The Importance of Florida within the US Housing Mark

Andrew Bartlett - Published in Discover Florida - Oct / Nov 2004

The importance of Florida within the US housing market – and the UK overseas market – was illustrated earlier this year with the release of figures from the National Association of Realtors (NAR). The Sunshine State had four of the country’s ten fastest-growing local real estate markets at the end of 2003, making Florida second only to California in the overall rankings. This position of strength has been further emphasized by the latest set of housing statistics. These recently released figures from The Florida Association of Realtors showed further increases in the median price of houses – climbing 30% percent in Sarasota-Bradenton – 13% in Orlando and 19% in the State as a whole when compared with June 2003.

Certain property spots in Florida are combining solid capital appreciation at well above the national average, making it a highly profitable market to enter. In terms of UK buyers, the dollar sterling exchange rate remains very attractive a trend that’s likely to be the case for some time to come due to the American trade deficit. This combined with low American interest and mortgage rates make certain markets very attractive.

There are a number of fundamental issues at play in the present property market, which are worthy of further examination.

Investment portfolio
There is a move away from traditional investment holdings in stocks and shares into bricks and mortar. Scott Bergman wrote in the May 31st issue of Barron’s investors are losing confidence in their stock portfolios and transferring wealth to more tangible investments like vacation homes where they can entertain the kids and grandkids.

Baby Boomers
Many property buyers who are looking for a second home or seeking to retire, realize that in the USA only Florida offers guaranteed sunshine at relatively affordable prices (southern California losing out on both counts) and Northern Europeans also are increasingly motivated by the price and weather advantages Florida has over their favoured Mediterranean retreats. If one analyises the demographic position in America, the baby boomers (1946 to 1964) make up 29% of the US population (76 million boomers!) A recent Harris poll indicated 59% intended to relocate on retirement and of those 21% or over nine million plan to come to Florida – this is a similar scenario to the British invasion of the Mediterranean over the past five years which has witnessed a huge increase in property prices. As the Barons article states more and more we see baby boomers buying up for retirement.

New methods of working
Technology is allowing freedom of choice on an unparallel scale – established professionals are no longer tied to homes near corporate headquarters. Nicholas Retsinas, director of the Joint Center for Housing Studies at Harvard University notes that the spread of technology is a significant factor in housing markets -. “ A day at the beach, or at least the beach house, no longer precludes a full day on the job.” More people are favouring a work base in Florida.

Given this background and taking into account the four key reasons why Brits move to Florida leads to the following observations.

Permanent move
Many Brits are making a permanent move to Florida the most popular areas being Orlando, The Gulf Coast around Sarasota, Naples and The Tampa/St Petes/Clearwater areas, The Atlantic Coast including Ft Lauderdale Miami and Coral Springs. These immigrants who generally fall into two main categories family sponsored or business visas give high priority to school districts, lower crime rates and lifestyle issues. A key consideration for this group is obtaining the most appropriate business in the area most suited to their needs. Unfortunately there are many cases where they are given poor advice on these points, particularly in relation to specific aspects of operating a business that differ widely between the US and the UK.

Second Home
The largest growing group of British buyers in Florida are those seeking a second home in the sun to escape the nippy and wet British winter. In America the favoured term for this group is snowbirds and the Gulf Coast areas around Sarasota and Naples are particularly favoured due to average winter temperatures in the 70s, laid back lifestyles and cultural facilities (not Donald or Mickey!) making for an idyllic winter lifestyle before returning to Britain just as the spring flowers are coming out. A high percentage of these active retirees are attracted to golf course properties where a 3-bedroom house with a pool is in the region of $450,000, waterfront properties are in excess of $1,000,000. Direct flights are available from the UK to Tampa airport – (Tampa airport is a 45 minute drive from Sarasota).

Rental Investors
The third major group is made up of those seeking to both invest in a Florida property whilst making use of it themselves for their holidays. The somewhat complex zoning restrictions that vary between Counties and indeed developments are very important in this case as many Brits want to rent for a one or two week period, however many areas and developments restrict such short term rentals.

This market has been traditionally focused on Orlando due to the theme park facilities and generally more flexible zoning restrictions for rental properties in certain areas. Although in the last few years rental returns have generally been reasonable the tempting advertising of properties in this area rarely mentions the potential dangers posed by a concentration of short term rental properties located in one area - a high proportion owned by British nationals and in turn rented to Brits. Taking a measured view- dangers are posed by any problems adversely affecting the theme parks as well as the number of British tourists wishing to rent in the area. British buyers need to be wary of strong currency changes effecting demand, an over supply of property and potential threats to the theme park economy.

Although the Orlando market is very popular with British buyers, there are concerns that in certain cases extravagant sales claims relating to guaranteed rentals may be a cause for concern for buyers requiring rental returns to cover their mortgage costs as well as providing lower investment growth over the short to medium term.

The sheer value for money of this area compared to Britain has proved a major temptation, a furnished 5 bedroom air - conditioned property with a pool near the parks priced under $250000 can seem to good to be true. However given the sheer number of these properties and limited demand by local people one needs to bear in mind that if one needs to sell at the wrong time in the property cycle - recovering the agents commission (sometimes as much as 10%) and furniture costs which may have been built into the property cost at the time of purchase - may prove difficult. There have been recent examples of properties failing to appraise at their selling price causing difficulties in raising mortgage financing.

Zoning restrictions in other areas can mean a very limited supply of properties which although bad news from the perspective of choice can be good news in regard to obtaining rental income. The Gulf coast is certainly an area that has seen a lot of British interest and tends to fall into two main categories. Certain areas such as Port Richey, Englewood and Cape Coral can offer more house for your money but are perceived by some to lack a core of good quality facilities on the doorstep. Sarasota/Bradenton and Naples offer an excellent choice of style, cultural, entertainment and shopping opportunities but are pricier although they command higher rental rates in many cases – up to $1200 a week. The areas of the Atlantic coast around Miami and Ft Lauderdale are also interesting possibilities.

Buy to Let investors
The final major interest sector for Brits in recent years has been long-term rental properties similar to buy to let in the UK. This group may never wish to visit the area or simply want to invest in dollar property as a hedge against currency fluctuations until their retirement. There is a particular need for careful research to pinpoint locations where there is strong rental demand, good schools and preferably a long wait for properties to be built. This requires those moving into the area to rent for up to a year in the school district whilst their property is being built. It is critical the area is not over saturated with landlords doing exactly the same thing –developments such as Lakewood with all the formula in place work well with unfurnished property in the region of $275,000.

The National association of Realtors chief economist has stated that the fundamentals responsible for property growth will continue throughout 2004, a growing job market, property investment and very low mortgage rates by recent historical standards. It is estimated that by 2025 there will be a 32% increase of people living in Florida’s southwest region. There will be no shortage of Buyers – however land supply is tightening dramatically in certain areas as prices constantly increase.

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Andrew Bartlett an acknowledged expert on property trends and relocation in Florida, writes articles and answers readers’ questions for several British publications including Florida Magazine, Escape Magazine, Place in the Sun, Sunday Times, America, and The Red guide to buying Property in America and is regularly consulted by journalists and broadcasters. His consumer web guides have received numerous accolades.

Andrew was a Senior Government Official for 20 years before relocating to Florida several years ago where he was headhunted to set up specialist British property and relocation teams for Coldwell Banker and Remax - America’s largest estate agents. He then established a uniquely impartial and independent relocation and property briefing company working between Britain and Florida. He has written a number of watchdog style articles warning Brits about the many disreputable overseas property and emigration selling techniques that are presently operating.