As home construction
picks up around the nation, it remains at a low level around Fort Lauderdale.
According to the U.S.
Commerce Department housing starts increased 26.6% in June (2015) year over
year, and Building Permits were up 30% through that same period.
Around Fort Lauderdale
and Broward County, Florida, however, home building is hovering around an
all-time low. From 1992 through 2006 the South Florida reporting area – which
encompasses Miami-Dade, Broward and Palm Beach Counties – typically averaged
between 20,000 and 30,000 housing starts per year.
Now, those counties
average around 7,000 housing starts per year, with Broward accounting for the
fewest – only a projected 1,200 for 2015.
There’s a very good reason
for this – we simply don’t have any more land.
In all Broward County
there is only 471 miles of developable dry land and at this point it is
essentially all developed.
Saw an article last year
where a developer was bemoaning this fact, explaining wistfully: “There aren’t
any more open green fields.”
That’s like whaling boat
captains complaining it’s getting harder to find sperm whales.
Well, pal, maybe if you
weren’t out there, you know – shooting them with HARPOONS – there might be a
few more of them around.
Ponce de Leon landed in
Florida in 1513. Developers discovered it in the Sixties. The U.S. Census in
1960 reported the population for Broward County at 60,000. Ten years later in
1970 the population was 600,000. Through the 70s and 80s, aside from tourism
and serving alcohol the only industry in South Florida was construction. People
moved to Fort Lauderdale and got jobs building houses for the next bunch of
people who showed up. Developers drained swamps, bulldozed scrub forest, built
miles of tract homes. Eventually they reached the edge of the Everglades, were
not allowed to go any further, since it would be cutting off our water supply.
As a result Fort
Lauderdale is now a perfect example of that old real estate adage – they’re not
making any more of it.
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| Broward County, Florida |
Broward County is fully
developed, but people keep moving here from those sub-arctic urban crapholes up
north. Late night comedians might crack jokes about Florida, but you don’t have
to shovel sunshine out of your driveway. After two brutal winters folks up
north are now bracing for what is predicted to be a “Godzilla” El Nino, so the
exodus to the South is not likely to slacken. Our population stands currently
around 1.75 million and some projections expect this number to climb to 2.3
Million by the early 2020s. That’s an increase of 30% within the next 5-6
years.
The effect this shall
have on our property values should be truly profound.
The Fort Lauderdale area
is quite simply the best part of Florida. It is not a Third-World urban city
like Miami, nor the tractless waste which is Palm Beach. Broward County is not
large, only 1,323 square miles. The western portion of the county, however,
over 60% of it, is wetlands – the Everglades – which is the water supply for
all South Florida, and therefore cannot be developed. Boil it all down that
leaves only 471 square miles of developable dry land, which as we’ve pointed
out is fully developed.
Talk about a No Brainer,
this would seem to be a simple matter of connecting the dots, what this should
mean for property values in Fort Lauderdale and throughout Broward County. 1)
We don't have much land. 2) Population is growing. 3) Demand is increasing. And
4) Prime property will outperform the overall average.
Add these factors up
significant appreciation in property values seems relatively inevitable. In
addition, whatever rate of appreciation you might wish to forecast for the
overall county-wide average, it should be markedly greater in prime real estate
such as waterfont homes, oceanfront condos, houses and townhomes in better neighborhoods
along the coast.
In my professional opinion
we are looking at a pretty good stretch into the foreseeable future in South
Florida – barring Acts of God, asteroid impacts and/or the total collapse of
Western Civilization. Bouncing off the bottom real estate values have already
come up sharply, then consolidated. Better locations throughout Fort Lauderdale
and Broward County are up almost 30% in recent years. Don't listen to skeptics
who act like this is somehow a bad thing. You are not going to get 20% a year
on your investment. That is simply unsustainable. Still, property appreciation
might average 8-10% over the next four to five years. If that's not good enough
for you, good luck and God bless.
In 2010 I started telling
customers to start buying. The housing market in Fort Lauderdale had
stabilized, had started inching upward. I told people as soon as real estate
investors noticed prices heading up in South Florida we’d have a mini land
rush. Well, I was right. Customers who listened have already seen nice
appreciation.
Others, however, started
citing stuff they were reading on the Internet about the “Shadow Inventory” – this
mythical tidal wave of impending foreclosures that was going to swamp our
market like a tsunami. Well, according to the Internet I win the Nigerian
Lottery three times a week. Again, I tried to explain with Florida being a
judicial foreclosure state there was simply no way the banks could ever release
waves of REO properties again, especially once they got caught in that whole
“Robo-Signing” scandal. Meanwhile, statistics released by leading real estate
data sources such as CoreLogic and RealtyTrac showed foreclosures dropping by
double digits month after month. The latest stats (the CoreLogic Foreclosure
Report for June, 2015) shows the foreclosure inventory in Florida dropped 54%
year over year, and completed foreclosures declined 17% in that same people.
So now those people are
sitting in a little rubber raft on the beach in rain slickers and floppy hats,
waiting for the big wave, while customers who listened lounge on the balcony of
their luxury oceanfront residence, sipping champagne and laughing at those
crackpots in the rubber rafts.
For an in-depth analysis of how the projected increase
in the population of Fort Lauderdale and Broward County should effect our home
values, check out the “Investor Central” page of my website at Fort Lauderdale
Beach Property (dot com).
