 4.7% compared to 12.2% nationally. The industrial vacancy rate is at 2.4% compared to 4.1% nationally, with industrial rents up 11.5%. The retail vacancy rate is at 3.7% compared to 4.5%. It is a vacation destination, with a slightly higher share of the workforce in retail/lodging, at 15% compared to 10% nationally.

The main risk area is in the hotel/lodging sector, as rising airfare and gasoline prices make travel costlier.

Tuesday, May 10, 2022

Florida home buyers can expect to see a “prolonged period of unaffordability”

Wary buyers and rising interest rates may affect some U.S. markets, but Florida’s rising demand and lack of construction will probably offset a potential cooldown.

WEST PALM BEACH, Fla. – Six of the nation’s top 25 most overvalued housing markets are in the Sunshine State, which can expect to see a “prolonged period of unaffordability” even as prices in other regions of the country cool.

Recent studies by three South Florida universities and the University of Alabama point to the same high demand and low inventory as reasons for the homebuyer and rental angst experienced since the start of the pandemic, but the research also found future population growth in Florida will extend housing woes.

Fort Myers led the state as the most “overvalued” market in April with homebuyers paying 51% more than they should based on historic pricing trends, according to a study by Florida Atlantic University and Florida International University. Lakeland was runner-up, with homes overvalued by 50%, followed by Tampa (49%), Melbourne (44.5%), Sarasota (44%) and Daytona Beach (44%).

The Gold Coast counties of Palm Beach, Broward and Miami-Dade ranked 53rd in the top 100 market list nationwide, with homebuyers paying 27% over value. While the ranking puts southeast Florida in the middle of the nation’s housing malaise, the area is creeping up the ladder as previous leaders falter.

“When we first started this about a year ago, southeast Florida was in about 75th place, now we’re up near 50,” said FAU real estate economist Ken H. Johnson. “Ten years from now, we’ll be talking about how it was good to go through a growth spurt, but they create short-term real estate problems.”

The housing study considered population growth numbers from the Indiana Business Research Center at the Indiana University Kelley School of Business. According to the center, Palm Beach County could grow by 12% over the next decade, an addition of about 180,000 people.

Martin and St. Lucie counties are expected to see even bigger percentage gains in residents, at about 17.5% in both counties.

At the same time, areas such as Detroit and Memphis, Tenn., could see only a 1.7% and 0.8% population growth, respectively. With higher interest rates, that near-stagnant growth is something Johnson said could dramatically cool – if not topple – the housing market in some areas.

“There is a reckoning coming one way or another,” Johnson said. “Around the country we are either going to continue to be unaffordable for a number of years, or a region could see a crash.”

The average interest rate on a 30-year fixed mortgage was 5.48% Thursday, an increase of 7 basis points over the past week, according to Bankrate.com. Rates as low as 2% in recent years fueled demand for homes.

That clamor for housing was exacerbated in South Florida by the pandemic when work-from-home edicts and extended lockdowns pushed people south.

“A lot of them are here to stay because they’ve seen what Florida has to offer,” said Ronald Pietkewicz, Bank of America preferred lending market leader for Palm Beach County and the Treasure Coast. “We are poised to have a very hot market through 2022 and a very robust spring homebuying season.”

Housing crash unlikely

Still, most economists are not predicting the catastrophic housing crash of 2007-2009 when there was a surplus of homes nationwide and a market saturated with bad mortgages.

Renters are up against the same spike in prices as homebuyers, with Florida having five of the nation’s top 25 most overvalued rental markets, according to a study released this week by FAU, Florida Gulf Coast University and the University of Alabama.

Palm Beach, Broward and Miami-Dade counties came in first place for the most overvalued rents, with people paying nearly 22% more than what they should based on historic pricing trends. Fort Myers was runner-up, with rents overvalued by 18%. Tampa was third at 17%, followed by Sarasota (16.9%) and Port St. Lucie (15.6%).

The first market listed outside of Florida was Killeen, Texas. Also in the top 10 for most overvalued rents are Lakeland, Bakersfield, Calif., Phoenix and Knoxville, Tenn.

“There are a lot of people being forced to reduce the size of their housing because of the higher prices,” said United Realty Group Realtor Tonsela Watts. “If a couple has two children, instead of living in a three-bedroom home with two bathrooms they are down to a two-bedroom apartment and one bathroom.”

Watts said she helped a client rent an efficiency apartment in Riviera Beach recently for $1,240 a month. Tenants in the same complex with current leases were paying only $550. That’s a price sure to increase when their leases renew, Watts said.

“I feel bad for people, but it’s beyond my control,” Watts said.

