TERRY TROMBETTI - REALTOR® Florida Real Estate For Your World!
GULF COAST REALTY NETWORK | 239.560.1574 | email@example.com | Cape Coral | Ft Myers and The Beach | Bonita Springs | Naples | Marco Island | YOUR FLORIDA REAL ESTATE INFORMATION CENTER Commercial and Residential Investment Guidance, Consultation, and Representation
Published: Saturday, January 10, 2015 at 10:40 p.m.
Last Modified: Saturday, January 10, 2015 at 10:40 p.m.
Florida appears to be recapturing its economic mojo.
After falling harder than most states during the Great Recession -- the result of double-digit unemployment and housing values cut in half in many areas -- the Sunshine State has regained lost ground in the categories of jobs, visitors, housing, manufacturing and other key sectors.
In some areas, like tourism, Southwest Florida and the rest of the state are even exceeding levels attained during the economic boom years of the last decade.
As 2015 begins, some analysts expect Florida's overall economy to grow this year by 4.1 percent -- a third greater than the nation's rate and one of the fastest growth rates in the U.S.
Much of the boost can be attributed to northern visitors and retirees, who are selling their homes or buying second ones here and providing a significant lift to cornerstone industries such as hospitality, health care and construction.
But more macroeconomic influences -- including the booming stock market, historically low mortgage rates and declining fuel prices -- also are helping Southwest Florida, analysts say.
"I think Southwest Florida has benefited disproportionately from the boom in the stock market and the bond market, and by all the wealth created by the stock market's incredible bull run," said Sean Snaith, an economist at the University of Central Florida. The region "tends to attract the more affluent retirees, and those are the people who, by and large, have reaped the benefits of a booming stock market. They are able to finance new home purchases and cash out assets and retire."
Economists also say the impact of falling gas prices cannot be underestimated.
"For 2015, what is different is we really have two potential upsides for the state -- low gas prices, which took us and everybody else by surprise, and the stock market," said Mekael Teshome, an economist who covers Florida for PNC Financial Services.
Both waning gas prices and waxing stock prices tend to bump up discretionary spending, which, in turn, boosts places like Florida that rely heavily on visitor and part-time residents' spending.
"Discretionary spending is what drives our business," said Virginia Haley, president of Visit Sarasota County, the area's tourism agency.
November statistics represent a window on the trend: Sarasota County's hotels were 53 percent occupied in November 2013, a record for what is often a slower month before the traditional winter visitor season begins in earnest.
A year later, November occupancy rates jumped to 64.6 percent. Average daily room rates rose at the same time, by nearly 10 percent, to $133.
If past trends hold, many of those visitors will become at least part-time residents.
Last year the Sunshine State added a net total of 712 new residents daily -- 260,000 in all, said Chris McCarty, director of the University of Florida's Bureau of Economic and Business Research.
The net in-migrations were at least partly responsible for Florida's ascension to the stature of third-most populous state in the nation, edging out New York.
That rate is still somewhat lower than during the economic boom years of the past decade.
Still, the in-migration is significantly higher than it has been since 2008, and it is having a tremendous impact on one of the region's key economic drivers -- residential real estate.
At least part of that boost is the result of mortgage rates, which have subsided in recent months as a result of global turmoil and investors' renewed interest in U.S. Treasuries that serve as a benchmark for rates.
Thirty-year mortgage rates have hovered around 3 7/8 percent, said Pat Neal, president of one of the region's largest homebuilders, Neal Communities.
"That means if you live in Ohio, Michigan, Indiana or Illinois, you can sell your home in the Rust Belt, which you have not been able to do for the past eight years," Neal said.
Lower mortgage rates have also spurred new development, though many Southwest Florida buyers have completed purchases with cash since the end of the Great Recession.
In downtown Sarasota, developer Tom Mannausa has completed 11 floors of a planned 18-story highrise called The Jewel.
All 19 of the building's units were presold as of last June, at prices ranging from $1.6 million to $3.5 million. To make their purchases, buyers provided nonrefundable downpayments of 35 percent to 65 percent.
In a possible harbinger of future sales for the Vue on Sarasota Bay and other planned downtown condos, Mannausa said he still receives about three calls a day from interested buyers.
"If The Jewel were three times larger, I could sell those condos, too," he said.
In all, there are 29 projects either under construction or in the pipeline in downtown Sarasota, valued at nearly $500 million.
"It represents the desirability of this area, and the rebounding economy," Sarasota City Manager Tom Barwin said.
