Florida is known for its
amusement parks, but no roller coaster has been quite like the last real estate
cycle. From 2004 to 2007, Florida experienced one of the biggest property booms
in America. Lax lending policies coupled with borrower greed led to massive
growth in a relatively short period of time. Despite the spectacular rise in housing
prices, many believed the market couldn’t fall. But when the U.S. market
imploded, Florida was one of the first states to crash. And, like the rest of
the country, many watched helplessly as prices fell significantly as demand plunged.
As ‘Foreclosure’ and ‘For Sale’
signs popped up like weeds, many Canadians – retired snowbirds and keen
investors alike – started taking interest. Florida prices plunged more than 40
per cent peak-to-trough on the Federal Housing Finance Association’s FHFA Index.
Top destinations such as Orlando experienced a 56 per cent drop in prices from
an average $258,000 (U.S.) at the peak, down to $113,400 in 2011. Rock bottom
prices and a favourable currency exchange rate made purchasing U.S. property an
attractive proposition for northern neighbours after the crash. According to
the National Association of Realtors, nearly a quarter of home sales in the 12
months ending in March 2012 were by Canadians.
Times, however, are changing. A
2012 report from Bank of Montreal indicates that while the housing market in
Florida is relatively stressed, the worst is over. “Florida was one of the
epicentres of the housing bubble-bust cycle, but there are mounting signs that
a recovery is under way,” it said.
Economists indicate that the
Florida economy is recovering at a modest pace with real GDP expected to grow
1.9 per cent in 2013.
Unemployment is trending down,
but it is still an above-average 8.7 per cent. Certain pockets of the housing
market are showing promise, with prices in Miami and Tampa bouncing up 9 per
cent from their late-2011 lows. Another positive sign is a reduction in the
supply of homes. Property market expert and owner of The Pink Flamingo, Erica
Muller, states that inventory has declined by more than 50 per cent, depending
on the market location.
“We are seeing bidding wars and
multiple offers on almost every property. As long as a home is not overpriced,
we are seeing it sell within the first week of listing and sometimes it’s sold
before it even hits the public MLS. Building starts are up and more and more
people are paying builder prices for a new home due to the lack of inventory
available.”
However, it should be noted
that the foreclosure rate in Florida is still the highest in the U.S. at 13.7
per cent.
“Overall, Florida’s housing
market is one of the most stressed (second of 50) in the country, behind
Nevada, but a draw down in inventories and upward price momentum are positive
indications that the worst is over,” states BMO.
All of the factors that have
made U.S. property an attractive real estate proposition still hold true;
Florida real estate prices are low, the Canadian dollar is near par, and low
interest rates at home make it easier for Canadians to equity out of their home
and put cash down on a U.S. property. The worst appears to be behind us and the
market appears to have bottomed out during 2012.
While factors that make buying
south of the border attractive to Canadians can apply to several states in the
lower 49th, investment experts argue Florida has unique economic advantages
that set it apart from other destinations. Florida is already the fourth
largest state in the country – has long been one of the fastest growing regions
in the U.S., and by the next census will surpass New York as the third largest
state in population. Florida’s attractions make it one of the top tourist
destinations in America and its weather will always be a selling point for
retirees looking to escape cooler climes. As Jerry Seinfeld quipped, “my
parents didn’t want to move to Florida, but they turned 60, and that’s the
law.”
Florida has no state income tax
for individuals and business structures, making it attractive for
entrepreneurial activity. Major changes to the Panama Canal – which will allow
container ships to reach Florida in 2014 – will make the state a stopping point
for distribution of imports to the Eastern Seaboard.
The recovery in Florida is not
happening uniformly across the state. As a top tourist destination, Orlando is
starting to benefit from a recovery in tourism-related employment and
expansions to Disney World’s Magic Kingdom Park, SeaWorld Orlando, and
Universal Studios Florida.
Meanwhile, Miami is
experiencing a turnaround in prices, thanks in large part to foreign
investment. The Miami Association of Realtors reported a 34 per cent increase
to $160,000 in median sales price of condominiums in Miami-Dade County in 2012
over the previous year.
According to Shalimar Santiago,
CEO of Investors Adviser’s Network, the hottest market is currently central
Florida, from Orlando to the Tampa region, with returns yielding on average
8–12 per cent.
“In the south Florida market
returns are less, ranging from 6–10 per cent, but appreciation and prices are
much greater. However, it depends on the investor’s appetite for risk and
investment goals.”
According to statistics, about
80 per cent of Canadians buying real estate in Florida are purchasing condos. Many
Snowbirds like a house that they can lock the door and walk away and not have
to worry about the exterior maintenance.
While single-family properties
are more labour intensive, they are currently producing higher yields, argues
Santiago. Townhouses are also hot, because they generally have lower monthly
fees than condos, yet you can typically pick them up for around the same
prices. Also, the rents tend to be higher and they attract more family-oriented
renters than condos do.
If you are Canadian and are
looking for a property in Florida, I can help.
Visit my website: www.buyinginflorida.ca
At the site, you can receive helpful
information on the buying process. If you are ready to buy, let me match you
with an experienced and qualified Realtor that specializes in the area or exact
community that wish to buy in. As a licenced Ontario Realtor, I can help you on
this end and ensure the process is worry
free.
Randy Miller
Sales Representative
Re/Max Rouge River Realty Ltd., Brokerage
905-427-1400