Landlords note that their costs are going up also with non-homesteaded properties getting hit with tax hikes and higher insurance premiums. A Singer Island landlord who didn’t want her name used out of concern her renters would read about her talking about raising their monthly payments said she’s had to increase leasing costs just to keep making the same money she did a year ago.

She’s considering turning two of her properties into short-term rentals to make up for the loss in revenue – a move that would take more rental homes for full-time residents off the market.

“Higher rents will persist until inflation comes under control and we build enough units,” said Shelton Weeks, FGCU’s Lucas Professor of Real Estate. “In the meantime, people will have to make hard choices.”

© Copyright 2022 Palm Beach Newspapers, Inc.

Thursday, May 5, 2022

The largest home price increase in the 45-year history of the index

CoreLogic: A record high, the annual growth was the largest in the 45-year history of the home price index. 

Florida had the highest state home price gain, 31.4%.

IRVINE, Calif. – U.S. home prices continued to post significant year-over-year gains in March, up by 20.9%, another record high. Even with the past year’s streak of double-digit price increases, annual gains are projected to slow to around 6% by next March, due in part to rising mortgage rates and higher home prices hampering affordability for some home shoppers.

Buyers who closed on a property in March had a good chance of locking in mortgage rates around 4% or slightly lower. By late April, rates had moved up to more than 5%, a jump of about 30% from the same time last year and a trend that might derail more prospective buyers.

“The annual growth in the U.S. index was the largest we have measured in the 45-year history of the CoreLogic Home Price Index,” said Dr. Frank Nothaft, chief economist at CoreLogic. “Couple that price increase with the rapid rise in mortgage rates and buyer affordability has fallen sharply.

In April, 30-year fixed mortgage rates averaged nearly 2 percentage points higher than one year earlier. With the growth in home prices, that means the monthly principal and interest payment to buy the median-priced home was up about 50% in April compared with last April.”

Top takeaways

Nationally, home prices increased 20.9% in March 2022, compared to March 2021. On a month-over-month basis, home prices increased by 3.3% compared to February 2022.

In March, annual appreciation of detached properties (22%) was 4.7 percentage points higher than that of attached properties (17.3%).

Annual home price gains are forecast to slow to 5.9% by March 2023.

In March, Tampa, Florida, logged the highest year-over-year home price increase of the country’s 20 largest metro areas at 32.5%. Phoenix ranked second with a 30.4% year-over-year gain. On the lower end of the price growth spectrum were the New York and Washington metro areas, both at 9.9%.

Mirroring metro level trends, Florida and Arizona were the states with the highest home price gains, a respective 31.4% and 28.7%. Tennessee edged out Nevada for third place with a 26.7% increase in home price growth.

© 2022 Florida Realtors®

Thursday, April 28, 2022

Home Prices Continue to Rise

20-city price index: A 20.2% year-over-year gain in Feb; up from 18.9% in Jan. Tampa and Miami were in top 3 cities for highest rate of home-price growth.

NEW YORK – The S&P CoreLogic Case-Shiller 20-city price index posted a 20.2% year-over-year gain in February, up from 18.9% the previous month.

Meanwhile, the Case-Shiller national home price index increased 19.8% between February 2021 and February 2022. This represented the third-largest pace of home-price appreciation in the Case-Shiller report’s history.

As in previous months, Phoenix recorded the highest rate of home-price growth in February, with a 32.9% year-over-year increase, followed by Tampa (32.6%) and Miami (29.7%).

All 20 cities that the Case-Shiller report tracks not only recorded double-digit price growth in February but also a faster pace of growth than the month prior.

Meanwhile, the Federal Housing Finance Agency Housing Price Index found that prices rose 19.4% year over year in February and 2.1% from the previous month.

Source: MarketWatch (04/26/22) Passy, Jacob

© Copyright 2022 INFORMATION, INC. Bethesda, MD (301) 215-4688

Wednesday, April 27, 2022

Housing Shortage, Rents Squeeze College Students

 By Janie Har

Rising rents, not enough student housing being built and other increasing college costs are causing “a perfect storm” for students in Florida and other states.

BERKELEY, Calif. (AP) – UC Berkeley sophomore Terrell Thompson slept in his car for nearly two weeks at the start of the school year last fall, living out of a suitcase stashed in the trunk and texting dozens of landlords a day in a desperate search for a place to live.

The high-achieving student from a low-income household in Sacramento, California, was majoring in business administration at one of the most prestigious universities in the world. Yet, Thompson folded his 6-foot frame into the back seat of his Honda Accord at night, wondering how he would ever find a home in the exorbitantly expensive San Francisco Bay Area city.

“Academically it was hard, because I’m worried about finding housing and I’m worried about my clothes and I’m worried about getting my car broken into all the time,” said the 19-year-old Thompson, who now lives in a studio apartment he found last September. “I was anxious 24/7.”

