Since the housing market in the Florida region is generally improving, this suggests that the state’s overall economic outlook is following the same pattern. The Leisure and entertainment industries are also benefitting.
When Brooklyn-born Evan Burschkopf started the expansion of his restaurant-bar Zarsha Leo franchise, he felt that this was as good a time as any to open up a branch in New Port St. Lucie, where his grandmother had recently retired. “As a businessman, I am always seeking opportunities for expansion,” he explained. “Given that the real estate market of Florida is booming right now and my grandmother loves her life there, I figured why not give the locals something different with Zarsha Leo?”
Recent news has indicated that Florida’s housing sector has gained the attraction of foreign buyers, specifically from Latin America. Christopher Wood, Managing Director of CLSA (Credit Lyonnais Securities Asia), is hesitant to use this information too flippantly though since the average US citizen has not encountered a substantial increase in income. Wood is somewhat of an expert in this field, having been “consistently voted best strategist in Asia’s leading industry polls,” in his provision of “award-winning coverage of global equity markets.” It should also be noted that international investment professionals and the media wholly commend his weekly ‘Greed & fear’ column.
Wood also points to the other issues on the table. Many people will continue paying rent rather than buying because of the flexibility it provides. In an analysis of today’s mortgages rates however, buying is usually less expensive vis-à-vis monthly payments. Thus the feeling remains that the country’s residential investment real estate is in an optimistic upswing. According to the CPI shelter index, rents have increased by 4.4 percent which is having an impact on the country’s CPI inflation numbers since shelter expenses account for 31 percent of its CPI basket and 41 percent of CPI’s core.
It must be understood that even though there seems to be a great deal of bad news vis-à-vis the housing market in Florida, it is not just bad news out there. There is some good news and one looking into the market has to thus be able to distinguish the good from the bad. For example, right now, the personal buyer and investor can buy homes with low interest rates and reduced prices of 50 percent or more. This may increase anxiety for sellers though but for buyers, there should be smiles on faces. Those in South America and Europe – concerned about currency flops at home – are perhaps being a bit too enthusiastic in their purchasing power though, negating important factors such as quality and maintenance costs. Russians too seem to see South Florida as their dream answer with many purchasing condos in markets that had not planned for such out-of-control growth.
In addition, those in Florida are moving around as South Floridians are heading north, seeking out better schools, lowered crime rates and in general, a higher quality of life. They are even looking at the purchase of oceanfront homes and property on the Treasure Coast; something that hasn’t happened in many years.
But what is the advice on the street for those looking into purchasing homes in Florida? Those who didn’t buy during the 2003-7 housing bubble might want to look now. Don’t look into gated communities or single-family homes; rather stay on the coasts. And, perhaps most importantly, remember that when you look into news in Florida housing, it’s not all bad.
The economic situation in both Florida and Michigan is pretty similar…and not in a good way. Along with high unemployment and mass foreclosures, this doesn’t bode well for politicians. Rightly or wrongly, people in economic trouble turn to them to blame them for finance-based problems. So when it came to the presidential primaries, of course it was going to have an impact. Ultimately though, Mitt Romney scored nearly half of the votes, coming in with 46 percent, the next closest contender to him being Rick Santorum who only got 13 percent. He said, “we still believe in the America that is the land of opportunity and a beacon of freedom.” Well, we’ll just have to wait and see how he relates this to the housing issue for the state.
Both Michigan and Florida have been trying to deal with their economic plights but to what degree has this been successful? Not especially. Foreclosures are so common because so many people lack a safety net. So if a spouse gets sick or dies, the main breadwinner loses their work, or there is some other crisis, foreclosure is the next step. And what’s worse for those in Florida is that since there was such an incredible housing boom, when the crash came, it was even more devastating. Statistics show that of the 4.5 million borrowers who still have mortgage loans to repay, over 2 million of these now owe more than what their houses are valued at. Nationwide the figure is around 28 percent, but in Florida it is closer to 48 percent. Good people who have worked hard their whole lives, are now being forced to rejoin the workforce having taken retirement at 65.
So what impact has the political situation had on this? Well, it seems like President Obama tried a couple of years ago. But the Home Affordable Refinance Program he established was too little too late. It was meant to assist those homeowners with little or no equity refinance. Florida is now seeing the establishment of support groups for the foreclosed, with one meeting being held in downtown West Palm Beach.
Americans are really struggling to pay their mortgages. Currently, approximately 11million people are “underwater” in their homes and it seems Florida is one of the states being impacted heaviest with a staggering 45 percent of their homes in this category. And one of the biggest gripes people in trouble are having is that the banks and financial firms that were somewhat responsible for this situation are not being penalized.