"We are seeing evidence all over the place that people's attitudes are dramatically upbeat compared to three-four years ago and that they are now feeling that this rebound may be sustainable for a decent amount of time."
More projects could be on the way, said Norman Gollub, the city's downtown economic development coordinator.
The tally does not include, for instance, the former Sarasota Quay site, a 15-acre bayfront parcel that recently sold to a Jacksonville-based company for $27 million. Developers are entitled to build 700 residences, a 175-room hotel and nearly 200,000 square feet of commercial space there.
Downtown Bradenton, too, has experienced a resurgence that will carry into 2015 and beyond.
Starting with the completion of the $6 million Riverwalk in 2012, the city has transformed itself into a livelier place to live and work.
NDC Construction, which was the construction manager for the project, reflects the resurgence.
Today, the firm is working on $89 million worth of development comprising two new apartment complexes along the Manatee River. The first, the $23 million Riversong, is slated for completion in February, NDC president Ron Allen said.
"With these projects, we will be bringing a lot of new residents downtown," Allen said. "Once those residents are there, shops and restaurants downtown will flourish even more than it is today."
While the respective downtowns have attracted considerable attention, much of the new development activity has centered on suburban areas throughout the region.
Neal has had so much interest in his new communities -- spread throughout Southwest Florida -- amid rising materials and other costs, that he has raised prices more than 10 percent, to an average of $345,000.
In 2014, Neal matched its sales and profit figures from 2005. This year, the builder expects to sell 1,044 new homes.
To get there, Neal is expanding geographically, with nine new communities from Hillsborough County to Collier County.
The additions will bring to 30 the number of communities Neal is active in this year.
"We are banking on the fact that the boomers have postponed their retirement, and because they can now sell their homes in Ohio, that they will buy homes from us in record numbers," he said. "Now that we see the Midwest recovering, our buyers are coming from the Rust Belt states for the first time in eight years."
In Lakewood Ranch -- already one of the fastest-growing developments of its kind, with about 20,000 residents -- the master-planned community is poised for further growth in 2015.
"I think we will escalate from our current pace of 500 homes a year up to close to 1,000," said Rex Jensen, president and CEO of Schroeder-Manatee Ranch Inc., the master developer.
Among the planned projects is a 640-acre Del Webb community that will ultimately have as many as 1,300 homes.
Jensen also said SMR intends to add about nine more miles of roads and utilities to open up access to the ranch from the south side at Fruitville Road. The company to eventually construct a bridge across Interstate 75 to connect Lakewood Ranch Boulevard to Cattlemen Road.
Bridge construction is tentatively slated for 2017, pending state financing to be arranged by Sarasota County government.
It's not just the out-of-towners buying homes here, thanks to an improved regional job market.
Both statewide and in Southwest Florida, the unemployment rate has showed continued improvement since 2012.
Florida's jobless rate in November -- the latest month available -- was 5.8 percent, while the three counties comprising Southwest Florida came in even stronger, at 5.4 percent.
By comparison, in late 2012, Southwest Florida's jobless rate stood at 7.7 percent.
But Snaith warns 2015 will not likely see similar gains.
"The growing labor force and rising labor participation rate will make lowering the unemployment rate more challenging," Snaith said. "The pace of decline will slow dramatically, and could reverse direction in any given month, as labor force growth picks up. As a result of this headwind, the unemployment rate should still hover around 5.8 percent through the end of 2017."
Payroll job growth, meanwhile, should average 2.3 percent this year, 1.9 percent in 2016 and 1.6 percent in 2017, he predicts.
Cyclical in nature
Economists note that the state's economy has surged in the past year because it is largely "pro-cyclical" in nature.
"It works both ways. The bad times are worse in Florida. The good times are better," said Kwame Donaldson, an economist who covers Florida for Moody's Analytics.
On the downside, the state still has less manufacturing than any southern state as a percentage of its overall job mix, and it has more reliance on tourism and construction than is desirable.
Wages remain low, too, which has somewhat checked economists' enthusiasm.
To boost wages, the state needs to expand its variety of businesses, they say.
"Florida needs to diversify," said McCarty, of the University of Florida. "There seems to be some awareness of that in Tallahassee, but how do you do it?
"Tourism is doing great right now, and we are building houses again, and people are moving here," McCarty said.
"But when things go sour, people stop coming -- that is the roller-coaster economy we live in."
Housing economists and would-be homebuyers are finding reasons for optimism as 2015 nears. To be fair, the bar’s set pretty low after a tough year for housing.
However, there are some genuinely encouraging signs that next year will be better for prospective buyers. Economic recovery and an improving job market will go a long way to boosting affordability for buyers in many markets.
