In the face of multiple nationwide challenges this past year, Florida’s coastal economy has continued to thrive – along with its property market. By now, most real estate investors have heard about the encouraging population inflows to the Sunshine State, drawn in by the state’s spacious residences, sun-kissed climate, and lenient tax policies. There have always been many reasons to move to Florida, and the pandemic has effectively accelerated several demographic trends that existed long before COVID-19.To that end, we’d like to share the top three reasons why we are actively investing in Florida’s multifamily market.
1. Florida’s Housing Inventory Remains Stubbornly Low
Florida’s housing demand has consistently eclipsed new completions over the past decade, and according to the National Association of Home Builders, the state’s home sales outpaced new construction starts by the largest gap ever last year (1). While the construction slowdown Florida experienced after the 2008 Recession has had a lasting effect, even before near-zero interest rates and the unprecedented influx of new residents into Florida began placing further strain on Florida’s housing market (2).
And while the natural solution is to build more residential properties, developers across the nation remain concerned about their ability to effectively source necessary construction materials. According to BMC, a major supplier of building materials, customers now regularly expect extended delays on new orders for roofing, engineered wood, vinyl windows and door locks, and two thirds of developers are worried about not being able to procure construction materials on time (3). At the same time, key building material costs remain inflated, with prices for products like softwood lumber jumping nearly 50% between April to August 2020 — the largest four-month increase since 1949 (3).
As a result, prospective buyers have made do with what is currently available for sale, and the number of sold-but-not-started houses in Florida in 2020 reached a record high at the end of last year (3). Going forward, the disparity between housing demand and supply is expected to further swell in 2021 (2), and the state’s residential housing constraints are expected to continue fueling demand for spacious, high-quality rental options that mirror the look and feel of private homeownership.
2. Housing Prices in Florida are Skyrocketing
With housing inventory in cities like Ft. Lauderdale significantly lower than most cities in the U.S., average sale prices for residential properties are skyrocketing across Florida (4). Single-family home prices in Miami-Dade County have grown more than 42% in recent years, prices in Palm Beach and Broward Counties rose by 20% and 12.5%, respectively (5), and Tampa’s housing prices increased by 10.7% in 2020 alone (2).
Overall, the median sale price for a single-family home in Florida has increased by over 17% to $430,000, according to the latest numbers released by Florida Realtors, and an increasing number of residents are being priced out of the market (6). And while Florida‘s multifamily rental market remains relatively affordable compared to other parts of the U.S., average rents in the state have also risen steadily and outpaced the national average (7).
Furthermore, Florida has successfully steered its economy through the pandemic for the most part and continues to attract a significant amount of business. Florida is serviced by 19 commercial airports and the state’s affordable office space, modern infrastructure, and multicultural, multilingual workforce has drawn a number of corporate heavy hitters in recent months, including Starwood and Blackstone, which plan on opening new headquarters in downtown Miami (8). As more companies continue to expand their presence in Florida, it is expected that housing and rent prices in nearby submarkets will increase in turn.
3. Florida Residents are There to Stay
People from all over the country are moving to Florida, and many of the state’s residents are there to stay. While many homeowners in Florida have long used their local address as a tax-saving domicile, an increasing number of new homeowners in the state are purchasing a primary residence rather than a seasonal second home (9). Additionally, recent figures indicate that existing Florida homeowners are staying in their homes for longer. While the average residency duration per home hovered between 6-7 years before the 2008 Recession, that number is now closer to a full decade (1), and this slowdown in residential turnover rates will only further exacerbate the state’s supply shortage and increase demand.
In short, while the Florida housing market is hot right now, demand is primarily being spearheaded by households who intend to make full use of their new homes. This is a marked contrast to the speculation-driven real estate purchasing frenzy that led to the 2008 Recession, and most indicators suggest Florida’s current property boom is the result of tangible, lasting supply and demand (2). As the continued expansion of business-friendly, transit-oriented development in regions like Miami-Dade, Broward, and Palm Beach Counties continue to accelerate, an increasing number of residents are expected to treat Florida as their primary, long-term home (10), and this growing population may trigger a rising tide that bolsters multiple property classes across the state.
Florida’s Future Looks Bright
Florida’s approach to COVID-19 attracted a lot of criticism and doubt, but despite the naysayers the state has emerged as a relatively successful example of what America’s next chapter may look like. As the pandemic gradually recedes into the background, the Sunshine State’s numerous charms will continue attracting new residents and businesses alike, and we expect local housing demand to continue outstripping supply for years to come.
If you’re interested in investing in a currently income-generating multifamily asset in Florida, you may want to take a look at our latest deal in Tampa. The deal asset is a gated community that offers residents convenient, low-density living coupled with high-quality amenities, and the Sponsor on the deal sees significant value-add potential. Additionally, the asset is located in Tampa’s University submarket, which is the top Tampa submarket in terms of projected post-COVID rent growth and the only part of the city with no new multifamily inventory deliveries expected through 2024 (11)
(1) Source: Sun Sentinel, “Home Prices are Surging in South Florida, and There’s No End in Sight”
(2) Source: Tampa Bay Times, “The Florida Housing Market is Booming. Is a Crash Ahead?”
(3) Source: Miami Herald, “Builders Can’t Keep Up with Demand for New Homes in COVID Era”
(4) Source: The Island Now, “9 Amazing Cities for Real Estate Investing in 2021”
(5) Source: Benoit Properties, “How Florida’s Real Estate Market Caught Fire During the Pandemic”
(6) Source: NBC Miami, “Buyers Getting Creative to Compete in South Florida Housing Market”
(7) Source: Florida Trend, “The Florida Housing Market is Booming. Is a Crash Ahead?”
(8) Source: CNBC, “Miami’s Commercial Real Estate Boom Picks Up Steam as Pandemic Pushes Companies to Seek New Digs”
(9) Source: Herald Tribune, “Home Front:: Snowbirds are Morphing into Sunbirds”
(10) Source: DJ Supra, “Exciting Developments in Uncertain Times: What’s in Store for Real Estate in South Florida”
(11) Source: According to Sponsor, with data provided by Axiometrics