But things might finally be changing. A recent poll was undertaken for attorneys general throughout the nation to determine if they are willing to fight the terrible practices undertaken vis-à-vis foreclosure practices in the late 2000s.
The settlement would force banks to provide assistance in the form of billions of dollars to those who have had their homes foreclosed or who are at risk. Government officials have not been particularly active in forcing the large banks to change their ways and help these people. Should the deal be activated, up to $17b would be set aside in order to pay for various relief for around a million borrowers who are not up to date on their payments but owe more than the current value of their properties. As well it would give around 750,000 individuals who lost homes in the foreclosure checks worth $2,000.
While we have already seen that it looks like 2012 is going to be a good year for the Florida housing market, figures coming in from last year are indicating that 2011 showed the state was recovering from its housing recession too. Indeed, looking at the figures it seems that compared to 2010, there was an 8 percent increase in Florida housing sales in 2011.
In addition, according to figures released from Florida Realtors, over the last few years, there has been a steady escalation in housing sales in Florida, since this latest increase marks the third time in three years that there has been growth.
However, looking at December 2011, it seems that there was a small plummet (of 2 percent) from figures for the year earlier. Again though, it was emphasized that recovery in Florida’s housing market will continue throughout this year.
A new program – Hardest Hit – has provided Florida with $1bn to help those who are unemployed (or underemployed) keep their homes. Around 3,400 home-owners are being helped in this way. The program began nine months ago from Florida and since that time, around 23,320 have filled out applications. A staggering $77.3 m has been given to those applications that were approved (or set aside for them). Moving over to Palm Beach County, out of the 1,931 applications received, 348 were approved and $7.7m was paid out or reserved for this program.
To be eligible for the program, homeowners need to be Florida residents, using the property as their primary residence. As well, they need to be unemployed/underemployed with a total household income that does not reach 140 percent of the area median income. Finally, their financial hardship must be the result of something that the homeowner did not cause themselves.
There have however, been some critics of the program. For example, some have complained that too many people are not eligible. Indeed, close to 10,000 homeowners failed the eligibility test. One of the reasons was that they were more than 180 days late for mortgage payments. But that seems unfair as they probably did not pay because they were unable to and thus need the help from the Hardest Hit program.
So while Hardest Hit is a great program, it definitely has room for improvement.
It seems that Florida is looking up vis-à-vis jobs and housing in particular and its economy in general. The Florida Legislature now has the capacity to develop close to 9,000 jobs, rendering a staggering $900m for the 2012-13 fiscal year. It will be able to do this by getting money from the state and local housing trust fund which often ends up in the category “general revenue” and pretty much gets lost.
Great Florida Housing à Great Florida Economy
The bottom line is that the more recovery there is on the Florida housing market, the better the entire state’s economy will fare. If capital is taken from the housing trust fund, it can be used to renovate abandoned homes, which would give those working in the field of construction, jobs, and thus boost the economy. So it just makes sense to invest in the state’s real estate market. Doing so will result in property value stabilization for everyone while supporting firms that deal in all sorts of construction areas (material provision; contractors; supervisors; workers and more.
Ultimately, Florida needs its sales taxes to generate revenue and when funds set aside for housing are not used for this purpose, there is an increase in sales revenue, which results in a reduction of the state budget deficit.
It seems like renting out government-owned homes in Florida would be a good idea right now. But, at the same time, doing so probably will not ultimately solve the problem in the areas where housing prices have taken the biggest hit.
The idea now though – in places like Florida – is that the FHFA (Federal Housing Finance Agency) is currently looking into the possibility of selling these homes to investors who would then rent or sell them, which would generate a profit for them. The hope thereafter is, that government-agencies will also make money (which they really need) and the value of neighborhood properties will increase by putting renters or buyers into the homes that are sitting empty. At the same time, this would facilitate tight rental markets through an expansion of the amount of homes available.
And now, no matter where you are, you can see what is going on in your home. Go out for lunch, go to work, but still be able to keep track of the happenings in your home. This is already the case in Naples, Florida, where monitors are being put in into homes. One homeowner said she likes the new technology just to be able to keep an eye on things at home when she’s not there.
The new technology – called E-Monitor – employs the same idea as a car dashboard. People using it can track their doors being locked, energy efficiency and even let them turn lights on and off. As a result, it is able to reduce energy bills by around a quarter. While it is currently available for use in Florida, experts believe it will be nationwide and a $15bn industry within the next three years. Presently, the system costs $1,500 to install. But it’s great if someone immediately finds out that their appliance is not working properly. Co-owner of Your Home Watch Professionals, Bob Weiss, said, “we’re always afraid that when we leave and turn the key something is going to break so we're able to monitor that by knowing that 7-10 days out we won't have to worry as much because if it breaks in three days we get an email alert.”