After years of hyper-cautious lending, more mortgage lenders are starting to relax credit and underwriting requirements, which are also known as “overlays.”
A big push in that direction came earlier this month when new guidelines from Fannie Mae and Freddie Mac took effect. These government-sponsored mortgage giants purchase about two-thirds of all new home loans.
The new policies were aimed at clearing up confusion about when lenders must buy back loans that go sour. Economists and industry insiders expect the newfound clarity will lead to broader access to mortgage credit.
“I’ve been told with absolute confidence that some lenders are lifting almost all of their overlays,” David Stevens, president of the Mortgage Bankers Association, told the Wall Street Journal.
The Urban Institute estimates more “normal” lending requirements could mean an additional 1.2 million home loans every year.
2. Lower Down Payments
Prospective buyers have another reason to high-five Fannie and Freddie: They’ve recently agreed to get behind loans with just 3 percent down. That lower benchmark, coupled with loosening credit standards, will likely help more first-time buyers enter the market.
Buyers will need at least a 620 FICO score and be on the hook for private mortgage insurance. Requirements for the 3 percent option vary between the two agencies. Depending on their path, buyers may need to complete a homebuying education program or show they haven’t recently owned a home.
“Our goal is to help additional qualified borrowers gain access to mortgages,” Andrew Bon Salle, a Fannie Mae executive vice president, said in a statement. “We are confident that these loans can be good business for lenders, safe and sound for Fannie Mae and an affordable, responsible option for qualified borrowers.”
FHA loans currently feature a 3.5 percent down payment requirement, but the accompanying mortgage insurance premiums have become increasingly expensive for many low- and middle-income borrowers. On a typical $200,000 loan, an FHA buyer might pay an extra $200 per month in mortgage insurance costs.
3. Cooling Home Prices
Some housing markets are still hotter than others. But the overall pace of housing price growth has slowed considerably. Freddie Mac’s housing price index soared 10 percent from September 2012 through September 2013.
Over the last year, the index is up just 5 percent, and Freddie Mac economists expect only a 3 percent increase for 2015.
Increases in housing inventory may also help to push down prices in some places.
4. Rates Still Low
Heading into 2014, most economists and housing wonks expected mortgage rates to top 5 percent by year’s end.
Last week, the average rate on a 30-year fixed mortgage didn’t even top 4 percent, according to Freddie Mac’s weekly lender survey. The 3.89 percent average rate marked an 18-month low.
A host of economic and geopolitical factors combined to keep rates lower than anticipated this year. They’re almost certainly going to rise in 2015, maybe even into that long-predicted 5 percent range, but they’ll still remain far below historical averages.
Before you buy a home, it’s important to check your credit to get an idea of whether you’ll meet lenders’ requirements. You can check your credit reports — you can get them once a year for free, and you can also get a free credit report summary on Credit.com — to see where you stand. You can also use this calculator to see how muchhome you can afford, which can help you target your search to a price range that is right for you.
Thomas Edison focused on botanical research at his laboratory in Fort Myers.EDISON-FORD WINTER ESTATES / COURTESY PHOTOWas 1928 a long time ago?
It seems like now when you’re standing in Thomas Edison’s Fort Myers laboratory, which was built that year. All his glass beakers, heavy-duty machinery and whatnots — the original ones — are arranged just as if he and the research team stepped out for lunch and would be right back, despite the fact that Mr. Edison died in 1931.
In the space of those three years, the inventor of light bulbs poured his considerable creative and research ability into a new company, the Edison Botanic
Research Corp. The mission: find a domestic, natural source for rubber, a resource valuable to the United States as well as his friends Henry Ford and Harvey Firestone, who needed it for tires.
The Edison & Ford Winter Estates offers regular tours of the Botanical Laboratory and gardens. Here, Mr. Edison and his team of specialists — widely recognized as a template for what is now the modern research and development lab — tested more than 17,000 types of plants, searching for a commercially viable source of natural rubber.
Edison Estate curator Mike Cosden stands in the legendary laboratory. EVAN WILLIAMS / FLORIDA WEEKLY“Edison always thought there were solutions to be found in nature rather than synthesizing chemicals in a laboratory,” said Mike Cosden, curator at the Winter Estates.
Mr. Edison, with financial contributions from partners Ford and Firestone, built the lab and headquarters in Fort Myers, right across from their homes. It was the right spot, the subtropical climate similar to where most of the world’s rubber was then being produced in Asia.
In May, the Winter Estates was recognized by the American Chemical Society as a National Historic Chemical Landmark, the first such designation in Florida and one of only a few in the United States, for Edison’s contribution as a researchand development chemist.
