Forecasters say 2012 Likely to Be a Better Year
A steady increase in Florida’s population, an uptick in housing starts and a gradually improving economy should make 2012 a better year for the state’s plumbing professionals. That’s the consensus of several economists who track Florida’s housing market.
“New job creation, rising rents and the inflow of international buyers are positive factors for the state’s housing market,” said Lawrence Yun, chief economist, National Association of Realtors, at the recent 2011 International Real Estate Congress in Coral Gables. “Today, the smart money is chasing real estate.”
Florida’s population is likely to increase by about 130,000 people in 2012, according to John Silvia, chief economist, Wells Fargo. In a recent forecast, Silvia added that tourism and healthcare are leading the recovery, but other sectors will also be adding new jobs.
New housing starts will increase in 2012, says economist Sean Snaith, director of the University of Central Florida’s Institute for Economic Competitiveness in Orlando. He predicts about 55,000 new residential starts in the coming year. About three-fourths will be single-family homes and the rest will be multi-family construction.
“Nationally, U.S. housing starts are at the lowest level since the end of the second world war,” Yun said. “America is not building any homes, even though we are adding 3 million people a year to our total population. Building activity needs to triple in order to get back to a normal level.”
However, tight credit for builders and developers, as well as home buyers, remains a negative factor for the housing market, Yun added. “The inventory of newly build homes is very low,” he said. “That means builders are selling whatever they can complete. The problem is that they can’t get construction loans in the current environment.”
While housing prices have stabilized in most Florida markets, they are still well below the boom-year peaks of 2004-2005. That’s because foreclosure sales continue to be a large part of the state’s real estate market. However, Yun said that lenders are bringing their REO (real estate owned) properties online gradually, rather than dumping them on the market at once. In addition, many lenders are recognizing that they lose less money by approving “short sales” (where the existing mortgage is larger than the home’s market value). Some are accelerating the sales process or even offering incentives for owners to move.
For Florida residential plumbing contractors, key opportunities include repairing foreclosed homes and other distressed properties, as well as additions and remodeling projects. One trend of note: some Florida parents are investing their excess cash by buying inexpensive homes and condos for their 20-something children. That allows these Millennials to have a place of their own that they can “fix up” and decorate themselves.
On the commercial side of the business, new construction is most likely to occur in the healthcare, retail and warehouse sectors. Little new office construction is likely as vacancy rates are now at 12 to 20 percent in the state’s major markets.
Yun notes that international trade will be one of the driving forces in the state’s economy in 2012. That could create new commercial opportunities in the state’s gateway cities like Miami, Fort Lauderdale, Jacksonville and Tampa Bay. As Yun said, “In Florida’s commercial markets, the worst is probably over.”