A housing slowdown is taking hold in some Florida markets, where a growing share of properties sold only after the seller cut the asking price. Miami, Jacksonville, Orlando, and Tampa take 4 of the top 10 spots for recent price reductions. How are Colorado and Florida related? Why should Coloradoans be concerned over what is happening in Florida? What can Florida tell us about the future of the resort communities?
Florida is home to 4 of the top 10 markets for price declines within metro areas throughout the United States. This is indicative of a rapidly cooling market as a housing slowdown is taking hold in some Florida markets, where a growing share of properties sold only after the seller cut the asking price. Miami leads the nation in both the size and frequency of such deals.
|Market||Share of homes sold at discount||Avg discount from original price|
Why the slowdown in Florida? The second home syndrome
While Florida has plenty going for it, from sunshine to tax advantages to the flood of retiring baby boomers, it also has plenty of second homes, which tend to suffer first during housing slumps. Buyers are more reluctant to make discretionary purchases as the market cools, said Knock Chief Executive Officer Sean Black.
“This seems like an interesting telltale that the market is shifting in favor of buyers,” Black said in a phone interview. “Florida is a popular secondary home destination, so it tends to drop faster in a downward market because it’s losing buyers, both domestically and internationally. Everybody needs a primary home. Not everybody needs a second home.”
What areas are most at risk?
Colorado, like Florida, has a majority of second home owners in certain markets. For example, if I look at Summit county, only 25% of all sales are to local buyers, with 75% to second homeowners. Surprisingly, Aspen had almost 50% of all sales to local buyers.
In Orlando, 40% of all sales were second home owners. This is considerably less than many ski resorts in Colorado, yet in Orlando 78% of properties listed cut their prices and the property eventually sold for almost 5% below the list price.
What does this mean for Colorado?
Although many resort communities are highly concentrated with second home owners, there is one major difference. Orlando and many Florida markets have considerable supply coming online. For example in Orlando, not far from Disney, there is a 2300 acre reunion resort with 6,000 new houses being built. Can you imagine a 2300-acre parcel with 6,000 homes in any Colorado mountain community? This would be impossible; most mountain communities are lucky to have a hundred houses built a year if that.
Although Colorado mountain towns are heavily tilted towards second homeowners, the risks for Colorado mountain towns is substantially lower than Florida. Supply is the big differentiator for Colorado vacation hotspots as opposed to Florida. I don’t see the same duress entering into the Colorado market as in Florida.
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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in the Colorado Real Estate Journal, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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