Florida home sales rose seven percent in May, and median home prices were up throughout the state, according to this press release issued today by the Florida Association of Realtors® (FAR). According to FAR, 24,069 homes sold statewide compared to last year's level of 22,496 homes sold, with the Tampa-Clearwater-St. Petersburg metro area leading the pack.
Home sales for that region totaled 5,482, increasing from 4,330 homes last year; a 43 percent increase. The Tampa Bay median home price also rose to $196,100. This time last year the median home price was $156,800.
A strong labor market, continued low mortgage rates and a growing economy are credited with the continually growing sales numbers. Are low mortgage rates contributing? Read this snippet from the release:
Keeping in mind the history of interest rates and mortgage rates, Scott took a look at their impact on median sales prices in the state. "The acceleration in median sales prices (both for the May comparison and for the 2005 year) of approximately 27 percent is not sustainable," he says. "Such price increases are being driven by a once-in-a-lifetime low interest rate environment and opportunity. Thus, this is more of an 'interest rate bubble' than a 'housing bubble.' Most investors and consumers do not have a long-term perspective on the behavior of interest rates."But for comparison purposes, back in October 1981, conventional mortgage rates hit 18.45 percent compared to the rates of today, which are in the vicinity of 5.63 percent. In addition, at that same time in 1981, inflation at the consumer level was in the vicinity of 10.3 percent compared to the most- recent observation of 2.8 percent. The key point is that observed inflation and expected inflation rates drive long-term interest rates. It is, therefore, interest rate changes in the final analysis that will help determine the robustness of the Florida and national housing markets," he says.
According to Freddie Mac, the average rate for a 30-year fixed-rate mortgage was 5.72 percent last month, up from 6.27 percent in May 2004. FAR's sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.
Of course, resort-like living all year 'round doesn't hurt the market, either, and as long as most adjustable-rate mortgages continue to allow for a maximum of a 1 percent increase per year for variable rates in most cases, the bubble myth will continue to be a myth, but prices will eventually slow and flatten for a while, but it's unlikely to happen any time soon. Contact a Florida Realtor now to buy your dream home or second home before prices go up again.
Article comments
— go to most recent comments1 - Brooke Lee
Yes there is: A home that is not in Florida.
2 - RJ
It's a bubble. The bubble will burst at some point. That's a given.
3 - Brooke Lee
Oh no! Then what will all the folks at Pebble Beach do? Or how bout Clint Eastwood and his planned community: Pasadera?
4 - Mr. Real Estate
If you have proof that it's a bubble, please share it. I have yet to see any proof. I read plenty of theories, but they're mostly from money market analysts who generally don't know anything about real estate. People have been saying there's a national real estate bubble for years, now they say bubble's exist only in certain communities.
I think people just want there to be a real estate bubble, because if there were, it would be much easier to afford a home, especially in this market.
5 - Nancy
This isn't a post, it's a blatant sales pitch and nothing more, and the last line confirms it. The editors should remove this post.
6 - Mr. Real Estate
Nancy, based on the guidelines I have been given previously by the publisher (I have it on file, still), this kind of post is okay, as it is not an ad, it's an opinion piece based on the news that Florida home prices are higher.
Blogcritics contributors promote themselves in the pieces they write all the time. I am not the only one.
The right to free speech and the fact that I freely contribute to Blogcritics without pay enable me to write about whatever I want, whether it be a free book or CD I receive to review, a political person or issue, or about an experience I had with something or someone, be it a product or movie star, or my area of expertise, which happens to be real estate.
If you don't like my posts, don't read them. Thank you. Take care and have a wonderful day.
7 - Nancy
Well, if it's within the guidelines & the eds are not jumping on it, then I'm the one out of line. If I'm wrong, I admit it.
8 - Eric Olsen
it's informational, that's the criterion
9 - Scott
I live in Florida and own a house. In my area (Pensacola), due mostly to Hurricane Ivan, home values have jumped as much as 60%. Very crazy stuff.
10 - Mr. Real Estate
I've recently been talking with a couple who want to sell their condo.
The last one that sold in their community went for around $107K. This was last year.
One (and it was the only one for sale in the community) recently went on the market for $145K. I originally thought it was overpriced. It sold in a week. The couple can now sell there's for more when they list because the value has obviously gone up in this condo community, and when they list, there's will be the only one on the market, most likely.
C'est la Florida housing.
As Jackie Gleason once said on the Honeymooners, "To the moon, baby, to the moon." I think he was talking about Florida housing prices.
11 - RJ
Dude. No.
In Palm Bay, Florida, one used to be able to purchase a shittly little stucco home with two bedrooms and one bathroom on a decent-sized plot of land in a relatively-rural area for under 50 grand, just 7 years ago. Now, these same plots are sold for about 125 grand.
