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Why House Prices Will Continue to Soar in Florida

By Dr. Steve Sjuggerud
Monday, June 6, 2016

I got a shocking update on the condition of Florida's real estate market last night...
My wife and I were out to dinner and we bumped into our longtime realtor. In the last 16 years, she has helped us buy and sell a number of houses in northeast Florida. She has seen every boom and bust.
Importantly, she is not prone to hype. She's the opposite, actually. That's one of the reasons my wife and I have worked with her so many times.
"How's business?" I asked her, as she said hello at our table.
"The market near the coast is crazy. I have plenty of buyers – but no homes for them to buy," she told me. "I have one woman who moved here in October specifically to find a home to buy. But every place she likes is either bought immediately by someone else or she gets outbid."
While I might think this was "hype" if it came from another realtor, in this case, I know it's not.
You can sum up the housing market in Florida in two sentences...
House prices in Florida have gone up – a lot. But there's still PLENTY of room to run, as the rate of homebuilding in Florida isn't even close to where it needs to be.
The following charts tell the whole story...
The first chart is an index of Florida home prices (from the Federal Housing Finance Agency), adjusted for inflation. You can see that house prices have moved up – a lot – since bottoming in 2011-2012. But they're still nowhere near the 2006-2007 highs...

The second chart is unique. I've never seen it before I put it together for you...
It is a chart of new housing permits in the state of Florida – adjusted for its population. (Florida's population today is nearly twice what it was in the 1980s.)
The message from this chart is simple: A lot more homes need to be built in Florida...

Just eyeballing the chart, we need to get to about 10,000 homes a year just to get back to trend. We are a long way from that now!
It looks like my realtor is right. There aren't enough homes for her to sell. (Though the Miami condo market seems to have an entirely different supply and demand situation right now.)
So... what does all this mean for the overall housing market in Florida?
It's simple. Economics 101: What happens when you have way more demand than supply? Prices go UP!!! (Until the supply goes up enough to equalize supply and demand.)
This idea of low supply leading to higher prices doesn't even take into consideration that mortgage rates are still near record lows, or that Florida is a desirable place to live.
My friend, I know you know that house prices in Florida have gone up... But fear not, there is plenty more upside ahead!
Good investing,

Further Reading:

Regular DailyWealth readers know there are plenty of reasons to be bullish on housing. Steve has shared some of them here, here, and here.
With super-low mortgage rates, Steve says it's time to take action. "If you haven't done so already, refinance your house," he writes. "And if you don't currently own a house, go buy one... Seriously." Read more here.

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