Orlando: Stable Real Estate Market

The overall real estate market in Florida has not fared well since the subprime mortgage crisis reared its ugly head. Miami topped the American Chronicle’s Worst 25 Housing Predictor Forecast in both 2007 and 2008, and was cited as possibly undergoing “the worst housing crash in national history.” But the market outlook in other parts of the state might not be quite so bleak. Just under 250 miles north of ill-fated Miami lies Orlando, the city of studios and theme parks, which is considered to be the strongest and most stable real estate market in the state.

Orlando is the county seat of Orange County in central Florida, and was home to 220,186 residents as of 2006, according to U.S. census estimates. It is surrounded by an abundance of tourist attractions, including SeaWorld, the Walt Disney World Resort and Universal Studios. It is also home to the University of Central Florida, the state’s second-largest university. The Orlando-Kissimmee Metropolitan Statistical Area (MSA) is the third-largest MSA in Florida after Miami and Tampa.
Florida’s housing market in general may be due for a recovery, according to the 2008 Fund Real Estate Forecast, commissioned by Attorneys’ Title Insurance Fund, Inc. The forecast shows that the state’s real estate market “flattened out in spring 2007, before the subprime mortgage crisis in August knocked markets down another 10 percent across the state. Since then the housing market has flattened and is expected to begin to recover during the next several years,” according to Reuters.

Orlando may be near the front of that recovery wave in Florida, as its market has remained stronger than those of other cities in the state. “[The forecast] shows that Orlando continues to be the strongest residential real estate market in the state because of its large share of fast-growing industries, such as tourism, healthcare, education and defense manufacturing,” according to Reuters. If this continues to be the case, savvy investors might stand to profit by getting in before the market begins to recover in earnest. Despite being the “strongest” market in the state, Orlando is still solidly in a buyer’s market and investors may comes across some potentially profitable deals in the area.

The unemployment rate in the city is 5.3 percent as of June, slightly below the national unemployment rate of 5.5 percent at that time, according to the Bureau of Labor Statistics. A year prior, Orlando’s unemployment rate was significantly lower at 3.9 percent, compared to the national average of 4.6 percent.

Although Orlando may be weathering the housing crisis better than other Floridian cities, it has still felt the effects of the crash. The median sales price of homes in Orlando decreased by 3.94 percent between June and July 2008, from $216,000 to $207,500, according to the Orlando Regional Realtor Association (ORRA). In July 2007, the median sales price in the city was $250,000, marking a 17 percent decrease over the past year, according to ORRA.

So far this year, property sales in Orlando are down by 24.52 percent compared to the same time last year. “However that gap is expected to close by year-end as the number of homes currently under contract (3,258) is 26.72 percent greater than the number of homes that were under contract in July 2007 (2,571). Pending sales for the past three months have been greater than their 2007 counterparts,” according to ORRA.

The affordability index in the city is strong at 103.8 percent as of July 2008, according to ORRA. The affordability index documents the ability of a family earning the area’s median income to afford a home at the median price. For example, an affordability index of 95 percent indicates that a family earning the median income is 5 percent below the required income to buy a home at the median price. Since the affordability index in Orlando is over 100 percent, families earning the median income earn more than is necessary to qualify for such a purchase. This means that there are likely to be more prospective homebuyers coming onto the scene in the area. It is important to note that affordability is lower for first-time homebuyers, at 73.81 percent.

Orlando is a prime tourist location for both domestic and international travelers, and holiday rental properties are likely to do well. 45,907,000 domestic visitors came to Orlando in 2007, a 1.8 percent increase from 2006, and 53 percent of these visitors came from within Florida itself. 2,838,000 visitors came to Orlando from international points of origin, a 5.7 percent increase from 2006. Of international visitors, 28 percent originated from Canada.

Lodging occupancy rates in Metro Orlando decreased from June 2007 to June 2008 by 3.8 percent, to 70.4 percent, according to the Orlando/Orange County Convention & Visitors Bureau. Lodging occupancy rates in North and South Orlando decreased by 4.9 percent and 6.5 percent, respectively, while the rates in Central Orlando increased by 0.7 percent during the same time period.

The largest percentage (17.06 percent) of active single-family listings fall in the $200,000-$249,999 range, while the largest percentage (14.02 percent) of active condo listings are in the $120,000-$139,999 range, according to ORRA.

There are several new condos planned over the next [two] years and a few condo conversions taking place in the downtown area. Be wise when shopping for a condo as the market seems over saturated.

Certain areas of Orlando may offer better stability than others, such as some neighborhoods in West Orlando. “The rest of Metro Orlando may have an average of 5 percent of all homes for sale, but in the Lake Mann, Sunset Lake and Clear Lake areas, only 1.4 percent of homes are on the market,” according to an October 2007 article in the Orlando Sentinel. Houses in these middle-class neighborhoods rarely come up for sale and, when they do, are often sold to friends or family members, according to the article. Investors interested in properties more likely to retain their values might consider seeking out available properties in these areas.

If you need some guidance contact our own Nigel Worrall at 407 870 1600 or www.floridaleisurerealty.com.

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