Is the Housing Market Back?
Nearly six years after the beginning of the global financial
crisis, Florida’s housing market appears to be making strong gains. According
to recent data from Florida Realtors, the traditional median home sale price
rose by 11.8% over the past year. In addition, the number of closed sales of single
family homes increased by 24.8% year-over-year. Both indicators suggest that
demand is once again increasing for housing in the Sunshine State. Homeowners
are slowly seeing some recovery in their household equity. Further, the state’s
homebuilders have been filing more building permits, suggesting growing
confidence in buyer demand for the year ahead.
According to John Sebree, Senior Vice President of Public
Policy for Florida Realtors, an interesting aspect to this increase is the
large percentage of international buyers that Florida sees. In 2012,
approximately 19 percent of the state’s purchase volume is to international
buyers. This is a stark contrast to the total U.S. market, of which only
five percent are international buyers.
These improvements beg the question: is the recent
performance in the state’s real estate market a sign of a new economic boom?
While recent economic data has been somewhat encouraging,
Florida’s housing market will take several years to approach the pre-recession
levels observed in 2006. The economic challenges facing the state’s recovery
are two-fold: much of the housing recovery is a result of helpful Federal
Reserve policy; and the pre-recession housing environment was substantially
inflated. The promising gains in Florida’s housing market have largely been
supported by the Federal Reserve’s asset purchases which have kept interest
rates low for home buyers. The trajectory of the recovery will depend on the
Fed’s future interest rate policy as well as market sensitivity to any changes
in borrowing costs. Finally, as a result of the overvaluing present in
the mid-2000s we should not expect the market to bounce back to those
artificially high levels. Despite these challenges, we should expect a modest
recovery in housing and the overall economy to continue in the near future.