College students across the U.S. are looking for housing for the 2022-23 school year and if 2021 was any indication, it won’t be easy. Students at colleges from California to Florida were denied on-campus housing last fall and found themselves sitting out the year at home or living in motel rooms or vehicles as surging rents and decades of failing to build sufficient student housing came to a head.

For some colleges, the housing crunch was related to increased demand by students who had been stuck at home during the pandemic. For others, including many in California, the shortage reflects a deeper conflict between the colleges and homeowners who don’t want new housing built for students who they say increase congestion and noise.

In March, the University of California, Berkeley, said it would have to cap student enrollment because of a lawsuit brought by irate neighbors over the school’s growth. State lawmakers fast-tracked a fix to allow the campus to enroll as many students as planned for the 2022 fall semester, but the legislation does nothing to produce more housing.

Nationally, 43% of students at four-year universities experienced housing insecurity in 2020, up from 35% in 2019, according to an annual survey conducted by The Hope Center for College, Community, and Justice at Temple University. Students reported being unable to pay utilities, rent or mortgage, living in overcrowded units, or moving in with others due to financial difficulties.

And for the first time since it began tracking basic needs in 2015, the survey found an equal percentage – 14% – of students at both four-year and two-year colleges who had experienced homelessness in the last year, said Mark Huelsman, the center’s director of policy and advocacy.

“This is a function of rents rising, the inability of communities and institutions to build enough housing for students and other costs of college going up that create a perfect storm for students,” he said.

For some students, the lack of affordable housing could mean the difference between going to college or not. Others take on massive debt or live so precariously they miss out on all the extracurricular benefits of higher education.

Jonathan Dena, a first-generation college student from the Sacramento area, almost rejected UC Berkeley over the lack of housing, even though it was his “dream program.” He found a studio at the heavily subsidized Rochdale Apartments for under $1,300 a month, but he might have to move because the bare-bones units may close for a seismic renovation.

Dena, 29, wants to continue living within walking distance of campus for a robust college experience.

But the urban studies major and student government housing commission officer said “it’s kind of scary” how high rents are near campus. Online listings showed a newer one-bedroom for one person at $3,700, as well as a 240-square foot (22 square-meter) bedroom for two people sharing a bathroom for nearly $1,700 per person a month.

“If I go to school in Berkeley, I would love to live in Berkeley,” he said.

Nationally, rents have increased 17% since March 2020, said Chris Salviati, senior economist with Apartment List, but the increase has been higher in some popular college towns. Chapel Hill, North Carolina, saw a 24% jump in rents and Tempe, Arizona, saw a 31% hike.

In some cases, the rental increases have been exacerbated by a lack of on-campus housing.

Last fall, demand for on-campus housing was so high that the University of Tampa offered incoming freshmen a break on tuition if they deferred until fall 2022. Rent in the Florida city has skyrocketed nearly 30% from a year ago, according to Apartment List.

Rent in Knoxville has soared 36% since March 2020, and it could get worse after the University of Tennessee announced a new lottery system for its dorms this fall, saying it needs to prioritize housing for a larger freshman class.

Even two-year community colleges, which have not traditionally provided dorms, are rethinking student needs as the cost of housing rises.

Last October, Long Beach City College launched a pilot program to provide up to 15 homeless students space in an enclosed parking garage. They sleep in their cars and have access to bathrooms and showers, electrical outlets and internet while they work with counselors to find permanent housing.

Uduak-Joe Ntuk, president of the college’s Board of Trustees, hesitated when asked if the program will be renewed.

“I want to say no, but I think we will,” he said. “We’re going to have new students come fall semester this year that are going to be in a similar situation, and for us to do nothing is untenable.”

California prides itself on its robust higher education system, but has struggled with housing at its four-year colleges. Berkeley is notoriously difficult, with cut-throat competition for the few affordable apartments within walking distance to campus.

"I definitely was not prepared to be this stressed about housing every year,” said Jennifer Lopez, 21, a UC Berkeley senior from Cudahy, in southeastern Los Angeles County, and the first in her family to attend college.

She imagined she would spend all four years on campus in dorms, but found herself in a scramble for a safe, affordable place to sleep. The urban studies major currently splits an attic space in what is technically a one-bedroom apartment shared by four undergraduates, one of whom sleeps in the dining room.

The total monthly rent is nearly $3,700 – laughably high in most U.S. cities – but she’s grateful for it.

“If I hadn’t heard about this place, I was either going to end up living in a basement, or in this other apartment I know (where) the girls are struggling with leaks and mold,” Lopez said.

The Basic Needs Center at UC Berkeley, which operates a food pantry for students and faculty, found in a snapshot survey that a quarter of undergraduates reported they “lacked a safe, regular and adequate nighttime place to stay and sleep” at some point since October.

