By Carrie Resch, Contributing Writer
With shifting demographics, a crowded field of competition and millennials entering the market, staying on top of the latest trends is essential for Realtors and builders in an ever-growing field of competition.
Area Realtors and builders are collectively optimistic about next year’s market.
Reverberation from a recovering market, insiders predict, will create an increase in first-time homebuyers and therefore an increase in demand for the Northeast Florida housing market, particularly in the lower-range starter homes.
The predicted increase in demand, for both new builds and existing houses on the market, will most likely be impacted by the continued shortage of builder labor.
In addition to first-time homebuyers entering the market, returning homebuyers are predicted to return the market in response to the recovering economy.
A decrease in REO and short sale properties also are likely trends for 2017.
Christy Budnick, executive vice president of Berkshire-Hathaway HomeServices Florida Network Realty, said most homeowners are now either at break-even or above water and they have seen REO properties decrease by another 55 percent this year.
First-time homebuyers
First-time homebuyers will be on the rise in the coming year, according to local industry leaders.
“I believe we will see an increase in first-time homebuyers and buyers coming back into the market that had financial difficulties during the recession,” Sherry Davidson, president of Davidson Realty, Inc. said.
Matt Roberts, president of Riverside Homes, echoed that sentiment.
He maintains that currently, the homebuyers in the market are over the age of 30. However, he believes the age of the new homebuyers is going to come down to a more normalized level.
A potential complication for first-time homebuyers may be the price point, according to Chris Shee, managing partner for MasterCraft Builder Group. He believes first-time homebuyers have almost been priced out of the market for new homes.
“I think that’s going to create more demand for multifamily product –– more townhome, duplex-type of product –– in order to get that price point lower on new homes, to cater to that first-time homebuyer,” Shee said.
Returning homebuyers
As the economy continues to recover, returning homebuyers is also a likely trend.
Davidson points out that Florida is continuing to see an increase in retirees and job seekers moving to Florida. That, coupled with positive business trends in Northeast Florida and increased household formations, Davidson said, should result in increased demand for housing in the area.
However, she predicts buyers will be more cautious and will tend to look for more value when purchasing.
“There are still many painful memories from the financial crisis and buyers seem more conservative with their buying decisions. Builders and developers are also taking less risk,” Davidson noted.
Recovering market
While the economy is recovering, so is the Realtor and builder market. When looking at the marketplace today, Budnick says that it’s both a very healthy and steady market.
“Appreciation in our area is really in that three to five percent range and that’s a really strong and healthy appreciation without being over the top and unrealistic to be able to stay in,” she said.
Davidson said she believes 2017 home sales will be better than 2016, but the market will still be inconsistent month-by-month as it was in 2016.
Roberts too believes more people are going to be more willing to purchase. A potential problem, Roberts foresees, has to do with rates.
“As the economy improves, rates are inevitably going to increase, which is going to reduce the buying power,” he said.
As a builder, Roberts said, the challenge will be to find that “happy medium” for price points as purchasers’ buying-power is going to come down at the same time as the rates increase.
With plenty of anticipated demand, Roberts said the challenge will be finding the right fit for the demand for the area, building the right houses and buying the right land.
Increased demand
As both first-time homebuyers and returning buyers enter the market, the increased demand is slated to be an ongoing challenge, especially due to the continued shortage of workers in the building industry.
Continuing to see a low-inventory market is a trend which Budnick expects to continue into the new year. In fact, she believes it will be the strongest trend the industry is going to see for the next couple of years.
Additionally, Budnick predicts the demand of what she refers to as the $200,000 and below homes will continue to create a “squeeze” on that market. It’s something, she says, that is creating a lot of issues for first-time homebuyers.
“When you look at the product that most of the builders are putting forth, it really doesn’t target that first-time homebuyer,” Budnick said. “I believe we need to find a way to fill that void.”
Other than a healthy real estate market, Budnick said she’s not sure what the solution is.
With the current cost of land combined with the cost of building, Budnick acknowledged it’s very difficult for a builder to be able to build a product, such as one targeted to first-time homebuyers, and still turn a profit that is reasonable.
Labor shortage
Roberts said builders are still feeling the thin labor market, but are looking for solutions to the ongoing labor shortage. Builders aren’t the only ones feeling a shortage in labor. Roberts pointed out that vendors, too, are experiencing the same shortage.
“Internally, we are looking to hire recent college grads to start training and growing our own labor,” Roberts said of ways his company is looking to deal with labor shortages.
Shee said he believes land and lot prices will start to level off because he really doesn’t see much appreciation occurring.
However, he notes that builders are getting hit by higher land prices and the shortage of labor is causing the cost to construct to go up as well.
“As a homebuilder, we can’t keep taking these increases without being able to increase our revenue, our sales prices,” Shee said.
How Shee’s company is coping with ongoing labor shortages is through loyalty to trade partners, he said.
The company uses the same subcontractors for every project they work on, hoping in turn that when it comes time to schedule a job, their company will be on the top of the list.
Shee noted, however, it’s not just subcontractors who are seeing a shortage in labor. Site developers also are suffering a labor shortage — mostly the underground pipe crews, which not only causes a big delay in construction, he says, it also increases the cost of construction for the horizontal development.