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Developers in Florida are failing to meet the very high demand for real estate in the state. This isn’t just a “Sunshine Estate” challenge. Lack of labor and lack of materials are some of the factors that contribute to this imbalance. Demand for new homes, on the other hand, is increasing significantly in an overheated market with low inventory. Builders try to run out of time, but nothing indicates that the new units will hit the market in time to balance it.
This imbalance between supply and demand was responsible for the record 20% on the average price of real estate in central Florida.
This October, the number of new homes under construction declined for the third time in five months. The drop was not due to the lack of willingness on the part of the builders to work. So much so that the number of new residence permits issued has increased, along with the number of homes permitted in 2021 that have not yet started to be built. In October of this year, the number of residences allowed, but not yet started, was 259,000 units – the highest since 1978.
If you are thinking of investing in Florida real estate, especially in the Orlando area, read this article to the end and understand why now it may be one of the best historical moments to invest in the region. After all, the trend is for prices to rise sharply for the next few months/years.
Shortness of material and labor
The crisis in the last two years, with restrictive measures and lockdowns, caused the industry, in general, to halt production. At the same time, the population, limited in its ability to circulate, reduced consumption, “repressing” a desire to buy that was just waiting for the end of the blockades to surface.
With the gradual return to normality, this pent-up demand arrived at full power. However, the shelves are empty. There is no stock, as the industry has reduced production in recent years. Factories are now trying to run out of time to meet the large consumption that presents itself. The production chain, however, is committed at all stages. Until the normalization of all processes occurs, the market, in general, will face a lack of inputs and raw materials.
This context considerably affects civil construction, one of the sectors that most employs and consumes raw materials in the economy.
Inventory too low
The market, which is already super heated, is facing a situation of low inventory and high demand. The downward trend in inventory has been around for a long time, but it has intensified in recent years.
High demand and low inventory is a scenario that tends to continue for years to come. Economists project normalization only for 2023. With construction companies struggling to meet high demand, the expectation is that inventory will continue to fall.
In Florida, demand for new homes has exploded. People, over the last few years, have chosen to change homes in search of a better quality of life and more spacious properties, with an outdoor area and in regions with less population density (less risk of contagion). This caused the prices of wood skyrocketed in May, making it difficult for builders to meet the new costs, as well as find raw material in the quantity needed.
Labor is also scarce and is related to the lack of inputs in the market. The industry is hiring in a hurry, and in quantity, to be able to face the new production.
Great time to invest and take advantage of the short-to-medium term appreciation
We are in a historic moment that is characterized by being one of the most promising for investment in Florida. This punctual imbalance in the market caused by the restriction measures in the last two years is not a structural factor in the economy. Once normality returns, the market tends to balance out. Until then, the average property price in Florida will have a considerable expected appreciation
About AMG International Realty
AMG International Realty is a global real estate company specializing in Florida. If you want to know more about the real estate market in Orlando and Miami, get in touch right now and chat with me on WhatsApp: +1 (305) 318 6968 (Heloisa Arazi).
