By Carole Hawkins, [email protected]
All the pieces are in place for Northeast Florida home buying to continue its upward trend.
A strong state economy? Check.
A healthy local economy? Check plus.
The national economy? A check minus, perhaps.
Three economists predicted a steady rise for local real estate going into 2016 and beyond at this year’s Northeast Florida Real Estate Symposium.
The annual event, which returned in February to the University of North Florida, was sponsored by the Mortgage Bankers Association Jacksonville, the Florida Association of Mortgage Professionals, the Northeast Florida Association of Realtors and the Northeast Florida Builders Association.
Unemployment rate drops to 4.9 percent
Nationally, the recovering economy is seeing headwinds from underemployment and debt, said Paul Mason, a UNF economist. But the sky over Jacksonville is relatively clear.
Gas prices across the country are down. And U.S. unemployment — a good indicator of home buying strength — has fallen to 4.9 percent.
It’s good news, but perhaps not as good as it sounds. The drop in the unemployment rate is partially due to people leaving the workforce, Mason said.
Fewer workers equals less output. That means fewer items for consumers to buy and less product for businesses to sell.
“We need a return to the kind of unemployment that creates jobs and returns people to work,” Mason said.
Federal debt also is a headwind. U.S. debt is now approaching 106 percent of the national Gross Domestic Product.
Despite national economic tremors, Mason said he’s optimistic about the local economy for 2016 and beyond.
The local unemployment rate is falling and retail sales are growing and increasing relative to the state average.
Northeast Florida’s economy is improving without a spike in inflation and real estate growth is particularly strong.
Expect a 10 percent rise in home sales in 2016
Jobs are a driver for real estate sales. And, jobs in Florida have surpassed their pre-recession peak.
Home sales in 2015 stunned the economists.
Year-over-year growth was expected to be about 10 percent. Instead sales grew by an average of 18 percent statewide last spring and remained strong throughout the year.
The trend appeared to peter out –– with the fourth quarter up only 2 percent from the year before.
But that’s deceptive. It really was a continuation of a sales jump that began in the fourth quarter of 2014, said Brad O’Conner, chief economist for Florida Realtors.
“Basically what we saw was a plateau rising in terms of sales that started in quarter four, 2014,” he said.
O’Conner is predicting 2016 will be less dramatic, with 10 percent growth — for real this time.
Homebuilding across Florida faces inventory pressure and a dearth of low-end product, O’Connor said. But locally, the supply and product mix are healthier.
Gainesville and Jacksonville led the state for growth in home sales’ total dollar volume, tracking 31 percent and 27 percent increases respectively.
“It’s the stuff north of I-4 that really performed well,” O’Connor said.
That’s because there are fewer issues with housing shortages in the north. Low inventory is prevalent throughout the state, but it’s much worse in the south.
“There are lots of homes available here,” O’Connor said. “You made all of your volume here by selling houses, not necessarily by price increases.”
Permits will climb to 8,000 units in two years
In Northeast Florida, homebuilding permits are rising, but jobs are growing faster. That should keep home prices and sales in a steady climb for years to come, said Anthony Crocco of Metrostudy, a home-construction research firm.
Yearly new home permits have now reached about 6,000 in the Jacksonville MSA. Crocco expects them to keep rising — to 7,500 this year and 8,000 the next.
New household formation has lagged below what’s normal, and Crocco expects it to at some point catch up.
“We need one-and-a-half to two jobs to create a (homebuilding) permit,” he said. “And we’ve been well below on permits being pulled. I’m seeing three to four jobs created and only one permit pulled.”
Where the new homes are being built has continued 2015’s mid-year trend.
St. Johns County, the leader through the recession, is now even with Duval, at around 2,000 home starts per year.
Price appreciation in northern St. Johns has pushed homebuilding into Duval County’s north and west sides and to places south further in St. Johns, near Florida 16.
Still, home sales in northern St. Johns remain strong. The master-planned community of Nocatee dominated again this year, accounting for half of the county’s new home starts.
Clay County is still a strong market, but it is not growing like its neighbor to the east, even though its homes are less expensive.
Clay should be doing 1,500 to 2,000 units in a normal economic cycle, Crocco said. Instead, less than 1,000 homes a year are being built.
“My sense is the commute is just too hard,” he said. “Clay buyers work in primarily Clay, and there’s not been much job growth there. And, it’s just too difficult still to commute to 295.”
Nassau County has finally cleared out its excess inventory from the recession, and sales there are rising at a faster pace than in Clay.
The easy I-95 commute is a plus, but the county needs more infrastructure –– schools, retail, healthcare and commercial– to really spark homebuilding, Crocco said.