Orlando’s housing market next year is expected to see reduced price growth that is likely to delay full recovery from the decade-old real estate bust for years, economists say.
Economists from the National Association of Realtors, Zillow and mortgage analyst HSH.com predicted slower price growth in Orlando, about 3 percent — down from double-digit increases in recent years. Stagnating prices could delay full recovery for another seven years, according to Zillow. Getting back to 2006 price levels is key for homeowners who purchased at that time and also for those trying to gain a bigger ownership stake in their homes.
Orlando price growth has been “quite strong” since the bottom in 2011, said Lawrence Yun, the National Association of Realtors’ Chief Economist. The area’s robust job growth should keep prices from collapsing but calmer days are ahead, he said.
“Orlando could see more moderate price growth moving forward,” said Yun. New reports show the median price in the core Orlando market — mostly Orange and Seminole counties — was $224,000 in November and still down sharply from the peak of $264,436 more than 10 years ago.
One concern: Price increases could stall if investors dump the distress sales they purchased and transformed into rentals. Orlando is seeing near-record levels of single-family homes used as rentals, according to a new report by Zillow. One out of five of Metro Orlando houses was a rental and about a third of rentals could be sold as starter houses to first-time buyers.
Seminole County schoolteacher Catherine Jollie, 26, said she looked at more than 20 houses when she was shopping earlier this year. Most of the houses were investor owned, empty and in need of work. Even though prices seemed high for the fixer uppers, they sold fast. Houses went under contract so quickly that her uncle, Winter Park real estate agent David Welch, quickly crossed them off the list because they were snapped up.
“It was so frustrating to go in and know I couldn’t beat the offers from other investors,” she said.
Welch said a wave of investment groups selling off properties could swell supply and depress listings.
“I have definitely run into investors starting to divest themselves and I’m wondering what impact that will have,” he said, adding that investor sales of starter homes fail to deliver the move-up buyers that benefit a market. “The investors are starting to say: ‘This may have played itself out.’ ”
Orlando’s housing market could take as long as seven more years to fully recover if prices return to typical annual growth rates, Zillow Senior Economist Skylar Olsen said. The region’s slim supply of homes on the market and other dynamics, though, could expedite the housing market’s healing process.
“Orlando fell far in the bubble bust, so they have a lot of ground to recover,” he said. “Orlando has experienced strong home values above 7 percent over the last few years, driven by strong fundamentals and constrained inventory. If those trends continue, it will take less than three years to recover at the current rate.”
November home prices in the core Orlando market — mostly Orange and Seminole counties — grew 2 percent from a month earlier and and 11 percent from year earlier, according to a new report by the Orlando Regional Realtor Association. The market showed signs of its typical early-winter slowdown following a hurricane season that whiplashed sales. November sales were down 6 percent month-over-month to 2,735. From a year ago, they were up about 8 percent.
Also in November, buyers got more leeway with interest rates dipping to 3.96 percent from 4.03 percent in October. Houses lasted longer on the market before coming under contract in an average 62 days, down from 56 days in October.
Association President Bruce Elliott, of Regal R.E. Professionals LLC, said he anticipated “the traditional sales jump that occurs in December.”
Following months of shopping, Jollie said she was able to purchase her first home. It did not have new appliances and finishes, but everything was in good working order. Her advice for anyone looking now: “I would advise them to start looking early.”
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