Summary
The Orlando market, which is generally considered to encompass the counties of Orange, Seminole, Lake, Osceola and Polk has experienced declining sales since mid (in most counties) 2006. While the most overbuilt areas, near the tourist attractions in Polk and Osceola counties, countinue to decline, beset by too many investors, too many lower paid owners (with ARM's) and too much supply, other areas have likely approached bottom.
Analysis
The Orlando market, which is generally considered to encompass the counties of Orange, Seminole, Lake, Osceola and Polk has experienced declining sales since mid (in most counties) 2006. While the most overbuilt areas, near the tourist attractions in Polk and Osceola counties, countinue to decline, beset by too many investors, too many lower paid owners (with ARM's) and too much supply, other areas have likely approached bottom.
Recent studies continue to support the conclusion of a long term tailwind for Orlando- 50,000 new residents relocate to the area. These are in a mixture of age categories. Further, the recent announcement of major medical and research projects will drive more educated professionals to the market (but these are longer, more secular trends).
Orlando is well known to international, especially English, Irish, Canadian and Latin American visitors. The English speaking visitors are beginning to view the market as cheap (a combination of falling prices and appreciating local currency). Currently, there are some issues with foreigner financing, however, as default rates for this profile have traditionally been very low, we expect sources of funds to be more robust by the second quarter (if not sooner) of 2008. These buyers will seek bargains in south Orlando as well as pool homes in Osceola and Polk counties.
The middle-to-upper ends of the market have experienced slower sales and some (but generally not double digit) price declines. These markets are being held back by buyers waiting for a bottom, as well as (to a lesser extent) the higher cost of "jumbo" loans. This market should slowly improve as a bottom is perceived, financing continues to be affordable and new residents seek housing.
There continues to be new inventory in the market, especially near the "tourist areas". However, the builders have been increasingly aggressive about liquidating their inventory and "panic" selling by the builders should be complete by Q1/Q2 of 2008.
Smart buyers should find optimal opportunities in early 2008.
New homes will not start to be built in any quantities until 2010 giving the smart land buyer an opportunity to acquire (at deep discounts) and develop (get entitlements, etc.) land in anticipation of a "return to normalcy" by 2010. While one might argue it is still early, the magnitude of discounts will likely peak in early 2008. Large distressed funds have raised money and are starting to deploy funds. The expectation of 90% off is not going to happen given the large adjustments banks have already taken on their portfolio combined with the large amount of money waiting to be deployed.
More to follow. . .
