Tuesday, January 31, 2012
At The Closing Table
From the January/February issue
Read the expanded version of this article
Sean Snaith, Ph.D., is director of the Institute for Economic Competitiveness, College of Business Administration, University of Central Florida. Orlando REALTOR® spoke with him about the economic conditions influencing Orlando’s housing market.
What economic trends in the Orlando area will guide the real estate market in 2012?
The linchpin for stabilization of Orlando’s housing market is the state of the labor market.
What percentage of annual job growth is needed for a positive impact on housing?
We need to see fairly robust job growth – above 2.5 percent – before we really start to see some measurable difference in the housing market. The labor market has been improving, but it’s been improving at such a slow pace that it’s not sufficient enough to overcome the supply side influences from distressed properties in the housing market. I think 2013 and 2014 will see higher rates of job creation, and that’s when we’ll really see some positive benefits for housing.
What concerns you most about the current state of Orlando’s housing market?
My greatest concern is the imbalance between supply and demand created by foreclosures, which is placing downward pressure on home values. With every dollar that the value of a home declines, that’s one dollar less in homeowner wealth or one dollar further underwater on a mortgage. And of course that feeds back into consumers’ spending behavior, and we get a vicious circle of feedback between the consumption, labor, and housing markets.
What represents a sign of optimism and opportunity for the Orlando real estate market?
I think there are a number of things to be optimistic about, starting with the census results. Population growth in Orlando will continue to be strong over the next decade or two. Central Florida and the I-4 corridor is the new breadbasket in Florida, and this is where job growth and economic growth will be the strongest in the state. In the nearer term I think the Medical City is finally poised to deliver on all of its promise in terms of creating jobs, boosting the economy, and providing a shot in the arm for the housing sector as well.