“That’s huge,” said Ruben Canedo, co-chair of UC’s systemwide Basic Needs Committee. “This generation of students is navigating the most expensive cost-of-living market while at the same time having the least amount of financial support accessible to them."

Thompson, the business administration major, started looking for an apartment last May, after spending his first year at home taking classes remotely to save money. He quickly realized that his rental budget of $750 was wildly inadequate and as a second-year student, he no longer qualified for priority in the dorms.

By the time classes began in late August, he was in a panic. He tried commuting from his home in Sacramento, leaving before 6 a.m. for the 80-mile (130-kilometer) drive to Berkeley and returning home around midnight to avoid traffic.

But that was grueling so he took to sleeping in his car. Initially he parked far away in a spot without parking limits. Then he parked at a lot between two student dorm complexes closer to campus, where exuberant partying kept him up at night.

He attended classes, studied and ate sparingly to save on ballooning food costs. He looked at apartments where five people were squeezed into two bedrooms with pared-down belongings stored under beds.

He slept in his car for almost two weeks until a sympathetic landlord who had also grown up in a low-income home reached out, offering a studio within walking distance of campus. The rent is $1,000 a month, and he hopes to stay until he graduates.

"I think I have a little bit of a PTSD factor,” he said.

Most students have no idea of the housing situation when they choose to attend UC Berkeley, said 19-year-old freshman Sanaa Sodhi, and the university needs to do more to prepare students and support them in their search.

The political science major is excited to move out of the dorms and into a two-bedroom apartment where she and three friends are taking over the lease. The unit is older but a bargain at $3,000 a month, she said. The housemates were prepared to pay up to $5,200 for a safe place close to campus.

“You don’t honestly know the severity of the situation before you’re in it,” she said, adding that landlords hold all the cards. “They know that whatever price they charge, we’ll inevitably have to pay it because we don’t really have a choice except maybe to live out of our cars.”

AP journalist Terence Chea contributed from Berkeley, California.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

Fannie Mae Predicts ‘Moderate Recession’ for 2023

New 2023 forecast: Expect a modest economic contraction in 2023’s second half, but the housing market should help cushion that even if its pace slows a bit.

WASHINGTON – The housing market may save the economy from the severity of another Great Recession, according to a new report from Fannie Mae economists. But a recession is still likely on the horizon.

With inflation running at a 40-year high and uncertainties growing in the economy, economists are revising their outlooks for 2022 and 2023. Mortgage financing giant Fannie Mae says that expectations of aggressive monetary policy tightening through 2023 by the Federal Reserve will “likely further soften economic output already weighed down by decades-high inflation and the ongoing effects stemming from the Russian invasion of Ukraine.”

Fannie Mae’s Economic and Strategic Research Group outlined the latest predictions in its April 2022 commentary.

The group’s forecast downgrades real GDP growth and includes an expectation of a period of modest economic contraction in the second half of 2023. But economists are quick to note that the projected downturn will not likely resemble the severity or duration of the Great Recession in 2008.

They say the downturn will likely be less severe because of the housing market, stronger mortgage credit quality, a far less-leveraged residential real estate and mortgage financing system, and ongoing housing supply constraints compared to demographic demand.

“We continue to see multiple drivers of economic growth through 2022, but the need to rein in inflation combined with other economic indicators, such as the recent inversion of the Treasury yield curve, led us to meaningfully downgrade our expectations for economic growth in 2023,” says Doug Duncan, Fannie Mae’s senior vice president and chief economist. “The tight labor market and continued demand for workers, the need for firms to rebuild inventories, and the slowing of some transitory inflation impulses all suggest to us that 2022 will grow a bit faster than long-run trend growth.

“However, as the remaining fiscal policy stimuli fade and the predicted tightening of monetary policy works its way through the economy, we expect the impact of these factors to diminish.”

Fannie Mae’s updated 2023 forecast includes a “modest recession.”

But while the housing market is expected to help cushion a lot of that, economists also note that the housing market will likely slow in the coming months as well. Higher mortgage rates are pricing out more would-be homebuyers.

The National Association of Realtors® predicts a 10% decrease in home sales for 2022.

“The housing market is starting to feel the impact of sharply rising mortgage rates and higher inflation taking a hit on purchasing power,” Lawrence Yun, NAR’s chief economist, said in response to NAR’s latest existing-home sales report which showed a contraction in home purchases.

Home sales remain quick and prices are still rising, but “sellers should not expect the easy-profit gains and should look for multiple offers to fade as demand continues to subside,” Yun added.

Source: “Inflation Rate Signals Tighter Monetary Policy and Threatens ‘Soft Landing,’” Fannie Mae (April 19, 2022)

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