Are the National and Florida Real Estate Markets Set for Another Decline?
Both the national and Florida real estate markets are looking strong for at least the next two years according to The Fall 2016 Housing and Mortgage Market Review produced by the Arch Mortgage Insurance Company.
According to the report, the chances that home prices will fall nationally is only 4%. This compares favorably with last year’s report which stated that the chance of a decline was at 6%. Two years ago the chances of falling home prices was a far larger 13%. And in Florida, the Market Review forecasted that a fall in Florida real estate prices in the coming two years is exactly half that of the national level, and stands at just 2%.
The only areas of the country where significant price drops are expected are those that rely heavily on the energy sector (coal, oil and natural gas). These problem areas include West Virginia, Wyoming and North Dakota.
According to Dr. Ralph Defranco, global chief economist at Arch: “Apart from some underlying issues that continue to hold back the housing sector, ranging from weak wage growth to skyrocketing student debt, strong dynamics are now in place that will continue pushing up home prices faster than inflation for the foreseeable future… Positive fundamentals include affordability, job growth, a shortage of housing, rising rents and underpriced or fairly valued housing in most areas of the country.”
The report emphasizes that good economic fundamentals will continue to outweigh the few negatives. Job growth has averaged over the 140,000 per month needed to keep the unemployment rate steady. During the last year, the labor market expanded by 2.5 million jobs, and added 15 million jobs since the recession ended – nine million jobs were lost in that recession.
The report further states that an increase in the number of people voluntarily quitting their jobs and seeking better employment opportunities points to a renewed confidence in the economy. Additionally, rapidly rising rents due to low vacancy rates make a home purchase a wise choice for many.
Further fuel pointing to increased home buying in the coming years are the affordability factor – interest and mortgage rates remain at historic lows, meaning monthly out of pocket costs remain quite affordable for many.
According to the study, “There is a growing shortage of housing, with demand for new households exceeding new construction levels for over six years now. Construction of entry level homes is being held back by higher local fees and regulatory costs.” This too points toward higher home prices.
In conclusion, the preponderance of data point to positives for home price increases. The chances of a fall in home prices nationally during the next two years are very unlikely. As for the state of Florida, the outlook is even more positive. The Florida housing market will continue to strengthen during this period with a confidence level of 98% according to the report.