This year, Miami real estate
will be filled with challenges: a slow economy, little population growth and uncertainty in the retiree market. But with sales activity rising and prices stabilizing in many markets, plus the federal tax credit extension for buyers, there are clear signs of an upturn that will create new opportunities for Miami real estate condos investors.
“On a statewide basis, Florida has been experiencing a difficult economic cycle”, says Sean Snaith, directory of University of Central Florida Institute for Economic Competitiveness. “But this is not a structural economic problem like Michigan faces with its devastated auto industry. Florida remains a desirable destination and conditions will improve, gradually.”
John Tuccillo, president of Tuccillo and Associates in Sarasota, and former chief economist for the National Association of Realtors, says Florida has been hit harder by the real estate slump than any other state east of the Mississippi. “For 2010, I see a better economy and real estate market for the state, but no sharp recovery either” he says. “It will be a tug of war between increased buying power and a growing distressed property inventory. Buying power will win, but only by a bit.”
One factor to watch for signs of a recovery in 2010 is new home starts, according to analyst Lewes Goodkin, president, Goodkin Consulting, Miami. “To me, that’s a real indicator of when a market has reached the bottom. There has been minimal new construction across the state, but with land prices falling and builders willing to sell new product at little to no profit, we will probably see a modest increase in activity this year.”
Noting that the pace of real estate transactions increased in 2009, and the 12 month moving average of prices turned upward, Snaith says, “Developers tell me that the prices of existing homes have fallen below replacement costs”, he says. “That indicates that pricing has overshot on the way down, because the long-run floor for prices has to be replacement costs. That points to prices rising in the future”.
“The big challenge for the Florida’s real estate market is the absence of population growth and ongoing slowdown in the construction sector”, he says. “We have more rooftops than we need, so the first step will be filling those new homes”. Another big issue is the number of foreclosures expected to continue through 2010.
Florida’s population is unlikely to grow much, if at all in 2010. After losing residents in 2008, for the first time since World War II, Florida’s population was expected to end 2009 with little change, while Snaith projects a very modest 10,000 person increase this year. “Until the labor market recovers, we won’t see strong in-migration” he says.
However, Florida’s market presents excellent opportunities for several market segments such as first-time buyers, investors and international buyers who want to take advantage of low prices, low interest rates and great deals on new home inventory. The extension and expansion of the federal income tax credit program is also expected to stimulate the state’s real estate market.
President Obama recently signed a bill providing a tax credit of up to $8,000 for qualified first-time buyers who have closed a transaction or have a binding contract in place by April 30, 2010. A $6,500 tax credit is available to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010.
“The substantial rise in home sales we’ve seen over the past few months proves that the tax credit is working”, says Charles McMillan, 2009 president of the National Assocation of Realtors. “Extending and expanding the home buyer tax credit will enable even more families to take advantage of current low interest rates and affordable prices to invest in their future through homeownership”.