In a typical town in anywhere USA, local, state, and national economics dictate real estate demand and prices. Sometimes destination locales and tourist areas forget this fact as some places buck national trends and can do well in a recession and poorly in boom times. Economics Drive Real Estate Markets Too.
One could argue it all comes down to economics, and one could argue Florida will always have sunshine and retirees, so we’re immune to such things. I agree that Florida has a lot to offer no matter the economic situation, and I also agree that economics affects us as well.
For instance, rentals are doing very well as many people have been foreclosed upon. Foreclosures are synonymous with bad economic times, but it goes deeper than that. People with bad credit are actually helping the rental market, which in turn makes the apartment building worth more. REIT’s (Real Estate Investment Trusts) and insurance companies tend to buy up apartment buildings, and their value is derived from the income they generate, so as rents go up, so do values. This can also affect single family homes, especially in the low to mid end. Upper end homes never rented well enough to support their value, so their value is determined by something else, like appeal, and future price appreciation.
This takes us to national economic factors. As Realtors in Florida, we all have access to economic data, and it’s important to look at how this data potentially affects real estate values here. If nobody had a job, it would surely impact housing. All real estate is local, and so is economic data. Today we are looking at national data, because this data affects real estate economies all over the US. Other markets affect us here too. If a snowbird can’t sell their home up North, there’s a chance they can’t or won’t purchase that 2nd home or retirement home in Florida. If their market is in the dumps, or their 401k, they may be less inclined to invest down here, so even though we are insulated from certain events, we can still be affected.
Unemployment went down nationwide, but so did payrolls. Many people gave up looking for a job and are not included in the unemployment data. Of course, we also have the under-employed. These are people who have given up on finding a job today they are qualified for and have alternatively taken a lesser job just to scrape by and pay some bills until jobs come back.
Average hourly earnings were down. This can be because less workers are full time and more are part-time. It could also be because there is pricing pressure and employers have had to cut salaries, or replace higher paying workers with less experienced and lesser paid employees.
Many employers are cutting back on bonuses, benefits, and salaries by furloughing employees in an attempt from laying more off, or shipping jobs overseas. We are in a global economy, and we must compete, or business will cease to exist here in the US.
Construction spending is down, as is the average workweek. These are not signs of a revved up economy and definitely a trend we’d like to see reversed. Keep in mind, small changes in numbers equate to big dollars, so it is important we start growing this economy in a sustainable way. All these parts work together, just like real estate markets do. We do not live in an economic or real estate bubble. We are affected, so it’s important we pay attention to what’s going on.
We just finished season, and by all accounts it was very successful. Many people from up North bought. Many will come back and buy in the summer or by next year. People loved their visit here. We’re entering the summer months, and an election year. This is the time of year economics matter. Keep your eye on the news.
Together we’ll be watching to see if Lee, Collier, and Charlotte Counties can lure some businesses to SW Florida. We’ll be looking at Florida employment figures, local construction, and housing numbers. We’ll also be looking at the national scene. We really need about 400,000 new jobs per month to grow the economy. Anything less than that is dragging our economy, and you can see that in March losing jobs did not help us gain 400,000.
Economic reports are only a point in time. They go up and unfortunately down. We’re focusing on trends and not blips. We’re praying for positive trends. I think this nation, and particularly SW Florida deserves some good news going forward.