Nothing substantive has changed. The employment situation has not changed. The land itself is the same. The neighbors are largely the same. The public schools are the same.
NOTHING HAS CHANGED, except that housing prices have more than doubled.
It's a bubble. There is plenty of land around here, and relatively few high-paying jobs. The bubble will burst in a couple years, probably after some level of inflation sets in and mortgage rates rise.
And then those houses/lots will collapse in price. Perhaps not down to their 1999 levels, but certainly below their present levels.
It's suppl and demand at work here. If housing costs increase, more homes will be built. This increases supply, while demand has no reason to increase further (due to a lack of high-tech jobs in the area). So, in a capitalist system, prices will eventually decrease, leaving real estate speculators holding the bag.
Mark my words.
12 - RJ
There are literally dozens of square miles of area within the jurisdiction of Palm Bay that already has paved roads and sewer and city water and electric set up. It is a massive chunk of land begging to be developed. But, as soon as it is, you have just massively increased supply, without denting demand.
Demand is artificially high right now due to the damage from last year's hurricanes. Assuming this area is not hammered by tropical storms for a couple years, demand will decrease, while foolish profit-minded real estate developers vastly increase supply.
Result: The housing market will collapse.
You heard it here first...
13 - Mr. Real Estate
You say there's plenty of land. Where can I buy it in Palm Bay? Or, has a developer already bought it and is waiting on approvals and infrastructure, in accordance with new growth management guidelines?
Here in Tampa Bay land is scarce, as is property for sale, which is why prices keep going up.
Anyone can call an area a bubble without studying it. Scarce supply and increased demand make prices higher. There's not much else that can. A pre-construction condo went on sale last weekend with prices in the million dollar range. All 103 units (the developer held 2 of them) sold out during a lotto. There were a large number of folks who did not get to buy a condo that wanted to. Most of these folks were baby boomers seeking a second home in Florida to retire in later.
Prove to me nothing has changed. The Florida Chamber of Commerce released a report showing 300,000 people will be coming to Florida every year for the next 25 years. That's quite a change, don't you think? Demand had to increase for prices to increase, and scarcity of available housing had to increase, as well. Available housing is what determines whether or not prices go up. If there's one condo in Tower XYZ and 10 people want to buy in that condo, prices go up. Same thing for Housing Subdivision ABC. Property for sale is pretty scarce in most Florida markets.
The price of oil, which drives up builders' and developers' costs, also makes new home prices go up, which is happening now, as well.
We can pretend nothing's changed, but the fact of the matter is, a lot has changed, and each year it continues to change; about 300,000 people coming to the state every year is a big change.
Palm Bay is smart. It's laying the infrastructure now expecting change. Here in Tampa Bay we're laying the infrastructure as it changes, but it's changing so quickly that we have no other choice.
The large number of people coming to Florida is the reason the Legislature changed the growth management laws last legislative session. They now make it so there must be infrastructure in place prior to new real estate development. This includes roads and schools.
300,000 people moving here each year is a rather large change, and it is what is driving Florida home prices up, and at some point they will level off, but then they will go up again.
Cheers.
14 - RoyTyrell
I must agree completely with RJ. I have lived in brevard county all my life and for the most part, anything not directly on the beach (or merritt island) is hicksville. I'm not sure what people are thinking shelling out this type of money for these crappy little houses in mostly rural communities. It makes no sense. As was pointed out, unless you are self-employed in a profession where geography doesn't matter (as i am), there really are NO high-paying jobs in this area. florida in general is a low-wage state. schools are generally sub-par. infrastructure is poor, and culture is redneck bars and beach shacks.
A home in palm bay, or rockledge, or cocoa (off the river) is NOT resort living. for the most part it's indistiguishable from any backwater you might find in any other rural part of america.
the place may have it's charms, but no way does it justify current prices.
15 - Mr. Real Estate
Roy:
All that may be true, but in spite of it, 300,000 people are moving to Florida each year, and are projected to do so for the next 25 years, and there aren't enough places to put them all now. the majority of those people are moving to towns and metro areas near beaches. This is why inventory continues to be scarce, new construction sells out quickly and prices continue to go up. The biggest concern our state has is infrastructure, which is why a bill was passed this past session by the legislature to address that particular issue. However, infrastructure doesn't determine property values. Supply (low) and demand (high) do. Florida is a service industry state, but if it were really low waged it would be very unionized and it is a right to work state. There are plenty of high paying jobs here for qualified individuals, it's just that most qualified individuals come from out of state due to experience and education (our education system isn't stellar, that's for certain). By the way, the recent bill addressing infrastructure makes developers have to make sure it is in place prior to developing. This way growth is better managed than previously.
All of this stuff is well documented in state studies and Florida Chamber of Commerce studies that have been around for years. Florida's biggest concern is infrastructure. Prices of real estate will level off when buying slows. It hasn't happened yet.
