The future of the SWFL housing market 2019 was presented at the November 2018 SWFL REIA general meeting.

The future of the SWFL housing market 2019 disclosure:

  • In 2009, I presented a Whitepaper on Lee County Florida from 2009 I have been revisiting this paper recently.
  • This presentation is my research done for me and shared with you.
  • This is meant to be a 10,000 sq ft view of the market.
  • Data came from everywhere… but mainly
    • Census Bureau.
    • Federal Reserve.
    • MLS export.

3 ways to react to change.

  • Watch it happen.
  • Complain about it.
  • Capitalize on it.

Everyone and each generation share common lifecycle characteristics.

  • Eat Meals.
  • Make babies.
  • Live in Real Estate.

Each generation has its own traits and modalities but in the end, we all do the same things.

Where are we now?

  • Currently, we (SWFL) are a balanced and growing market.
  • Everyone wants to compare this market to 2005/2006 but currently, we do not share the same metric traits of that market.
  • Traditionally we have been a retiree based market. Timing the birth rate of people turning 62 timed the last cycle almost perfectly.

The future of the SWFL housing market 2019: How did we get here?

  • 2001 thru 2003 we experienced a growth cycle in SWFL. In 2004 thru 2005 this transformed into a speculative mania.
  • An economic bubble or asset bubble is trading in an asset at a price or price range that strongly exceeds the asset’s intrinsic value.
  • For example, a 330k North Cape Coral home that rented for $1,600 a month.

 

The future of the SWFL housing market 2019: Difference in demand.

The future of the SWFL housing market 2019 single family permits in Cape Cora; 2001 thru 2008

Check out the growth 2004 thru 2005! By percentages it is astounding.The future of the SWFL housing market 2019 Cape Coral permits 2009 thru 2018

The sharp jump from 2014 forward shows growth but the percentages are not in line with a mania.

  • The market bottomed in August of 2008. Prices have risen since then.
  • Of recent the average price is flat and the median price is still rising.

The future of the SWFL housing market 2019: Potential negative disruptive factors.

  • Change in Demographic Demand.
  • Easy leverage causes a speculative mania to form.
  • Random external events (black swans).

The future of the SWFL housing market 2019: Are foreclosures an issue?

Foreclosure report for Lee County showing the foreclosures by year for October 2018

What does this spike 2016 mean?

  • Lending was loosened.
  • The amount of the defaults is at a pace that the market can absorb.

There have just not been enough mortgages since 2008 to drive another wave as we seen before. Below is the last cycle.

Foreclosure report for Lee County showing the entire last cycle for Lis Pendens filings

The future of the SWFL housing market 2019: Demographic Trends

  • Every generation is traveling across a level of time.
  • Millennials are on the cusp of surpassing Baby Boomers as the nation’s largest living adult generation. Millennial’s, whom we define as ages 20 to 35 in 2016.
  • Millennials are expected to overtake the Boomers in population in 2019 as their numbers swell to 73 million and Boomer’s decline to 72 million.
  • Generation X (ages 36 to 51 in 2016) is projected to pass the Boomers in population by 2028.
  • The Millennial generation continues to grow as young immigrants expand its ranks.
  • Note the Millennial and Gen Z generation are always grouped together but they are very different. Think 18 years old versus 30 years old.
  • From 1965 to 1999 there were 140 million babies born.
  • You also cannot ignore the impact of immigration and foreign investment.
  • One percent of the U.S. baby boomer population controls about one-third of that generation’s assets and the richest 10 percent of the population own more than two-thirds
  • While the Millennial have had a later start in the life cycle, the boomers are also retiring much later. They are balancing each other out.

The future of the SWFL housing market 2019: Some perspective on 55 and up assets.

  • While they will not buying into the market in growing numbers, they will be still participating in our local economy.
  • There will be the internal retiree migration.
    • Many start in a house or condo that is not age restricted.
    • They then transition to an age-restricted community.

The future of the SWFL housing market 2019 chart of the live births for the United States from the census

The future of the SWFL housing market 2019 showing the census data for people turning 62

The future of the SWFL housing market 2019: The local economy.

It is basically two things happening at once:

  • The Boomers will spend less money.
  • The millennials will spend more money.

The future of the SWFL housing market 2019 showing income and expenditures by generational cohort

The future of the SWFL housing market 2019 chart showing generations by cohorts by percentages

 

 

The future of the SWFL housing market 2019: The millennials are making more money.

The future of the SWFL housing market 2019 chart showing real incomes by age group

That generation has experienced the most wage growth of recent. They all do not live in the basement as social media would have you believe. They are also heading up more households.