Where's the story?8 Points Mentioned
Henry Ford, Thomas Edison and Harvey Firestone outside the laboratory. EDISON-FORD WINTER ESTATES“I think it changes the whole slant on the Edison and Ford site,” said Chris Pendleton, CEO of the Estates. “It’s not just where they lived and vacationed, it’s where they came to work.
“I also think it characterizes Lee County a little differently. It’s not just a tourist spot, it’s a place where research and invention is also happening and can have a home here.”
That’s true here and in other Florida counties, where governments and communities have wooed modern bioscience companies, such as Algenol Biofuels, which produces ethanol using patented algae technology.
The company’s research and development was like Mr. Edison’s in that it systematically screened thousands of strains of algae to find a handful that work to produce ethanol commercially, said Paul Roessler, the company’s chief scientific officer. He moved to the area about 2½ years ago before visiting the Botanic Lab.
Curator Mike Cosden in Thomas Edison’s lab, which looks much like it did 85 years ago. EVAN WILLIAMS / FLORIDA WEEKLY“When we ultimately made it to the Winter Estates I didn’t realize at the time that this laboratory existed. Much of my career has been spent looking for renewable and domestic sources of these kinds of polymers… You think about light bulbs and electricity and phonographs, I hadn’t realized there was a botanical side to (Edison), but it made a lot of sense.”
Today as in Mr. Edison’s time, there was great interest in the positive impact that a bioscience company could have both in terms of notoriety and economically. For his Research Corp. the interest was on a national scale, although Mr. Edison employed a local team that included a research superintendent, linguist, shop manager, chemist, secretary, plant collectors and a part-time glass blower.
The New York Times reported from Fort Myers in February 1927, “Thomas A. Edison is working way past midnights in his laboratory here on an experiment which he believes will revolutionize the world’s rubber trade and change the South from the land of cotton to the rubber-producing center of the United States.
That didn’t happen. High labor costs associated with growing rubber plants was one of the big hurdles Mr. Edison faced. He believed he could invent a machine to harvest it at lower costs once he found the right plant. Others thought cheap foreign labor was the way to go. The New York Times reported in March 1927 that a retired British Army officer living in Palm Beach, Capt. Arthur Herbert Vaughan-Williams, thought the U.S. should import “several thousand Hindu laborers” to work on rubber farms.
“They can live on a handful of rice a day and it would cost little enough to keep them,” the Times quotes Mr. Vaughan-Williams.
Although Mr. Edison didn’t end up creating a commercial source of rubber, his work at the lab has far-reaching historical significance.
With British rubber flooding the market after World War I — Great Britain established vast plantations on land ithad colonized in South Asia, Mr. Cosden explained — one of Edison’s and the United States’ hopes was to create a domestic source, a boon for national security and the economy.
Goldenrod became the most promising plant after the Research Corp. bred a hybrid version for its purposes. In protecting his research, Mr. Edison and agricultural inventor Luther Burbank helped pass the Plant Patent Act of 1930, the first to offer plant breeders intellectual property protection, with implications for agricultural companies among others.
Mr. Edison felt he was close to finding a domestic, commercial source of rubber. He told the Times in March 1930:
“Give me five more years and the United States will have a rubber crop which can be utilized in less than 12 months’ time.”
He died the following year in October. The U.S. Department of Agriculture took over the lab, which remained in operation until 1936. Eventually synthetic rubber became a solution for the U.S., with natural sources grown overseas.
Now, at least one U.S. company, California based Yulex, produces natural rubber to replace the petroleum-based version in some commercial products. It uses guayule, a plant native to the arid U.S. southwest. Its non-allergenic rubber has been used for products such as medical gloves, condoms, and Patagonia wetsuits.
Melanie Venter of Yulex said volatility in the natural and synthetic rubber markets is “driving a search for alternative sources of natural rubber and a more sustainable, local rubber producing project.”
Mr. Edison would have been familiar with those market forces, even if environmental concerns factor more heavily today.
“He was certainly frustrated with the process,” Mr. Cosden said. “But, overall, he seemed very excited and optimistic about it right up until the end of his life. And I think that was modus operandi for Edison. He was always very persistent and optimistic.” ¦
The traditional home mortgage has taken a back seat to cash sales in South Florida, more so than any other place in the country. Cash buyers are leading the housing market recovery, Real estate agents said, but at the same time making it more difficult for middle-class buyers, who don’t have that kind of cash on hand and already face tight lending standards, to secure a mortgage.
