THE ORLANDO FLORIDA
The answer(s) to the impact of the COVID19 Pandemic on the housing market has had another month to brew. As you can see in the report below (along with additional comments), the short term effects are becoming a little more evident with this month’s data having come in. The long term effects are still in question. As we pointed out last month, the pandemic itself is separate and independent from the financial world as the economic impacts have been brought on purely by both political and social responses.
Since our last report, the vast majority of the country appears to have peaked in the number of COVID19 case increases. Fortunately, as of this report, the fatality numbers predicted by models have not reached those predicted levels – even in the hardest hit places. Central Florida has fared very well in this regard with fatalities in the 1000ths of 1 percent range with respect to the total population (21,477,737). As of this report, more than 717,000 people have been tested in Florida, but fortunately, approximately only 6.5% have tested positive – and this has trended downward as testing has progressed.
Perhaps some foreshadowing can be seen with the states of Georgia and Colorado. Despite dire expert and media predictions otherwise, Governors Kemp (Rep) and Polis (Dem) moved to open their respective economies three weeks ago. There have been no surges in hospitalizations or fatalities as of this report. This would suggest that perhaps the individual behavioral portions of social distancing such as frequent hand washing, covering coughs and sneezes, not touching one’s face, not shaking hands, limited social distancing (6’ apart), and staying home when sick, may prevent a majority of transmissions.
Regardless, it is still expected that the most vulnerable – those in nursing and assisted living facilities, those over 70 years of age, and those with underlying medical conditions will need to continue to be vigilant until definitive and successful standards of care are firmly established and a vaccine of some kind is developed, the latter being still some extended period of time away.
However, the efforts in pursuing both treatments and vaccines have been vast as there have been more than 7,000 scientific research papers submitted or published on both the SARS-CoV-2 virus and COVID19 illness subjects in just the past ninety days alone.
In the meantime, the devastation to the US economy brought on by state and city lock downs is beginning to affect the overall housing market. Unemployment, as expected, shot up from historic lows to over 14%. This of course is an artificial jump and not a normal swing in the economy since the underlying economic conditions were solid prior to the pandemic. Several factors have exacerbated the economic damage such as some lock downs being more heavy-handed than others – locking down areas within a state that is experiencing or has experienced relatively little of the pandemic, arbitrarily classifying some businesses as non-essential while other similar businesses are allowed to operate, allowing some activities while banning other similar activities, offering unemployment benefits which in many cases make it more monetarily advantageous to not work, muddled and ambiguous directives from policy makers, and the continual 24 hour news cycle of doom and gloom.
Some of these have led to rebellion by people eager to return to work and business owners striving to save their businesses as well as numerous lawsuits, some of which have overturned and nullified some lock down orders. Until these overall general circumstances trail off and end, the unemployment rate is expected to continue to climb.
Per the foregoing, it appears most agree the recovery is not going to be a sharp “V” shape as originally hoped. Some businesses have already announced permanent closings and those folks may be unemployed for much longer than originally anticipated. Stimulus packages are temporary in nature and meant to jump start things, not support things long-term. Thus, the longer these policy measures are in place, the more likely the artificial unemployment created can become an actual driving economic force on its own going forward.
Since the vast majority of homes are purchased with loans, unemployment has two immediate effects on the housing market. First, loans cannot be obtained without gainful employment. Second, while unemployed, a would-be potential buyer must use savings – which reduces his or her cash on hand for down payments and closing costs. Both serve to reduce the number of potential buyers in the market and the latter also serves to delay purchases even when employment is obtained.
Other related issues involve lenders pulling certain loan-type products off the market – those that allowed more latitude in a buyer’s circumstances - until some firmness in the overall economy is reached, along with construction and maintenance issues of supply chain availability and stability.
As we stated last month, the dynamics between all of the various factors will be uncertain and reactionary, and therefore highly unpredictable. As such, some of the effects of COVID19 on the real estate market will be more readily evident – such as the rise in inventory this month. Others will evolve over time as these issues, factors, policies, and politics interact and play out.
In the meantime – as has been stated many times in many places: wash your hands frequently with soap and water or hand sanitizer with at least 60% alcohol – especially after handling anything in public, avoid touching your face with your hands (use the inside of your shirt if you must), do not shake hands, try and stay at least six feet away from one another, and stay home if you feel ill.
This Month’s Report………
The latest housing market data are in for Central Florida, including Lake Mary Florida, Heathrow Florida, Longwood Florida, Sanford Florida, Winter Springs Florida, Oviedo Florida, Debary Florida, New Smyrna Beach Florida, Apopka Florida, Orlando Florida, Geneva Florida, Belle Isle Florida, Maitland Florida, Sorrento Florida, Winter Park Florida, Wedgefield Florida, Avalon Park Florida, and Altamonte Springs Florida. Here are the highlights taken from the Orlando Realtor Regional Board report ending April 2020 (the latest now available):
As has been anticipated, inventory is again up from the previous month by 4.3%. This is still less than that which was available a year ago. There are now 7,659 homes available on the market – still far from a balanced market.
