Demand for new and existing homes is likely to continue to exceed supply in the coming year, as just a 13,600 housing permits were issued in the past 12 months, compared to a projected population gain of 32,000 residents or nearly 13,000 new households. That leaves way too little margin for second home and vacation properties, and does not allow for any increase in overall homeownership. The net result will be continued upward pressure on existing home prices.
Port St. Lucie-Fort Pierce
The run-up in housing prices in Palm Beach County has sent many homebuyers scurrying further north into Martin and St. Lucie counties. Sales of existing homes in the Port St. Lucie-Fort Pierce metropolitan area, which includes the two counties, rose 5 percent over the past year, and permits for new single-family homes have risen 15 percent. Development of condominiums, townhouses and apartments has also increased in recent years, but slowed during the past 12 months. Permits for multi-family projects fell 37.4 percent over the past year. Most of the growth is occurring in Port St. Lucie, which has the most land open to new residential development. Stuart and Martin County in general, have embraced development somewhat less enthusiastically, accounting for just 23.7 percent of housing construction in the two counties over the past five years.
The strength in residential construction reflects the region's burgeoning population. The Port St. Lucie-Fort Pierce metropolitan area has added 60,000 new residents over the past five years, adding 25,000 households to the region. With little existing housing stock in place, this enormous influx of new residents has set off a wave of residential and commercial development. Job growth has also picked up. Nonfarm employment increased 4.4 percent over the past year, with most of the growth occurring in population-driven industries, including construction, retail trade, health care, and local government. The unemployment rate has fallen 1.4 percentage points during the past year to just 3.4 percent.
While considerably stronger, residential construction has barely kept pace with demand. We estimate that 30,000 new homes, townhouses and apartments were completed over the past five years, which barely keeps pace with the rise in full-time households and second home owners. In addition, the region was ravaged by two hurricanes last fall. As a result, the supply of new housing has not even come close to keeping pace with demand. The median price of an existing home has surged in recent years, climbing 151 percent over the past five years to $265,300. The run up in housing prices has significantly cut into the region's affordability. The median price of an existing home is now 26 percent above the national average. By contrast, up until recent years, houses in the Port St. Lucie area had consistently sold for 25 percent below the national average.
Orlando
Home sales and residential development have been booming throughout Central Florida for the past several years, reflecting the region's consistently strong economy. Businesses and local governments are on a pace to create 45,000 new jobs in the Orlando area this year, matching last year's increase. Hiring would likely rise even faster if employers could readily find all the workers that they need. The unemployment rate has fallen nearly a percentage point over the past year, and is currently just 3.7 percent. Hiring is also up solidly in neighboring metro areas, including Melbourne and Daytona Beach.
Orlando's robust employment growth is pulling in plenty of in-migrants, which is fueling demand for new and existing homes. The four-county metropolitan area has added 265,000 new residents over the past five years, which translates into 100,000 new households. On the surface, construction looks as though its has more than kept pace with demand, with builders delivering a total of 135,000 new homes, townhouses, condominiums and apartments during this period. Orlando, however, is a very unique market, and must also accommodate exceptionally strong demand for second homes and vacation properties. In addition, a number of homes were damaged or destroyed by last fall's hurricanes. We estimate total demand for new homes of all types to have been 155,000 units over the past five years, or 20,000 more than were supplied. Orlando's robust employment growth is pulling in plenty of in- migrants, which is fueling demand for new and existing homes. We estimate total demand for new homes of all types to have been 155,000 units over the past five years, or 20,000 more than were supplied.
With demand for homes running well ahead of supply, prices of existing homes have been driven significantly higher. The median price of an existing home sold in the Orlando area surged 45 percent over the past year to $247,900. The price jump was the largest among the state's 21 metropolitan areas and brings the cumulative increase in home prices over the past five years to 124 percent. Moreover, Orlando area housing, which traditionally has been priced well below the national average, now sells for 17.8 percent more than national average.
The rapid appreciation in housing prices has produced a windfall for local governments. Property tax receipts in the Orlando area rose 12.8 percent this past year, which translates into an additional $131 million for city and county governments in the Orlando area. But the run up in prices also appears to be tempering demand somewhat. Sales of existing homes have fallen 5.9% over the past year and homes are tending to stay on the market a bit longer than they used to. Part of the slowdown in existing home sales reflects growing competition from new construction, which really began to ramp up about a year ago. More recently permits have slowed, however, as builders continue to scramble for developable land, raw materials and workers.
Melbourne-Titusville-Palm Bay
The strength in the Orlando market is spilling over into neighboring metro areas, all of which were already seeing sizable gains in home sales in their own right. The Melbourne-Titusville-Palm Bay metropolitan area has enjoyed strong employment growth over the past year. Nonfarm employment increased 2.6 percent, reflecting strong gains in the construction, retail trade, health care, and hospitality industries. Residential and commercial building activity has strengthened considerably, with gains driven by an influx of new residents and rebuilding efforts from last fall's hurricanes. Manufacturing has also picked up, particularly in the aerospace and defense sectors. With hiring up solidly, the unemployment rate has fallen to just 3.7 percent.
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