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Orlando housing values are safe

The risk of a drop in local home prices is far less than the U.S. average, data show.

Jerry W. Jackson
Sentinel Staff Writer
Posted April 14 2006

Don't worry about that real-estate bubble bursting just yet -- at least not in Metro Orlando. But homeowners in Tampa, Fort Lauderdale and Miami might be in for a rough time.

The latest national rankings show that nearly all of the country's 50 biggest metro areas face a greater risk of declining values than they did three months ago.

According to the PMI Mortgage Insurance Co.'s most recent market-risk index, the four-county metro area -- Orange, Seminole, Osceola and Lake -- has a 16 percent chance of a decline in home prices during the next two years -- well below the 28.7 percent U.S. average.

"We're still very healthy, in this market," said Sue Trover, broker for All Star Vacation Homes in Kissimmee. Trover, a 21-year veteran of residential real-estate sales, said the Orlando area has advantages over many other parts of the country -- from steady tourism to ongoing population growth.

The news wasn't as good for Tampa, Miami and Fort Lauderdale, which are among the 25 riskiest metro areas, according to PMI's second-quarter rankings.

Fort Lauderdale's metro area is the 17th-riskiest area in the nation, with a 42.3 percent chance of a price decline in the next two years.


When Walt Disney opened the Disney World Resort in 1971, he created a unique market that has thrived for over 30 years. With an estimated 55 million visitors expected in the next year, renting property has become a mainstay industry in central Florida. Couple that with a booming property market, and the opportunities are many and varied.

  •  Good appreciation potential in Orlando Florida homes is confirmed by the statistics from OFHEO  The majority of the twenty cities that experienced the highest appreciation in property values during the first quarter in 2004 are in Florida and California.
     

  • There are 55 million visitors per year to the Disney World area. Therefore vacation rental homes within 30 min driving distance from Disney World are in demand + high rent (rents for vacation homes are rising). In fact, Kissimmee and Orlando are called the vacation capital of the world since besides Disney World, this area has many other attractions, e.g. Universal Studios, Sea World, Splendid China, etc.
     

  • Tourists start to find out vacation homes offer better deal than hotels. This is especially true when families (60% families) bring children and/or elders. Besides saving money, vacation homes offers amenities that hotels do not offer, e.g. private pool, kitchen, large living area, etc.
     

  • There are many well-established management companies in Kissimmee / Orlando area that can provide worry-free property management for out-of-state clients. Many of these companies provide online status update of your rental property.
     

  • Alternatively, if you do not want to manage your homes, you can pay the deposit for a new home and then earn the appreciation by selling it when it is completed a year to a-year-and-a-half later.
     

  • Orlando area is not near coastal areas and therefore tropical storms usually do not cause serious impacts in this area.
     

  • Many of the vacation homeowners in this area are Europeans. This reduces the investment risk since Euro is rising against the US dollar and the European interest rates do not move in synchrony with the US rates.
     

Many people buy Orlando vacation home real estate for its appreciation potential. Orlando vacation homes have rose in price between 20%-30% last year. With home building costs increasing and 55 million people expected to visit Orlando for vacation this year, and interest rates at a low, many analysts are predicting a continuing surge in new home sale and prices.

    Some people buy their Orlando vacation home at pre-construction pricing, watch as the builder increases the prices each quarter, and when the house is built, sells the property for a healthy profit, without even setting foot inside. This built in equity is proving a boon to those with the timing to get the early pricing.

       e.g. A four bedroom vacation home purchased in a resort community May, 2004 at $207,900 was being sold in October of 2005 by the same builder in the same resort at $359,900! This represents an overall increase of 37% in just over a year. Assuming the purchaser put 20% down on the property (approx. $42,000), his net profit ($152,000 - $42,000) of $110,00 was a 261% return on his down payment.


 

Others purchase vacation homes for the lifestyle they and their family can enjoy. With an average temperature of 72F in December, many people enjoy getting away from the snow to their personal paradise. When they are not staying in their Kissimmee vacation home, they rent it using a reputable property management company. These rentals usually pay your running costs, and allow you gain equity in your property while someone else pays the mortgage. If you are a US resident the tax advantages can be another source of "hidden" income. The IRS allows two "inspection" visits as write offs to your property, which to most correlates to two vacations. Couple this with the allowed deduction of all taxes and interest paid on a second home, and the benefits are great.

please click on the links below to some articles in The Orlando Sentinel

 

         Homeowners cash in big.
See the press release for more details.
 
        Rental homes can offer great profit potential.
See the press release for more details.


Study: Most Florida real estate not overvalued





CLEVELAND -- Feb. 10, 2005 -- Is Florida real estate overvalued? A study by National City Corp., one of the nation's largest financial institutions according to Hoovers, finds some slight evidence of overpricing in South Florida markets. However, in other areas such as Tampa and Daytona Beach, real estate appears undervalued.



"The housing market has shouldered much of the economic recovery," says Richard DeKaser, chief economist of National City Corp. and author of the study. "Many are concerned that housing represents an overvalued sector of the economy that will be corrected with future price declines." DeKaser found a home value concern in about one-fifth of the markets studied, but he also found a large number of U.S. cities where real estate is either fairly valued or undervalued.



DeKaser's study examines what home prices should be in each city, controlling for differences in population density, relative income levels, interest rates and historically observed market premiums or discounts. The study focused on the top 99 U.S. real estate markets, and any rating over 20 percent was considered a red flag for over-valued housing. Chico, Calif., the city determined to have the greatest risk of overpricing, had a premium of 43 percent. In Florida, West Palm Beach had the highest premium at 26 percent. Salt Lake City, the most undervalued U.S. market according to the study, had a discount (negative evaluation) of 23 percent.



But four Florida cities had very low premiums or discounts, with two cities -- Daytona Beach and Tampa -- tied for most affordable based on the market with a 1 percent discount each.



"While overvaluation in home prices presents a risk of future declines, these risks may well go unfulfilled," DeKaser adds, "The true test of today's premiums in these markets will be the economic environment, especially incomes and interest rates, in the years ahead."



The Florida cities ranked in the study, followed by their premium or discount, include:



W. Palm, 26 percent

Miami, 23 percent

Sarasota, 22 percent

Jacksonville, 3 percent

Orlando, 2 percent

Tampa, -1 percent

Daytona Beach, -1 percent



For more info on National City, visit their Web site at http://www.nationalcity.com/economics



2005 FLORIDA ASSOCIATION OF REALTORS

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