Florida Housing Markets — Riding the Roller Coaster Back Into the Station

Three states had a phenomenal and aggressive roller coaster ride when it came to housing in the rise and burst of the real estate bubble: California, Florida and Nevada. Just remember that whenever you ride a roller coaster to the top of the track, at some time it comes plunging down — typically at a high velocity. But if you survive that, eventually you pull back into the station from where the ride originally departed.

Florida may have been that record roller coaster ride, but it now is heading back into the station. And many riders are getting onboard. Buyers are now coming back to real estate — big time.

This month I had the opportunity to do multiple presentations in Southwest Florida. Not only was it ground zero for several hurricanes in 2004 and 2005, it was the poster child for the real estate bubble. A phenomenal rise and plunge – and now a resounding recovery.

A good representation of what went on in Southwest Florida and the real estate bubble was Punta Gorda. If you have not ever been there and desire or love the tropical climate in the lower 48 states, you need to at least visit. And I bet once you visit, you will return.

While jobs are finally growing in the Punta Gorda MSA, the number still falls far short of the peak seen in 2007. That said, Punta Gorda added 1,100 net new jobs in the prior 12 months – a growth rate of 2.6 percent. Not bad at all. In fact pretty strong. The graph below shows the seasonally-adjusted job numbers for the Punta Gorda Metropolitan Statistical Area (MSA) since January 2007.

2-24-14 graph1

Recovery in housing markets in tourism and hospitality destination areas such as Punta Gorda are perhaps best viewed in housing sales numbers. Since real estate is a true leading indicator of where the housing market is heading, Punta Gorda is looking very positive. The following chart is the raw data as reported by the MLS on sales numbers. Note the missing date from 2004 when multiple hurricanes impacted the market. Peak housing sales have now occurred for three consecutive years on a seasonal basis.

2-24-14 graph2

A better way to analyze housing sales on a trend basis is to view the 12-month moving average. Because of the missing data due to the hurricanes in 2004, the following chart illustrates the average number of sales per month since 2006. The strong recovery in Punta Gorda sales is shown here. The average number of sales in the prior 12-months in Punta Gorda is almost equal to that of January 2006 (when near the elevation of the bubble). Punta Gorda, from a sales perspective, is back to normal. Sales at the end of 2013, on a 12-month moving average, were almost equal to the peak in 2006. So from a sales number perspective, Punta Gorda is strong. And I believe it will just get stronger (and no—I do not own property there—but wished I had purchased in 2011).

2-24-14 graph3

Home prices in Punta Gorda are nowhere near where they were in 2005, nor should they be. That was a bubble. Temporarily unsuitable based on incomes. Simply stated, some people paid too much. And they bought more properties than warranted. Or which they could sustain payments.

The following chart, which shows raw unadjusted median home prices, indicates that current home prices are essentially one-half of the peak for the Punta Gorda area. Two statements here. First, the peak in 2005 was not merited or sustainable. It was indeed a function of the housing bubble. Second, I believe that current home sales median prices are really affordable. Read that as cheap. Even though the 12-month moving average median price in Punta Gorda is up 19.1 percent, prices are still heading up . Trust me. Maybe not 19 percent in the coming 12 month, but up at least 8 to 10 percent.

2-24-14 graph4

For people that purchased homes in the past 12 months in Punta Gorda, congratulations. Median home prices are up 19 percent – that is impressive. But notice from the previous graph of raw data, current home prices are basically near one-half those seen in 2003. Prices are going no place but up. And they still will be a good buy then.

2-24-14 graph5

The bottom line is that Punta Gorda, a beautiful place in Southwest Florida, still remains a great buy from a historical price perspective. And it is indicative of what is going on in Florida.

Will write future blogs about Florida markets. Great news on a recovering market.

Trust me, I am a doctor (of finance).


Leave a Reply