2007 Industry Outlook
Residential Real Estate
As the residential market cools, pricing becomes key.
A solution to rising property taxes.
Initiatives to increase the supply of workforce housing.
When G.L. Homes opened Greystone in Boynton Beach in October, more than 1,000 prospective buyers lined up outside the sales center for a chance to buy single-family homes starting in the $310,000s. A few weeks later, The Related Group of Florida enjoyed similar sales success with Loft 3 in downtown Miami thanks to prices that began at $159,000.
For Florida residential developers and builders, the lesson is clear: Pricing will be a key factor in determining sales success in 2007. Today, all segments of the market -- primary-home, second-home and investor buyers -- are looking for value.
Unfortunately, most residential developers and builders are finding themselves squeezed between the new market realities -- slower sales, lower prices and more stringent qualifying terms for mortgages -- and their own cost structure. With high land prices and construction costs, there's little room to offer discounts.
Some bright spots on the horizon in the residential sector remain. For instance, single-family home builders in Jacksonville, Orlando and Tampa Bay did not run far ahead of end-user demand, unlike their counterparts in multifamily housing, specifically high-rise condos. By mid-2007, there will be a better balance statewide between demand from primary-home buyers and the supply of houses on the market.
Rentals offer another growth opportunity for developers. Floridians who can't afford to buy today's higher-priced homes are likely to remain renters, and condo conversions have removed tens of thousands of attractive units from the state's rental pool. In Tampa, for instance, more than 30,000 units were converted into condos in the past five years.
"Housing affordability is at a low level right now," says Gleb Nechayev, vice president and senior economist at Torto Wheaton Research in Boston, in a recent CB Richard Ellis multifamily housing outlook conference in Hallandale Beach. "As a result, the number of renter households is increasing for first time in a decade, and we expect to see real growth in rental rates."