Market outlook Q&A with Florida Realtors Chief Economist Dr. John Tuccillo

Florida Realtors® Chief Economist Dr. John Tuccillo fielded questions from webcast participants and the live audience during the state association’s 2012 Real Estate and Economic Forecast Conference in Orlando on Dec. 6, 2011. Listed below are detailed answers to the market economy questions.   

Q: What effect will retiring baby boomers have on the Florida economy and specifically the real estate market?

A: Boomers will continue to come to Florida because of climate and cost. Housing in Florida is generally more available and cheaper than in other potential boomer destinations. With considerable wealth transfers occurring from prior generations, and with improvement in the economy, boomers will also have the means to retire to Florida. Their spending will bolster both the economy and real estate.

Q: Do you see the trend toward urban development continuing and attracting what type of client?

A: The one potential barrier to the movement of boomers to Florida lays in their inability to sell their own homes. While an improving real estate market will offset this to a degree, there appears to be an increasing demand, especially among young households, to live in areas where a vehicle is necessary only for one use---usually commuting to work—and all other necessities are taken care of by foot, bicycle or public transportations. This “new urbanism” puts pressure on suburban developments where vehicles are necessary for all uses.

Q: In markets like Naples, with very wealthy retirees and snowbirds with large disposable wealth, does this factor offset the effects on the local market from current unemployment?

A: The short answer here is that in high wealth markets, unemployment is less a problem than affordable housing for service industry workers. Naples is no exception. High priced markets follow their own logic more than they follow economic cycles, so the return of retiring boomers and seconds home owners is the key factor in a vibrant housing market here.

Q: What is the best source for finding international demographics for South Florida?

A: NAR’s recent report on international buyers has a wealth of information about Florida (www.realtors.org/research). In addition, the Miami Association of Realtors does a significant amount of international work and can be of help.

Q: In Florida, how is the foreclosure rate for investment properties compared to that of primary residences?

A: We do not have those numbers yet, but we are conducting a research project that ought to give us the answer in the first half of 2012.

Q: How much of a factor is the lower inventory on the decline in closed sales in 2011? Is it a larger factor than tight credit?

A: Sales are actually higher now than they were at the beginning of 2011, although they have declined in recent months. By far the largest factor in the continued sluggishness of the housing market is tight credit. NAR numbers suggests that signed contacts are failing to close at historically high rates and this is because of the inability of buyers to secure financing. Inventory numbers reflect a numbers of characteristics of this housing market, including the more rational and businesslike approach taken by lenders in dealing with distressed properties.

Q: Are the changes coming up on HAMP going to have a big impact stabilizing the market once banks are able to refinance borrowers who are under water?

A: Most analysts agree that the best way to unblock the real estate market is to allow homeowners to refinance, at current rates, their homes in a way that reflects their true market value. HAMP and like programs are a means to do this. But our experience has been that these programs reach too few of the affected households and thus are of little impact. A firm commitment to use refinancing as a broad tool to preserve owners in their homes or allow them the flexibility to sell is necessary.

Q: Given returning soldiers, can we expect any changes in VA loans? Qualifications or incentives?

A: The VA loan guarantee program is essentially unlimited for veterans. We can expect more use of the program, but it doesn’t need to be altered. There will be an education program at Florida Realtors’ winter meetings in January that deals with working with veterans.