Why Florida’s Housing Numbers Are Back on the Upswing

Five years ago, you would have had a hard time finding a home in certain parts of Florida that hadn’t been ravaged by the economic recession. Today, however, large investors have crept in to buy back some of the property that was formerly owned by the banks that foreclosed on it. That means a bit of sunshine through the clouds that have lingered since the uncertainty of the housing crisis in 2008 and 2009.

In areas like Orlando, last year saw an increase in pending sales and higher average sales from 2012, revealing that the real estate market in Florida is finally back up near its pre-recession numbers. Looking at all of South Florida, home prices jumped up 21% last year alone. Statewide, the median sale price climbed to $168,000, a nearly 16% increase from 2012 to 2013. That’s even higher than the national average for the same time period — a total of $197,100, as the National Association of Realtors reports.

So who are these large investors that have come to buy these properties? It depends on the region. According to this NPR story, hedge funds and private equity firms have had a hand in the game, as have other institutional investors, or organizations that purchase up to 10 properties a year. What that’s led to is a bit of an arms race — or more appropriately, a bidding war — between potential buyers. And the winner is usually the party who offers up the most cash.

Yes, cash. Exchanges made in cash tend to comprise the majority of the new home transactions in Florida’s real estate market, and the reason for that is simple. Cash tends to be a bit harder to turn down in the moment, especially if you’re looking to sell the bargain-priced home you’ve got on your hands. The numbers prove it — single-family homes and condominiums bought in cash accounted for 67% of all transactions in Florida’s Sarasota County in January, says a new study from RealtyTrac data.

In Manatee County, the number is closer to 60%, but Charlotte County saw a cash pay rate of 88%. This all proves that though it depends on your geographic location, Florida real estate purchases in cash tend to get the most immediate results.

“There’s a couple of reasons why it’s improvement. People have seen a stabilization in the foreclosure market, because the banks have stopped releasing houses in vast numbers,” says David McChesney, Realtor and GRI from Absolutely Fabulous Condos. “It’s become much safer. interest rates are low, which leads to better investment purchases. That has also lead to major price increases, because everyone has been overbidding each other. On the other hand, people have seen that, and have been trying to reclaim their investments that they made years ago. We have to be careful, so that it doesn’t get to the point where there’s another bubble, which is quite likely.”

Though the market has once again been showing promise, it’s too early to tell if these trends will last. As we’ve discovered, there’s nothing quite as volatile as the housing market. But if the current numbers are any indication, it’s something we should keep our eyes on in the coming months — and even years.

Sources:
http://www.npr.org/2014/03/10/286261937/big-investors-boosting-home-prices-and-not-everyones-pleased
http://www.heraldtribune.com/article/20140310/ARTICLE/303109983/2107/BUSINESS?Title=Cash-is-still-king-in-Southwest-Florida-real-estate&tc=ar
http://www.aplaceinthesun.com/news/feature/tabid/131/EntryId/2595/Default.aspx

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