Are We Due For Another Real Estate Recession?

Florida real estate

Not anytime soon, as most of the top econmists think. The probability of a recession is pretty low right now, however the global fear generated by epidemics like the spread of the coronavirus and the upcoming presidential election can create some turbulence in the real estate market. We may see the economy to slow a little but not for long. The Florida real estate market is still benefiting from pupulation and job growth as well as South American presense in the region.

Historically, the Miami market is growing faster than the overall U.S. real estate market. The recent commercial and residential development boom that has transformed Miami neighborhoods such as Edgewater, Midtown Miami and Wynwood. There is also an influx of financial services companies relocating from the state-tax states thus creating a more sophisticated and resilient local economy.

Additionally, during the last five years a lot of new offices were built, which pushed rates up and the vacancy rate down. Now we are in one of those cycles with a large amount of office space and the demand to fill it.

Broward county reported more home sales in 2019 than Miami-Dade and Palm Beach counties, according to recently released reports.

In 2019, 61,524 homes and condos sold in the tri-county region of South Florida. Broward saw 32,609 residential closings last year, according to the Miami Association of Realtors. While total sales outpaced Miami-Dade and Palm Beach counties, that figure marks a slight (0.6 percent) decline year-over-year in Broward.

The reports from the Miami Association of Realtors give a snapshot of how home and condo sales performed last year, including neighborhoods with the least supply.

Miami-Dade:

In Miami-Dade, residential sales totaled 27,436, a 2.4 percent annual increase from 2018. The year 2013 recorded the highest number of closings, which was 30,032, according to the report.

Last year, there were 13,322 single-family home sales in Miami-Dade, a 3 percent annual increase. Another 14,114 condos sold, up 1.8 percent, year-over-year. Total sales volume came out to $12.9 billion in 2019.

The more affordable price range of $300,000 to $600,000 was the strongest segment of the single-family home market. Homes sales in
that range increased 14.7 percent to 7,231.

The median sales price in 2019 for houses was $365,000, a 4.3 percent increase from 2019. The median price for condos was $245,000, also up 4.3 percent.

The “hottest” neighborhoods with the fewest months of supply and significant closed sales activity were:

Single-family homes:

Palmetto Estates, 2.1 months of supply
Westwood Lakes, 2.3 months of supply
Hialeah Gardens, 2.5 months of supply
Kendall West, 2.5 months of supply
Cutler Bay, 3 months of supply

Condos:

The Crossings, 2.1 months of supply
Kendale Lakes, 2.3 months of supply
Tamiami, 2.4 months of supply
Cutler Bay, 2.6 months of supply
Country Club, 2.6 months of supply

Broward:

In Broward, there were 15,979 single-family home sales in 2019, up 2.2 percent from 2018.

Condo sales totaled 16,630, down 3.1 percent annually. The total sales volume came out to $11.1 billion.

Mid-market home sales outperformed the rest of the market, similar to Miami-Dade. Homes priced between $400,000 to $600,000 increased by 15.5 percent, year-over-year.

The median sale price for single-family homes rose 3.3 percent to $365,000, and it rose 3.6 percent for condos, up to $171,000.

The top neighborhoods, ranked by the Miami Realtors by supply and home sales, were the following:

Single-family homes:

Cooper City, 1.8 months of supply
Coral Springs, 2.1 months of supply
North Lauderdale, 2.1 months of supply
Pembroke Pines, 2.3 months of supply
West Park, 2.3 months of supply

Condos:

Cooper City, 1.7 months supply
Parkland, 2.4 months of supply
Tamarac, 2.6 months of supply
Oakland Park, 2.6 months of supply
Davie, 2.6 months of supply

Palm Beach:

Residential closings fell by 1.5 percent to 30,819 in Palm Beach County, due to a drop in condo sales. Single-family home sales were flat compared to 2018, with 17,421 closings in 2019. Condo sales declined by 3.4 percent to 13,398. Total sales volume in Palm Beach County came out to $13.5 billion, a figure boosted by two record sales of $105 million for single-family homes.