Florida was king of cash sales in the second quarter of this year, defined as single-family homes and condos where no loan was recorded at the time of sale, according to a report by the research firm RealtyTrac. The state swept eight of the top 10 areas for cash sales in the country. The Cape Coral-Fort Myers area saw 62 percent cash sales, and Sarasota-Bradenton-Venice 61.5 percent, the second and third highest of the 100 largest metro areas in the United States
The greater Miami area took the top spot at 64 percent. Hidalgo County, Texas, and the Las Vegasarea rounded out the list at numbers seven and 10. The national average was 37.9 percent.
Those figures are “very consistent with what we’re seeing here in Charlotte County,” where cash accounted for 66 percent of single-family home and condo sales in the second quarter, said Roger Morris, managing broker at Michael Saunders & Company.
Nationwide, cash sales were especially high for the cheapest and the priciest properties, RealtyTrac says. In the luxury Naples market, Realtor Corey Cabral reported that fully 96 percent of his homes sold for cash in the last two years, priced from $500,000 to more than $1 million.
In addition to the sunny lifestyle, buyers were attracted to the lower prices, driven down in the wake of recession and now beginning to appreciate again. Too, cash deals don’t require the red tape of loan applications and appraisals.
CABRALThe cash buyers fall into three main categories, said Daren Blomquist, RealtyTrac vice president: investors aiming to flip or rent property, from institutions such as Wall Street firms to individuals; foreign buyers looking for a safe haven for their money or a trophy property; and retirees who may have sold a home up north and brought the proceeds south.
They may also have cashed in other investments.
Where's the story?9 Points Mentioned
“They were able to see a significant gain in their stock portfolio,” said Randy Thibaut, president and CEO of Land Solutions, which specializes in residential tracking and land transactions in Southwest Florida. “They took some of those winnings of the table and instead of reinvesting it used it to buy a home in Southwest Florida while prices were still down.”
The influx of cash helps the market recover in the “short term,” said Mr. Blomquist, but traditional mortgages play an important role in allowing young families and other middle-class buyers to enter the market.
BIENZ“We need to see more first-time home buyers and move-up buyers participating in the housing recovery for it to continue to happen,” Mr. Blomquist said.
Mr. Morris added that buyers who need a loan and compete with cash offers generally lose unless they are especially credit worthy and make a higher offer.
The average price point for cash sales of single family homes is about $150,000 in Charlotte County, while the average overall is $170,000, said Crystal Bienz, a Realtor based in Punta Gorda.
“The low end is right now almost strictly cash,” she said. “The regular buyers, they can’t compete with these cash buyers.”
Cash buyers helped absorb distressed property but eventually, Mr. Thibaut predicts, they will be fewer in number.
“And that is where the challenges lie,” he said. “Because most of the people who have decent credit and had the ability to go get a loan have, and now what’s showing up is the challenged credit buyers.”
Mr. Blomquist notes cash sales have already abated slightly from a year ago in South Florida, by about 2 percent, indicating a continuing decrease in the trend that began when the housing market bottomed out after the great recession and vulture buyers began to swoop in looking for deals.
Luxury homes for cash
Corey Cabral has been a Realtor in the Naples luxury housing market for the better part of four decades and is watching the trend in cash sales with fascination.
“This is a dramatic change in the real estate market in recent Naples history,” he said.
With home interest rates so low, buyers might consider taking out a mortgage and investing their cash in the surging stock market instead, he points out. But that’s not happening, indicating that cash buyers see a home as a better bet than stocks or other investments.
“The national and international (buyers), particularly, consider Naples to be a very secure marketplace for investment and I believe that’s why they’re willing to leave their cash here in the real estate instead of other avenues for investment,” he said.
For Mr. Cabral, Canadians are his top international market. There is also a mix of European, Asian, Indian and Brazilian buyers.
“The investor doesn’t have the confidence in the governments and so they look to invest their profits outside of their own country in the U.S. marketplace.”
Mr. Cabral has been through three recessionand recovery cycles, he said, and finds in the current version cause for both concern and confidence. “I don’t like to see a recovery at the pace that it’s moving at because it’s a clear duplicate of the last recovery we had, moving too fast, ultimately ending in a bust,” he said. “But what’s very different now — this boom is being driven by cash buyers. The last boom was driven by cheap mortgage access. Anyone who was a warm body could come in and get a mortgage back in 2004, 2005 and 2006, and that was fueling the huge price run-up inCollier County whereas today we’re not seeing it at all. Even if there’s a pullback, the cash buyers aren’t going to have to bail and run.” ¦