The start of 2005 is a good time to reflect on some of the major real estate events that helped to shape the industry in Florida this year, according to the Florida Association of Realtors.
Hurricane
season
Florida’s four hurricanes in 2004 - Charley, Frances, Ivan and Jeanne - stirred up trouble beyond the physical damage felt by residents and businesses across the state.
Following Hurricane Andrew in 1992, insurers, builders and state politicians took a hard look at the state’s resources and asked what could be done to minimize future damage from another hurricane; and this year, many of those new systems were put to the test.
Overall, the Florida building code held up well with less damage done to homes built since the new code went into effect, and there is now more pressure to bolster the code’s standards. But hurricane insurance laws, including a fund to help offset insurer losses in major hurricanes, had mixed results for Floridians.
While the current system kept many insurers out of bankruptcy and therefore able to pay for repairs, the protections given to insurers cost some homeowners a lot of money.
Property
insurance
The hurricanes pummeled parts of the state during August and September, but the storm they kicked up in property insurance rates could last a lot longer. As an immediate problem, consumers had to pay 2 to 5 percent of their homes’ value as a deductible for property coverage, meaning higher out-of-pocket expenses; and second, a loophole forced homeowners to pay that amount repeatedly if hit by more than one storm.
The Legislature met in special session in December, offering $150 million in relief to Floridians hit by multiple hurricanes and banning multiple deductibles in the future. However, property insurance problems will last well into 2005 and beyond as private insurers stop writing policies, cancel policies and ask the state for permission to raise rates.
More homeowners are now forced to rely on Citizen’s Property Insurance Corp., the state’s insurer of last resort. Lawmakers hope to find a way to minimize risk to all Floridians and, at the same time, find ways to entice private insurers to take on more Citizens policies without coverage raising rates to unaffordable levels.
Existing
home sales
Despite the impact of four hurricanes, existing home sales remained strong for most of 2004, according to FAR’s data.
Until the storm season hit, sales of single-family existing homes hit record volumes in many of Florida’s metropolitan statistical areas (MSAs) month after month.
Mortgage rates averaging below 6 percent helped spark buyer demand for housing.
Nationwide, the housing sector continues to bolster the U.S. economy.
For 2005, the National Association of Realtors projects 6.48 million sales, which would be the second highest level on record. New-home sales will rise 9.5 percent to 1.19 million in 2004 and sales of 1.11 million are forecast for 2005.
Housing starts are expected to reach 1.94 million in 2004, the highest level since 1978; while housing construction is projected at 1.87 million units in 2005, according to NAR.
Median
home price
In markets across Florida, prices of single-family existing homes headed to new heights this year.
In November, the latest data available, the statewide median sales price reached $192,400 for the year-to-date - a 22 percent increase over the same period last year.
Looking back to November 1999, Florida’s median sales price at that time was $103,200, translating to a 86.4 percent gain over the five-year period.
Since January 2004, the statewide median sales price has shown double-digit gains each month, according to FAR records. In November, the Naples MSA reported the highest median sales price, $369,900, while the Ocala MSA had the lowest median price at $113,000.
Realtors across the state report tight inventories, particularly for residences priced under $200,000. NAR predicts the national median existing-home price will rise 7.9 percent to $182,500 for 2004, while the median new-home price should increase 8.9 percent to $214,600. In 2005, NAR expects the median existing-home price to rise 5.0 percent and the typical new-home price to grow by 5.8 percent.
Condo
market
Condo sales are hot. And thanks to historically low interest rates, even business has gotten into the act, with demand for office condominium space at an all-time high.
Nationwide, condo sales will easily set a record this year.
“We’ve seen an incredible pace of existing condo and co-op sales over the last six months, but we’re also seeing some exceptional price appreciation,” notes David Lereah, NAR’s chief economist. “In fact, the median condo price has been rising at more than double the rate of single-family home prices.”
The median existing condo price was $197,000 in the third quarter, which is 18 percent higher than the same quarter in 2003. By comparison, the median-priced existing single-family home was $188,500 in the third quarter, up 7.7 percent from a year ago.
Hank Fishkind, president at Orlando-based real estate research company Fishkind & Associates Inc., notes that a number of his banking clients are even imposing stricter lending requirements for condo units, particularly on preconstruction loans, as some market watchers worried that too many speculative buyers may be artificially inflating the costs, particularly in South Florida.