16 - Mike
All the back and forth debate on this issue is meaningless. Facts are facts. If an average of 800 people a day are moving to Florida, then Florida's home prices will keep going up. The rate of increase certainly won't be what it is this year, but historically, real estate has out-performed Wall Street. Anyone who thinks they can "wait it out" and home prices will fall are probably still holding on to their $60 a share Cisco stock dreaming of the day it'll come back.
17 - Robin
We bought a new home in Palm Bay in 2002. It is 2000 sqft and on 1/2 an acre. We paid $120,000. We just decided to buy an investment home to rent out. We went to a real estate agent and asked to see houses for $120K. There was one. It had fire damage. We tried $150K and found 2 condos from the 1970s, 1000 sqft. At $175K there were 5 houses all under 1400 sqft, and 20 years old. We are now looking at paying $200K to build a 1500sqft house on a small lot. Our home was appraised for $325K!! Now you guys have me scared that if I build this house for $200K it won't be worth that much if the "bubble" breaks a few years from now. Advice??
18 - Mr. Real Estate
Robin:
There's no bubble. Real estate isn't a liquid asset like stock, so when, and if, prices sink, they do so over time, not overnight. Real estate values also increase over time, with some periods of home prices leveling off, which is sometimes followed by prices becoming slowly lowered.
I do think that in some markets prices will level off somewhat for a period of time. They did this in 2003, then continued rising.
What's causing real estate values to increase so rapidly here in Florida is that (1) Many baby boomers are buying second homes in preparation for retirement, and (2) There are investor-speculators who buy then re-sell a short time after for a nicely sized profit. In the business we call it flipping. Why is there so much flipping going on?
Well, in the 1990s President Clinton signed a bill that became law that now allows single homesellers to pay $0 in capital gains taxes if their gain is up to $250,000 when selling their home (condo, etc.). Married couples do not have to pay the tax on gains of up to $500,000. On stock, you pay 15% no matter what your gain is. The lack of the tax allows for higher gains, tax-free, so there's a lot of flipping going on. See your tax attorney or CPA for further details on tax laws and their effects, as I am not an attorney or CPA.
I suspect that when the baby boomers stop migrating to Florida in huge numbers, around 2025 or so (because many will have retired here by then), and if that particular tax law is changed, we will witness a different real estate market. However, I don't believe a $200,000 home will become a $75,000 home overnight, similar to a bubble-burst, unless we have another Great Depression, or a very deep recession. I suspect prices will appreciate, but with stagnant periods of appreciation in between.
Bubble-theory inflaters should stop. Most of them come from stock market-related industries, or are renters, and are not licensed real estate professionals, according to most studies. Unless they have proof of a bubble, they really should stop frightening buyers and sellers with information that has no solid foundation, unlike real estate.
19 - Aaman
So, only real-estate professionals, who have the most interest in keeping prices high, should opine about the 'bubble'? Smart, real smart - you left out that it would be 'un-American'
heh
20 - Phillip Winn
I have family moving away from San Diego right now, because even though they very recently refinanced and pulled out equity, prices are rising so rapidly they can afford to refinance again and pull out enough equity to buy a house cash in Dallas.
Prices keep going up in SoCal for a couple of reasons, but it all comes down to supply and demand. Temperate coastal areas obviously have high demand, and the supply isn't growing to meet it due to both land constraints (there's only so much room between the ocean, the mountains, Mexico, and Camp Pendleton) and governmental restraints. Some people who lost their houses in the horrible fires a couple of years ago are still waiting for permits and such to rebuild.
A "bubble" is probably the wrong word to describe the situation, because it implies a certain and dramatic pop at some point in the future. That *could* happen, but given the general principles of supply and demand, it looks unlikely. Adjustments? "Market corrections?" Sure, if enough people decide to cash out and move to another area, the value of land could drop. But not like a bubble popping, I don't think.
21 - Mr. Real Estate
Phillip's post is right on the money. I have clients who used to live in California, and they decided to cash-out and buy a waterfront home here, which they did not have nor could they afford in California. A lot of buyers who buy in my area use equity in their homes, located in the Northeastern part of the country, or out West, to buy a second Florida home.
22 - Phillip Winn
Er, I was thinking more of the advisability of moving out of places with higher-than-average home prices, like Florida, but I suppose people can take away any meaning they want to from my statements. :-)
23 - Phillip Winn
Actually, at least in 2004, the Tampa area wasn't really overpriced. I'll be curious to see how it stacks up for 2005.
24 - Mr. Real Estate
This post got a ton of responses. Why don't we do a Real Estate Spotlight right here on Blogcritics? Maybe Blogcritics from around the world would be willing to write about what's going on in their real estate markets. Just a thought.
25 - Temple Stark
zzzzzzzzzzzzzzzzz ....