Florida soared higher than any other state during the boom of the early 2000's. Florida also fell faster and harder in the bust than most of the nation, and has stayed at the bottom for longer.
But nothing lasts forever. And if market analyst Lesley Deutch is right, Florida's homebuilding market is on the rebound — big time. Deutch is a Vice President with John Burns Consulting, a building market research firm with clients all over the nation. In a newsletter and blog post, Deutch reported on her recent 14-day, 20-community tour around the state: "The Florida market is booming."
Land prices are rising rapidly, says Deutch: "In some submarkets, land and finished lot prices have now surpassed peak levels." Home prices are also on the upswing: "In markets like Orlando and Naples, new home prices are increasing approximately 1%-2% per month in many communities. Lotteries are back. We are projecting double-digit home price appreciation in many Florida markets for 2013."
Second-home buyers from Northern states are driving the recovery, Deutch says — along with cash buyers from overseas. "In one sales office I visited recently, there were three families buying homes at the same time," she writes — "from Brazil, Germany, and China."
In a followup phone interview with Coastal Contractor, Deutch added some detail. "I run the Florida consulting business for John Burns," she said. "In the last two weeks, John came into town and we were visiting builders around the state. The builders and developers were excited. I work here all the time, and I knew things were getting better, but I didn't think they were getting better that quickly. It was quite an eye-opening experience."
The upswing is starting to reinforce itself, says Deutch. "In southwest Florida, where the market is active adults, retirees, second home buyers, what's happening is they are starting to see the prices increase. So last season, during the height of the season, the prices were going up a little bit and everyone was excited, and the builders had a great year. And then this season has been up 20, 25 percent from that. People are going back home in the summer and telling everyone, 'Prices are going back up. Florida hit bottom.' So for that market, you really are seeing really strong demand."
"Prices are down from the peak," explains Deutch, "and they're affordable now. And a lot of retirees who put off their decisions until the prices started to increase again, who didn't want to buy into a down market, are coming in. Because clearly, we've bottomed out and we are on the upswing here. And it's driving a lot of people who were on the fence to come down to Florida and start buying again."
In the Orlando market, foreign buyers are pushing the rebound, Deutch says. "They're cash buyers, and they're putting their money down," she says. "They're all over the place. It's amazing. And if you walk into a sales office, the sales person might say, 'Oh wait, I gave you the wrong price sheet. The prices just went up. I'll go get you a new one.' The prices are going up very fast."
But with low interest rates still in force, Deutch points out, "When you look at it on a monthly payment basis, it's still very affordable. It's not like 2006, when things were so overpriced. And so buyers are thinking that this is their chance to get in."
It's not all blue sky, though. "If we go over the fiscal cliff and the government decides to stop buying mortgages, it's all over," said Deutch. But she adds, "We project interest rates to rise about half a point a year for the next five years. But if that happens, you're still in a very affordable market here."
"I knew the numbers, but I was still surprised by the enthusiasm," Deutch says. "We went to a lot of places, and the sales offices were packed everywhere. It's really amazing."
That's fine for the well-financed larger builders and developers who have access to plenty of buildable land. But what about the smaller players? Deutch says, "It depends where you are. In some of the smaller markets, like southeast Florida, there aren't a lot of big pieces of land. So the little players are actually doing okay, because they can find the small parcels and the infill parcels. But there's significant competition for land in Orlando and Jacksonville, and to a lesser extent in Tampa. The public builders have deeper access to capital, and they are able to get a better position. So in those big markets, the private builders and small builders are getting priced out completely."