Florida's housing market has again come unmoored from fundamental economics. But unlike the pre-recession bubble, this time there is too little residential construction, said Sean Snaith, director of the University of Central Florida's Institute for Economic Competitiveness.
Speaking at the Federal Reserve Bank of Atlanta's Public Affairs Forum at the Jacksonville Branch in early September, Snaith discussed his outlook for the national and Florida economies. In particular, he noted that Florida's housing market continues to recover. Home prices are rising by double-digit percentages year over year, as investors vie for a shrinking pool of distressed properties.
Meanwhile, the Sunshine State is outpacing the national rate of employment growth, and Florida's population is rising quickly again after growth slowed during the Great Recession.
Home builders, however, are not keeping up with the growth, Snaith said. Housing starts climbed above 100,000 in 2015 for the first time since 2007, but the number remained well below levels of 2001. In 2005, housing starts peaked at nearly 300,000 in Florida.
Population increases again fueling Florida economy
"We should be building more product, and we're not," Snaith said. That could lead to higher home prices, as a continuing influx of retirees, general in-migration and more births than deaths fuel population increases. Population growth has always propelled Florida's economy, he says.
"It's economic development for dummies," Snaith said. "You want a region's economy to grow? Shove more people in it."
The latest U.S. Census Bureau estimates put Florida's population at 20.3 million as of July 2015. That suggests the state added 1.5 million people since 2010. During the same period, Florida added nearly a million jobs.
Florida will continue to surpass the nation in the rate of job growth, Snaith forecast, though he says Florida's pace will likely slow in the months and years to come. Among particular occupations, professional and business services—white-collar jobs such as attorneys, architects, and scientists—continue to add the most positions, he said.
Tourism stung by troubles overseas
Job growth in the state's large leisure and hospitality sector is steady but likely to be tempered in the future by economic troubles in other countries. Florida attracts a lot of foreign visitors. For instance, Snaith said, one in eight Canadians visits the state annually. But Canada's economy contracted in the most recent quarter, and the Canadian dollar has slumped in value. Meanwhile, Britain's exit from the European Union has weakened the pound, and Brazil's severe recession has likewise sent the real lower against the dollar. A less valuable currency makes visiting Florida more expensive for people from those countries.
Within Florida, Snaith figures the Orlando region will continue to lead in job growth. One factor in central Florida's favor is its relative lack of natural constraints to development. South Florida is bordered by the Atlantic Ocean to the east and the Everglades to the west. So growth either moves up Interstate 95 or up into the sky in the form of taller buildings, Snaith points out. By contrast, central Florida faces no such geographic barriers to expansion.
Public Affairs Forums are an event series that feature noted speakers who explore regional and national issues from an economic perspective.