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At Wed.\u2019s 2021 Florida Real Estate Trends, NAHB Economist Dr. Robert Dietz called 2020 \u201ca surprise year for growth,\u201d and he along with other presenters generally agreed that the strong market will continue into spring, held back only by the need for more newly built homes.<\/span><\/span><\/span><\/p>\n<\/div>\n ORLANDO, Fla. <\/strong>\u2013 Homebuilding experienced \u201ca surprise year of growth\u201d in 2020 despite the pandemic, but new home construction this year will be constrained by supply side factors like higher lumber costs, a shortage of lots and regulatory issues, according to Dr. Robert Dietz, chief economist and senior vice president for economics and policy for the National Association of Home Builders (NAHB).<\/span><\/span><\/span><\/p>\n Dietz was one of several real estate economic experts who spoke to 424 Realtors<\/span>\u00ae<\/span><\/span><\/span><\/span><\/span>\u00a0and attendees during Florida Realtors\u2019 virtual 2021 Florida Real Estate Trends summit on Feb. 4.<\/span><\/span><\/span><\/p>\n He said, \u201cWe expect the COVID-19 crisis to continue through February 2021, with a 50% vaccination rate by the end of April and a 75% rate by the end of October \u2013 we anticipate accelerating economic growth later in 2021. The new-home construction industry will grow in 2021, but at a lower rate, especially as interest rates trend higher with the recovery, thanks to aggressive action by the Federal Reserve. Housing affordability will be key \u2013 we risk pricing households out of the market\u201d due to rising interest rates and higher construction costs.\u201d<\/span><\/span><\/span><\/p>\n Supply-side issues continue to impact homebuilding and affordability, especially for millennials seeking entry-level homes in suburban areas to raise growing families. Dietz predicted older millennials now ready to buy their first home \u2013 and looking for single-family homes they can afford \u2013 will be a leading demographic for residential real estate this year and in the years to come.<\/span><\/span><\/span><\/p>\n \u201cThe limiting factor for builders has been the roller-coaster ride for lumber prices,\u201d he said. \u201cIn talking to builders, rising lumber costs for a newly built home could be pushing prices up $15,000 or more. And, about 24% of the cost of a new home comes from the cost of regulatory requirements, during both the development and construction. We need to see what can be done in regulatory costs to keep down what we call \u2018death by a thousand cuts\u2019 in the new-home market.\u201d<\/span><\/span><\/span><\/p>\n However, Dietz noted that Florida, in particular, showed strong growth in new construction last year, with 2020 building permits in the state up \u201can incredible 30% year-over-year.\u201d<\/span><\/span><\/span><\/p>\n The NAHB chief economist said he tracked data to look at the often-cited \u201cshift to the suburbs\u201d for housing in the latter part of 2020 due to COVID-19. He found that large metro areas with high density in the urban core still experienced a year-over-year growth rate of about 5.7% in 3Q 2020, but the lower-density, lower-cost suburbs out from the cities reported a growth rate of about 15%. Dietz also looked further out from Florida\u2019s urban cores at communities known for second homes, investment homes or retirement. He said those areas reported a year-over-year growth rate of about 23.2% in 3Q 2020.<\/span><\/span><\/span><\/p>\n Turning to multifamily construction and commercial construction, Dietz said he expects an 11% decline in apartment construction growth in 2021, but multifamily construction will stabilize heading into 2022. Nonresidential building will feel more pain from a lack of commercial investment due to the pandemic and economic weakness.<\/span><\/span><\/span><\/p>\n Taking a look at Florida\u2019s residential real estate market, Florida Realtors Chief Economist Dr. Brad O\u2019Connor said the lack of for-sale inventory continues to constrain Florida\u2019s housing market in 2021, and it appears new-home construction \u201cisn\u2019t going to bail us out of our home shortage on the market anytime soon.\u201d <\/span><\/span><\/span><\/p>\n Wrapping up 2020, he noted that by the end of the year, the drop-off in Florida\u2019s housing market from February into early May \u2013 due to COVID-19 \u2013 had reversed to the point where, overall, north of 300,000 sales of single-family homes were reported for 2020, a rise of almost 6% compared to 2019. Meanwhile, close to 120,000 sales of condos and townhouses were reported for 2020, for a 2.5% increase compared to 2019. <\/span><\/span><\/span><\/p>\n Most of the counties in the state saw a year-over-year increase in overall closed housing sales, said O\u2019Connor, though that wasn\u2019t the case in Orange, Miami-Dade and Broward counties. In Orlando, the drop in closed sales was in large part due to the loss of jobs during the pandemic, especially in the areas of entertainment, leisure and hospitality. Meanwhile, South Florida, especially the cities of Miami and Fort Lauderdale, was hit hard by the early wave of COVID-19 cases and then had another hit when the state experienced a second wave of cases in the summer of 2020. <\/span><\/span><\/span><\/p>\n \u201cThe highest closed home sales in 2020 tended to occur in the state\u2019s smaller coastal communities, which draw retirees and second-home buyers,\u201d O\u2019Connor said. \u201cA lot of that growth was in sales of homes at $400,000-plus. The homes listed at $1 million or more did even better, with 100-plus percentage growth in many markets across the state, including some metro areas.