I had heard that the real estate market was doing better in Orlando than in other parts of Florida. Cruising down International Drive, the city looked prosperous. There was a lot of activity and very few empty storefronts. But after looking at some numbers, I’m starting to wonder.
The Sunshine State has had a terrible time in general, with the housing crunch and the more recent financial industry meltdown. It’s worth comparing Orlando to some of the other cities in Florida. I started with www.city-data.com, which is one of my favorite sites for looking at housing markets.
Miami’s best quarter ever for home sales was 2005 Q2, when 16,000 homes sold in Miami for an median of about $270,000. Home prices peaked in 2007 Q4 at a median of $330,000 (volume had already dropped off a cliff at 6,000). In 2009 Q1, about 2,000 homes sold, for a median of $220,000. Imagine being a Realtor in Miami these days. You’re selling 1/8 the volume of homes at 2/3 the price. Your commissions may have peaked at $150,000 in 2005 – this year they project to be about $17,000. Time to sell that Mercedes!
I believe 2007 was the year that my friend in Sarasota, Florida decided to try his hand at selling homes. My friend had made a lot of money flipping houses in previous years. He’s intelligent, friendly and hard-working. In a year’s full-time effort, he did not sell one home. Of course that resulted in a commission of $0. Sarasota’s market slump is even worse than Miami’s, though it is a much smaller market. The number of homes sold there in 2009 Q1 was less than 1/6 what it was in 2005 Q2, and the median price was about 52% of its peak in 2007 Q2.
Now lets look at Orlando. Orlando’s volume peaked in 2005 Q3, when 11,500 homes changed hands and the median price was $225,000. The price peak was 2006 Q4 at a median of $260,000. However, in 2009 Q1, the median was $160,000 and only about 1,000 homes were sold. In other words, volume is about 1/12 what it was at the peak, and prices are down about 38%. Volume has dropped faster than in the other two cities, and the median price has dropped faster than in Miami. How, then, is Orlando’s market any better? Answer: it isn’t.
So why does the city look so prosperous? My sense is that tourism plays a greater role in Orlando than in other parts of the state, and the theme parks, hotels and airlines have been aggressively cutting costs and in some cases, prices to keep people coming.
How’s the Job Market?
One of my other favorite sites is the federal Bureau of Labor Statistics. This site has an incredibly useful mapping feature which shows you unemployment by state, county or MSA. Here’s unemployment for the counties that include Orlando, Miami, and Sarasota (from March):
- Miami-Dade County (Miami) – 7.8%
- Orange County (Orlando) – 9.9%
- Sarasota County (Sarasota) – 10.7%
The Orlando area’s unemployment is substantially higher than in Miami, and only a bit less than in Sarasota – another sign that Orlando is suffering from the same malaise that is hitting the rest of the state.
Is Orlando Really Any Different?
As always, if you really want to investigate this market, you’ll have to go a lot farther than I did. But here are a few tidbits to get you started. First of all, besides the tourist attractions you already know about, Orlando has a well-established high-tech industry and entertainment industry. Second, Orlando tends to be less threatened by hurricanes than other Florida cities because it is not on a coast. Third, the general cost of living is lower in Orlando than in other major Florida cities.
Those are all advantages. Orlando also has a couple of disadvantages compared to other Florida areas, which should be noted. Not being on the coast makes Orlando a less attractive destination for many Florida visitors and immigrants (from other states as well as other countries). However, the area’s biggest disadvantage is that it serves primarily a young demographic. So much of Florida’s growth has been fueled by retirees, and we’ll have many more of those in the next few years. Such folks will probably not be entranced by Orlando’s lineup of kid-friendly attractions.
I saw this with my own parents, who came out to join us for the week when we were on vacation. They enjoyed the trip mostly because they got a lot of grandparent time. At the end, though, they were very happy to return to their quiet, golf-heavy coastal community.