A continued interest rate decline and inventory increase may suggest that this drop is not due to rates, but rather to job loss and loan product loss. That is, without employment, a loan cannot be obtained and many lenders have pulled back the number of loan products which had more creative requirements. The products remaining have more stringent, albeit not onerous, but more traditional, requirements. Many builders have responded with incentives for closing, upgrades and ultra-low interest rates.
Homes spent an average of 47 days on the market, seven days less than last month and 11 days less than two months ago. Last year it was 57 days and two years ago it was 54 days. At the current pace of sales, there is is now an overall average of a 3.2 months, up from 2.4 in April of 2019 and up from 2.3 last month.
Estimated Supply is tied to both inventory and pace of sales. Six months of supply is generally considered balanced. Under normal economic conditions, anything above six months is generally considered a “buyer’s market” and anything below is then considered a “seller’s market”. However, there are other factors which weigh into supply times. Primarily location and price point are the two other significant influencers. Great locations will move faster than the average market and lower price points tend to move faster as well.
Regardless of what you tend to hear – there is no true Seller’s market - Buyers ultimately set the market price no matter what the inventory numbers are at any particular moment. That is, Buyers decide if they are willing to, or can, pay more, and by how much, in response to demand, inventory, location and price point.
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There were 2,393 sales in April (actual closed sales from MLS listings) a 28.1% drop from April of 2019 – and a drop of 25.3% drop from last month.
This was to be expected with the COVID19 Pandemic fall out. Without active foot traffic, higher unemployment, and the pull back in some lending as stated previously, an overall drop in sales would be a natural result.
Pending sales – a forward indicator - are down 17.1% from last month.
IF YOU ARE LOOKING TO BUY OR SELL
YOUR HOME OR PROPERTY –
PLEASE CONTACT US AND FIND OUT HOW WE CAN HELP!
The median (usually close to the average) price of all homes sales was $263,750, up 12.2% from a year ago, and up 4.0% from March, 2020.
The year over year median price for a single family home was up 9.0% from the previous year at this time to $278,000. Condos posted an increase of 5.1% over last year at this time coming in at $145,000 and townhouses increased 5.6% to $225,000.
While this seems to be counter intuitive, sales of existing homes can take up to 45 to 60 days to complete and sales of new homes can take six to nine months to complete. Thus, the prices paid in April in many cases were already determined well before the full extent of the pandemic was in progress.
The difference between the median and average most times is very small – especially as the sample size increases. The technical difference is that the median is the sales price number in the exact middle of the number of sales – that is exactly where half of the sale prices are lower and half are higher. The average price is the total sales prices divided by the total number of sales. The median is less influenced by fringe numbers – ones very large or very small as compared to the usual numbers. For example, a million dollar sale in a $200,000 neighborhood or a $50,000 sale in the same neighborhood. Just for completeness – the mode is the sales price number that is repeated most often.
Price points and sales pace are heavily influenced by location and price-point market segment. That is, generally homes in the $250,000 - $350,000 range will sell faster and can sell for more per square foot than a home at the $2 million price point because there are far more buyers capable of affording the lower priced home. Thus, there is more competition amongst that group vying for that particular home.
If one were to add in the location consideration as well, homes in the most desirable locations can sell for many times more than the same home would sell for in an inferior location. Of course this multiple times the value factor is diminished the higher the price point.
This can be illustrated in the locations and price points most production builders opt for in Central Florida. Here, we don’t generally see subdivision production builds of homes in the $1M and up range - but in the $300s-$500s is fairly common.
The latest numbers for the Orlando Florida MSA – for March was 4.0% up from the previous month – far from the true picture today. The national average for April 2020 (the latest) was 14.7% - up some eleven points from February.
Average Orlando MSA Interest Rates*
The average interest rate paid in the Orlando MSA experienced some wild swings over the past few weeks but has settled down and has remained under 4% to an average of 3.2%, down from 3.45% last month. Home loan rates tend to generally trend along with the ten-year US Treasury bond markets. However the rates for specialty loans are influenced directly by the secondary investor market – those who purchase loan packages after closing.
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*The interest rate statistic is over all types of loans with varying terms, conditions, circumstances and credit scores, and should be used as trend reference number only. Consult your lending representative for rates that would apply to you.
The statistics cited are provided by the Orlando Regional Realtors Association, of which we are a member.
This report is intended to be for reference and informational purposes only. The opinions expressed herein are solely those of New Southern Properties Inc. and are opinions. No purchases or investments should be made based solely on this report, this data, or the opinions expressed herein. Real Estate purchases and investments are complex transactions. You are strongly urged to consult with your financial, legal and real estate consultants before making any real estate purchase or investment