Florida real estate market has hit bottom according to the latest University of Florida (UF) report. Results of the first quarter survey indicate that the real estate market in Florida has hit bottom and is in the process of stabilizing across most property types, says Timothy Becker, director of UF's Bergstrom Center for Real Estate Studies.
Private capital, both foreign and domestic, is continuing to enter the state in search of quality investment deals. Another good sign: Life insurance companies have started to re-invest in commercial properties after backing off for the last year and a half, Becker says. Because these companies use premiums from life insurance policies to make investments, they are not deterred by the lack of available bank financing.
Life insurance companies see the fundamentals of the economy stabilizing and they see the opportunity to get quality assets at a good price. So if they think things aren't going to get worse and they may actually get better, it follows that they're going to want to start investing again.
On a negative side, unemployment continues to be one of the state's biggest problems, edging up to 12.3% in March, its highest level since the state began keeping count in the 1970s. Florida has lost more than 880,000 jobs since 2007. Although there is a potential for job growth later in the year, even under the most optimistic assumptions it will take 3 to 4 years to return to 2006 levels.
Also of concern is the continued hesitance of commercial banks to lend money because of pressure from regulators to manage risks along with depressed values that make it difficult to refinance mortgages.
The retail and office markets are the worst off, Becker says. Until there is an increase in job growth, there is no need for more office space, and people aren't spending as much money as they used to.
Apartments continue to be the best market in the state due to high demand from prople moving out of foreclosed homes. More people are going to be living in temporary places than trying to buy homes because it's become more difficult to buy homes from a financing perspective.
One of the strongest area of the state in South Florida, especially Miami-Dade and Broward counties, with their diverse economies, steady migration and influx of foreign capital. The glut of condos in South Florida is actually starting to change hands, they're begining to rent them.
A positive note overall is that survey respondents' confidence in their own business has risen for the 5th consecutive quarter. I'ts alway a good sign for us that the lenders think their business is going to get better, Becker says. Maybe it means there is some light at the end of the tunnel.
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