Median prices rose for both condos and houses: increasing 2.9 percent to $354,900 for single-family homes, and up 2.2 percent to $182,000 for condos.

The top neighborhoods were:

Single-family homes:

Lake Clarke Shores, 1.7 months of supply
Palm Springs, 2.4 months of supply
Greenacres, 2.6 months of supply
Royal Palm Beach, 2.8 months of supply
Jupiter, 3 months of supply

Condos:

Greenacres, 2.5 months of supply
Royal Palm Beach, 2.6 months of supply
Tequesta, 3.2 months of supply
Jupiter, 3.4 months of supply
Palm Springs, 3.7 months of supply

Florida – No-State-Tax State vs. California

Florida real estate

More and more people today are moving from high-tax states like New York and California to states with lower, or no state taxes, like Florida. The most recent data from the IRS also points to the Sunshine State, one of the most popular places for people looking to lower the tax payments, basically from states like New Jersey, New York, Connecticut and of course California, one of the most expensive states to live in. Let’s face it, in 2018 Florida stated collected a whopping $16 billion dollars as the gross income, vs. the second best Arizona with only $3.5 billion. Texas, which is also a no-state-tax came in third with the generated
$3.4 billion. However, after Florida, Arizona and South Carolina are the two most desired destinations for movers during 2018 and 2019. The three states above are most favorable because of the warmer climat and retirement opportunities.

In fact, the high-tax states such as California and New York have been loosing a significant amount of adjusted gross income – about $10 billion dollars annually as wealthy individuals and businesses have been moving out. Even our president Donald Trump had announced that he had decided to change his domicile from New York to Palm Beach, Fla. Billionaire investor Carl Icahn is also headed to Miami, and billionaire hedge fund manager Leon Cooperman fled to Boca Raton.

The Tax Cuts and Jobs Act capped state and local tax deductions at $10,000, which is well below the average amounts claimed in places like New York and California. Florida has long lured relocating residents with its lack of a statewide income tax, and inheritance tax. Meanwhile, New York’s top income tax rate is more than 8 percent.

An individual or couple earning $650,000 in ordinary income could save $69,719 per year by moving from New York to Florida.

Let’s look at three recent newspaper headlines, all seemingly unrelated. But are they really? I think not.

“FLORIDA PULLS IN BILLIONS AMID HIGH-TAX STATE EXODUS”

“I think that California can serve as a great example … something the rest of the country looks up to.” — Former New York City Mayor Michael Bloomberg.

“Today’s groundbreaking is just another indication that Florida remains the best state in the nation to start or grow a business.” Governor Ron DeSantis, hailing Spirit Airlines’ decision to locate a new headquarters in Fort Lauderdale, beating out Dallas, Texas.

“Florida greeted the largest number of U-Haul® moving trucks entering its borders versus exiting them, establishing a new No. 1 growth state for the first time in four years….” California ranked 49th. — U-Haul annual growth survey.

Bloomberg’s notion that the now-tarnished “Golden State” can be a model for anyone would be laughable if it weren’t for the tragedies driving out desperate citizens all over that state.

BILLIONAIRES BOLT TO FLORIDA AMID HIGH-TAX STATE EXODUS

That desperation is demonstrated not only by California’s near-last place finish in the U-Haul survey, but also its rental rates: one-way U-Haul trucks from leading California destinations to Texas cities cost four times those heading the other way.

Who can blame Californians – and where to start with all the reasons they’re voting with their feet in deserting one of the most scenically beautiful, and once most prosperous, jurisdictions in the greatest nation on earth?

How about the highest sales tax rates in the nation which exceed 10 percent in parts of the state. Then there’s the second-highest gas tax at nearly 50 cents/gallon and overall gas prices that are the highest in the nation.

