Continued employment growth, consistent migration from out of state and an optimistic national and local economic outlook are factors local professionals say will bring gradual growth in inventory and prices in the Northeast Florida housing market this year.
Relocating and expanding industries are creating jobs necessary to maintain an unemployment rate less than 4 percent, enough to absorb new residents taking advantage of the Northeast Florida lifestyle.
Inventory of existing housing stock, however, remains tight as demand continues to strain supply.
The October Multiple Listing Service report provided by the Northeast Florida Association of Realtors showed inventory down 23.3 percent, or 3.3 percent, from the previous month, contributing to a 10.8 percent increase in the median price to $205,000.
Interest rates have held steady at just below 3.9 percent on a 30-year fixed mortgage, keeping buyers in the market.
“Although inventory levels are low in many markets, there has largely been enough listing and building activity, or at least conversation about future activity, to maintain a positive attitude about the prospects of buying or selling a home,” the report reads.
“Low affordability has started to become a recent topic of conversation and is worth watching. But with a healthy economy, level of demand and national unemployment rate, sellers are going to continue to see strong prices for their homes.”
Christy Budnick, executive vice president and broker for Berkshire Hathaway HomeServices, expects those trends to continue deep into 2018.
“One of the things we have been looking at is the market (in 2017) has been relatively flat over the previous year,” Budnick said.
“However, in the broad spectrum we consider that a positive because there have been areas throughout Florida where the upper-end market has cooled off dramatically. We’re not seeing that locally and we expect much of the same this year, she said.
She said she doesn’t expect a large rise in the sale of units, but she does expect a continued increase in the average sales price.
Budnick expects a continued shortage in lower-priced housing. The hottest market segment, she said, will continue to be homes priced between $250,000 and $500,000.
“Anything under $500,000 is moving quickly if priced well and positioned properly,” Budnick said.
“Trying to find anything under $200,000 is very difficult, so days on the market when any of those becomes available are negligible. They sell within hours,” she said.
New construction
Mattamy Homes Jacksonville Division President Cliff Nelson agreed that the under $250,000 market is tight because of land prices, impact fees and infrastructure costs.
The margins do not exist for low-cost, single-family new construction, a condition, he said, that will persist in 2018.
“St. Johns County is working on some new impact fee structures … and the biggest challenge we have and will continue to have in new construction is how do we balance these increased development costs in order to provide the county what it needs for infrastructure with affordability for the costumer,” Nelson said.
“It’s a tough balancing act because not everyone understands that while the fees are necessary, when it impacts your pocketbook it makes that choice harder to make when signing a new home contract,” he said.
Rising costs also discourage homebuilders from providing more speculative inventory.
Also, new construction customers want to be involved in the process from the outset, he said.
“While a portion of our business is selling spec homes, builders putting more spec homes on the market won’t make the market any healthier because there is still a finite number of buyers who are looking for that home with a short fuse to move into and not be involved in the whole process,” Nelson said.
Nelson said he expected Mattamy to have 500 local housing starts by the end of 2017 and perhaps a modest growth in that number in 2018, adding that is reflective of the region’s new construction market as a whole.
“I anticipate this year to be similar to last year industrywide,” Nelson said. “We will have growth, but it will be steady growth.”
Staying put
Another factor leading to tight inventory is the reticence of homeowners who would like to move within the market, but find the selection limited. The result is that they decide against listing their own homes, compounding the shortage.
Budnick said new construction in new large communities coming online, particularly in St. Johns County, will only partially address the problem.
“There are a few communities that are going to help,” said Budnick. “The biggest area where we find the lack of inventory is the $250,000 home and under. It gets very frustrating for a buyer who will make offer after offer only to be beaten out in a multiple-offer scenario. New construction will speak to that, but the majority of those homes are at $250,000 or more.”
Limited options mean prospective clients who would like to move within the region either cannot or choose not to do so.
“There are many prospective sellers who would like to move but don’t want to put their home on the market for fear of it selling too quickly because they don’t know where they are going to go,” Budnick said.
She said many are starting to look at their current home to do some upgrades and renovations.
“We are seeing an increasing number of homeowners who would consider selling, but are staying put,” she said.
Slow and steady
Homebuilders and real estate agents cast a wary eye toward explosive growth similar to the early 2000s. The bursting of the housing bubble leading to the Great Recession and the decimation of their respective industries is never far from their minds.
But the steady economic growth, albeit sluggish by previous post-recession standards, is a cause for continued optimism.
“Building has not kept up with demand, which is why prices have been rising,” said Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida, at November’s meeting of CREW Jacksonville.
“It’s not another bubble for two reasons: inventory has been low and what we don't have that we had in 2005 is easy financing. Back then you could get a half-million dollar mortgage with a pulse and a pencil to fill out an application,” he said.
The pendulum has swung the other direction, Snaith said. “This is not easy money you can use to speculate and flip like you could in 2005.”
Both Snaith and JAXUSA President Jerry Mallot, who spoke at November’s Northeast Florida Builders Association Sales and Marketing Council breakfast, agree the current economic recovery could last into the next decade.
“We are at a real important period,” Mallot told the homebuilders group. “We always worry. I’m hearing more and more economists say we never really fully got out of the last recession and we may have three or four years before we have to have another one, and that’s got to be music to your ears. We may be able to extend this period of expansion and growth a lot longer than we have done before.”
All of which points to the steady, healthy growth in home prices and new construction volume Budnick and Nelson project for 2018.
“The market is going to remain strong, that's our forecast,” Budnick said. “We are not forecasting a steep increase in units, but we are expecting about a five percent increase in average sales price.
“While we appreciate a strong market, we don’t want the high highs and the low lows. Slow and steady is tremendous,” she said.