\u201d<\/span><\/span><\/span><\/p>\n Florida Realtors chief economist noted this kind of information came from the Research department\u2019s analysis of what\u2019s currently driving housing sales around the state.<\/span><\/span><\/span><\/p>\n \u201cWhat we have tended to find so far is that density is not one of the most important factors driving sales growth,\u201d O\u2019Connor said. \u201cIt turns out that buyer wealth and the amount of available inventory tend to matter a whole lot more. So, I would hypothesize that\u2019s why you\u2019re seeing a suburban shift in new home sales. And, why you\u2019re seeing an overall greater surge in sales of upper-priced and luxury homes in Florida is that these kinds of homes are more freely available, and because many of the folks who are able to afford these kinds of properties also tend to be those who will be most able to work from home going forward.\u201d<\/span><\/span><\/span><\/p>\n What\u2019s ahead for the next several months in 2021?<\/span><\/span><\/span><\/p>\n O\u2019Connor said: \u201cI expect to see the recent trends from the end of 2020 to continue. I think we will continue to have robust sales growth, and as we get closer to vaccination really making a dent in the threat from COVID-19, we might see more people starting to consider upgrading or changing to a different home to take advantage of interest rates while they remain in the low to mid-3% range, which is what most forecasters currently predict. I think there are a lot of people right now dreaming of maybe trading in their home for another one that better suits their tastes, which I believe are shifting.<\/span><\/span><\/span><\/p>\n \u201cEven if it’\u2019 not a work-from-home situation for you, all of us have been in our homes a lot more than ever before recently, and some of us are getting a little bit sick of our current arrangements. Maybe a change of scenery would be quite nice. I see a lot of residential real estate activity in general for the next couple of years at least. And if new construction slows back to the recent rates from before the pandemic, as Dr. Dietz suggested, then that\u2019s only going to continue boosting sales and prices in the resale market.\u201d<\/span><\/span><\/span><\/p>\n The event concluded with experts addressing \u201cWhat Happens When the Office and Store Move Home?\u201d Moderated by Jennifer Quinn, economist and director of economic development for Florida Realtors, the panel included Kristine Smale, senior vice president, Zonda Advisory; Chris Owen, director, Florida research, Cushman & Wakefield, and Nancy Muscatello, managing consultant, CoStar Advisory Services, CoStar Group. <\/span><\/span><\/span><\/p>\n The three panelists agreed that migration trends to Florida already occurring accelerated in 2020 because of the pandemic, with some people able to work remotely at second homes or at a vacation rental, while others moved up plans to retire here. The Sunshine State consistently ranks high for people moving here from other states, as migration data from moving companies and real estate analysis firms shows. Corporate relocations to Florida are also currently on the rise, they said.<\/span><\/span><\/span><\/p>\n \u201cLower costs, lower taxes, a large and talented workforce and a business-friendly climate \u2013 all those benefits are drawing business to Florida, particularly financial service firms,\u201d said Nancy Muscatello.<\/span><\/span><\/span><\/p>\n Added Kristine Smale: \u201cYou\u2019re going to get a nice snowball effect, as the relocations attract higher-paying jobs, talented workers and more. Florida\u2019s policies really incentivize these businesses coming to our state.\u201d<\/span><\/span><\/span><\/p>\n The panelists\u2019 predictions for the next 12 months?<\/span><\/span><\/span><\/p>\n \u201cFrom a commercial standpoint, especially here in Florida, we\u2019re not going to see the economy take off until late 2021, after the vaccine rollout is mostly complete and widely distributed,\u201d said Chris Owen. \u201cA lot of it has to do with people\u2019s confidence level \u2013 there\u2019s a pent-up demand for travel, entertainment, going out. We\u2019re not looking to see that until the latter half of 2021 and into 2022.\u201d<\/span><\/span><\/span><\/p>\n Said Muscatello: \u201cRecovery is going to be slow and steady. The vaccine rollout is good news, but it will happen slowly; I think the momentum will pick up significantly toward the end of summer and around Labor Day. We\u2019ll start to see people coming back to offices, restaurants and entertainment then.\u201d<\/span><\/span><\/span><\/p>\n \u201cThe residential real estate sector and housing has been the golden child keeping real estate going and the economy going, to some extent,\u201d said Smale. \u201cI\u2019m very bullish on housing \u2013 we\u2019ll continue to see a limited supply with very strong demand. Low interest rates have helped affordability and will continue to do so, but we do have to be cautious of prices increasing too quickly \u2013 that\u2019s always our pushback.\u201d<\/span><\/span><\/span><\/p>\n\n