The future of the SWFL housing market 2019 chart showing millennial population as they are likely to head households

They are also migrating in large numbers. SWFL is one of the destinations.

The future of the SWFL housing market 2019 showing the migration for attracting millennials The future of the SWFL housing market 2019: The Macro Picture

A rising tide lifts all boats The aphorism “a rising tide lifts all boats” is associated with the idea that improvements in the general economy will benefit all participants in that economy, and that economic policy, particularly government economic policy, should, therefore, focus on the general macroeconomic environment first and foremost.

First, let us start with the money supply.

In response to the 2008 financial crisis, the money supply was expanded to stabilize the economy. Here is the long view.

The future of the SWFL housing market 2019 chart showing the money supply

 

Here is the 10-year view.

The future of the SWFL housing market 2019 showing the 10 year chart of the United States Money Supply

Here is the 5-year view.

The future of the SWFL housing market 2019 here is the 10 year view of the United States Money Supply from the Federal reserve bank

Here is the one year view.

The future of the SWFL housing market 2019 here is the one year view of the United States money supply from the Federal Reserve Bank

Notice how the expansion by ratios is slowing down. Traditionally this causes a pullback in the economy. There is not much traditional about the economy anymore.

The future of the SWFL housing market 2019: Macro debt levels.

Commercial and Industrial Loans, All Commercial Banks

The future of the SWFL housing market 2019 Commercial and Industrial Loans, All Commercial Banks

Total Consumer Credit Owned and Securitized, Outstanding

The future of the SWFL housing market 2019 this is a chart showing the Total Consumer Credit Owned and Securitized, Outstanding

Charge-Off Rate on Credit Card Loans, All Commercial Banks. How are the consumers performing with this debt?

The future of the SWFL housing market 2019 Charge-Off Rate on Credit Card Loans, All Commercial Banks. How are the consumers performing with this debt?

How about Student loan debt? This will impact the ability of the Millenials to buy and how much they can buy.

The future of the SWFL housing market 2019 How about Student loan debt? This will impact the ability of the Millenials to buy and how much they can buy.

How about 1 to 4 family residential debt levels? This shows how under or over-leveraged this is in relation to the economy.

The future of the SWFL housing market 2019 How about 1 to 4 family residential debt levels? This shows how under or over-leveraged this is in relation to the economy.

The only debt level that has not blown thru the peaks of the last cycle is this asset class. This could change as the cycle goes further. Dodd-Frank is impeding this.

The future of the SWFL housing market 2019: Changes in the Real Estate Industry.

  • There are no information gatekeepers anymore.
  • The transition from a low to moderate interest rate environment will have challenges.
  • Technology disruption…
  • AI (artificial intelligence) being able to determine the difference between intent and interest is going to be the key to profitability.

The future of the SWFL housing market 2019: Some thoughts on Commercial Real Estate.

  • Retail will need to change. Call it the Amazon effect.
  • Also, the sharing economy (Uber) will change this space.

The following slides were from an SME from the Federal Reserve at the CIP Group that meets in the morning. If you are into commercial, it is a great group. Click here for more information.

The future of the SWFL housing market 2019 showing the malls at risk of closing by asset class

Office Space will be impacted by the changing economy.

The future of the SWFL housing market 2019 Office Space will be impacted by the changing economy.

 

The future of the SWFL housing market 2019, this is a chart showing total occupied square feet by worker

As interest rates rise many of the low cap rate investments will feel some pain.

The future of the SWFL housing market 2019 a chart showing how an increase in cap rates will change the LTV of financed commercial transactions

Notes: Commercial is in a period of change. Industrial seems to be the most stable.

The future of the SWFL housing market 2019: Other trends of note.

  • 80 percent of the worlds internet traffic will be video by 2019.
  • With a $205 billion Internet, ad spend compared to a TV ad spend of $192 billion, global Internet advertising spends exceeded TV advertising spend for the very first time in 2017.
  • Over 52 percent of the traffic in 2019 is expected to Social Media.

The future of the SWFL housing market 2019: things to watch.

  • Can and how do we transition from a retiree driven community to one more balanced?
  • Will we overbuild?
  • Will we over lever?
  • How will the 55 plus communities fare with lesser demand?

Thanks for reading. Please let me know what you think.

The Southwest Florida Real Estate Investment Association is the leading source of SWFL real estate investing events that provide investment education and networking in southwest Florida. We analyze the housing market and foreclosures and provide information, education and networking events in order to build a network and knowledge base for investors and potential investors. Our members include real estate agent, brokers, investors, hedge fund managers, rehabbers, wholesalers and more.

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 Subject: The future of the SWFL housing market 2019
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