How about the highest state income tax topping at 13.3 percent or the average family state income tax at approximately 10 percent.

— Californians who dare to drive, own property or earn a living are saddled with this huge collective burden.

Then there are basic services (like street-cleaning) which are fast becoming a secondary priority behind liberal social experiments that run counter to the American ethos of working hard and getting ahead and mandating protections to illegal aliens through sanctuary city declarations to the detriment of legal immigrants and American citizens. How about under-performing schools with barely half of the students achieving reading standards and far less in math, and achievement scores far below the national average.

CALIFORNIA GIG ECONOMY LAW COULD PUSH FREELANCERS TO FLEE THE STATE

Not to mention regulatory schemes putting livable housing out of reach. The treatment of mental health and other core issues that cause homelessness have been replaced with lax attitudes toward the resulting homeless that spawn shantytowns everywhere from business districts to residential neighborhoods, with piles of trash, needles and even human feces overwhelming cleaning crews.

All of this has resulted in shockingly unsanitary conditions like the waste being tracked on San Francisco’s “poop map” and public health crises like typhus not encountered in generations.

Then there are the wildfires caused by layers of mismanagement resulting in potentially years of blackouts that have literally plunged Californians back into the Dark Ages. How about crumbling infrastructure on top of all this while billions are diverted to a now-abandoned bullet train to nowhere, and poor and politicized water planning is denying much-needed water to farmers and ranchers in the nation’s breadbasket.

Democratic-dominated state and city governments obsessed with “progressive” notions including, courtesy of the Heritage Foundation’s Daily Signal, a recent litany of the City by the Bay’s looniness: “bann(ing) fast-food restaurants from including toys with most children’s meals; prohibit(ing) city-funded travel by local employees to 22 pro-life states; rais(ing) the minimum wage from $9.79 to $15.59 an hour; and, after banning plastic bags in 2007, first set(ting) a 10-cent fee for each nonreusable bag at stores, and then a 25-cent fee per bag.”

And of course, the far-left windmill-tilting on climate change, gun control and criminal justice reform (read: not arresting lawless thugs) that prompted Bloomberg’s remarks.

Contrast Florida, where two decades of conservative Republican leadership in the governor’s mansion and unbroken GOP control of the legislature are attracting new citizens and businesses. There is no state income tax, there are low effective corporate income taxes and there is a favorable regulatory environment. As a result, Florida’s unemployment rate is currently near historic lows.

Stir a high quality of life into the mix, too. Steadily rising student test scores and graduation rates and a narrowing of the achievement gaps between lower- and high-income students also make Florida a great state for families, thanks in large part to expanding school choice efforts that increase freedom and create competition even as overall education spending is expanded and reinforced. Plus, Florida boasts a state university system ranked first in the nation.

Add to that gubernatorial leadership that is laser-focused on the needs and priorities of citizens, including higher teacher pay, increased school safety, improved immigration enforcement, and environmental protection, including taking on the blue and green algae crises.

In short, the state being held up by elitist Michael Bloomberg as an “example” is burning, parched, disorder-ridden, over-taxed, overregulated, underperforming, stinking and shrinking. While the one being effectively governed by Ron DeSantis and a legislature fully in touch with its constituents is growing and flourishing.

No wonder Bloomberg, the billionaire businessman, is at just 14 percent in the latest Democratic presidential poll – while Governor Ron DeSantis is soaring with an incredibly-high approval rating at 65 percent (in a state with a sizable Democratic population understand that this is a huge number).

The three articles quoted at the beginning of this op-ed all reflect the same reality. The sun shines in both states but it shines its light on two very different realities. It shines much more brightly in Florida thanks to conservative policy and good governance.

Ed Pozzuoli is CEO of Tripp Scott and former chairman of Jeb Bush for governor. This article came from FoxBusiness –Stinking, shrinking California vs. fantastic, flourishing Florida — A tale of two states