News-Journal/PETER BAUER Rich Emerson, a Realtor with Adams, Cameron & Co., stands near a home on Windsor Heights Street in Deltona that recently sold to a non-homestead buyer. Adams, Cameron & Co. general manager John Adams said investors and "flippers" are buying many of the houses on the market in the Volusia area, fueling rising sales numbers.
Seven years ago, just before the housing bubble burst, when someone bought a house in Volusia or Flagler counties, there was a good chance they were planning on living in it.
Today, despite rising home sales, new construction and a widespread sense that Florida is recovering from the Great Recession, that scenario has become rarer.
Investors, not families, are buying most of the existing homes.
New single-family homestead tax exemptions in 2013 have dropped to a fraction of what they once were in Volusia and Flagler home sales. More than half of this year’s sales in both counties have been cash transactions. Both trends suggest the existing housing market is still full of investors.
The consequence for actual potential homebuyers: The median sale price of a home in Volusia has risen. The average percentage of asking price has increased. Inventory is falling, and each house is spending less time on the market.
“It’s the classic American story right now,” said Maryke Guild, a real-estate agent and property manager who runs a small family brokerage in Daytona Beach. Traditional buyers, many of them already foreclosed on and limited by bad credit, are getting eclipsed by the investors in the market. Mortgage money is still tight.
“It’s prime investment property,” she said. “In three, four years’ time, when the market has been resaturated, those guys are going to sell at a profit, there’s no doubt.”
Of more than 7,600 homes sold in Volusia so far this year, less than 17 percent of them have come with homestead exemptions. That’s down markedly from 2012, when the figure was almost 40 percent for the full year. It’s down even more from 2006, when it was 50 percent. And even farther from 2000, when it was almost 54 percent.
The numbers fell just as far (although from a higher starting point) in Flagler this year — 40 percent of single-family home sales so far were homesteads, down 37 points from a 77 percent share in 2000.
Some 2013 buyers still can file for homestead exemptions — they have until March 1 to do so — but Volusia Property Appraiser Morgan Gilreath said the trend is likely to remain.
It’s all happened as home sales have spiked in numbers and in price. Almost 700 homes sold in Volusia in September, for example, up 26 percent from September 2012. The median price increased 13 percent, to $128,000 from $113,000.
‘FLIPS WON’T SUSTAIN MARKET’
Homesteads have retained a healthy share (about 44 percent) of real property in Volusia, but the disparity in recent sales is significant. What it means depends on your perspective. Realtors see it as a phase in the recovery, part of a process that involves “flippers” fixing up neglected, often foreclosed-on houses for new owners. Their sales numbers are up, and business is good.
“A large portion of what we do is investor sales, and our investor sales are strong,” said Arthur Kowitz of Arthur Kowitz Realty. “And our property management division is strong.”
“Flips are not what’s going to sustain the market,” acknowledged John Adams, general manager of the Daytona area’s biggest real-estate firm, Adams, Cameron & Co. “But we got in such a bad position that many of the homes were in terrible shape. ... From my perspective, in my neighborhood, I would rather have those improvements taking place than have (a house) sit there with an absentee owner who’s not going to care about it.”
“The days of foreclosures standing out like a sore thumb, with grass two feet tall and boarded-up windows, are over,” said Daytona Beach Area Association of Realtors president Steve Koenig.
Gilreath said lingering uncertainty about the economy — and even about health care — has an effect on homesteads, particularly in a retirement-heavy area.
“The real estate market seems to be clearing out, prices are getting better and we’ve got construction going on... all of that looks very positive. But from an economic standpoint, and somebody looking at everything going around them, it’s not a stable world yet. And that may make someone say... ‘Hey, let’s rent for a while before we buy.’”
Outside the real-estate market, there’s a view that Volusia’s aging and stagnant population has put the area at least a decade away from full recovery. Census data show Volusia’s population growing slower but getting older faster than the rest of Florida. Most of the county’s younger demographics — the people with the potential to buy a home, work and raise a family in the area — are declining.
Volusia’s population grew by half a percentage point between 2010 and 2012, compared to 2.8 percent in Flagler and 2.7 percent statewide. It has grown 12 percent since 2000, while the state has grown 21 percent and Flagler has nearly doubled with 97 percent growth, (a reflection of a much smaller population as a starting point).
“As I have been screaming in the wilderness for several years now, new home construction (the only thing that really matters here in the long run) cannot recover in Central Florida (and especially in Volusia County) for at least another full decade from now,” Mark Soskin, an associate professor of economics at the University of Central Florida, wrote in an email to The News-Journal. “Existing home sales, at least in Florida, is now a meaningless indicator to track. Banks are merely off-loading losses from their balance sheets onto non-bank syndicates. About the only thing we are observing is speculation and shifting owner-occupied housing to an increase in detached rental housing stock, always in hot demand in a county notorious for its lack of apartments.”
RENTING ON THE RISE
People are starting to build new houses in Volusia and Flagler counties again, but not in pre-boom numbers. Volusia has issued almost 1,100 single-family homebuilding permits this year — up 55 percent from 2012, but nowhere close to 2005 (5,068) or even 2000 (3,088). Flagler has topped 400 this year, up 83 percent from last year and the highest level since 2007. In 2004, Flagler was at 4,275.
Meanwhile, renting is on the increase here and across the U.S., according to Census figures. Six years ago, 29 percent of Florida households were renting. By 2012, that number rose above 34 percent, close to the national average of 36 percent. Today, in Volusia, Census data indicate there are about 61,000 renter-occupied homes, or almost a third of all households in the county. And renting is relatively cheap: Volusia’s median rent is $890, compared to $981 statewide.
The much smaller Flagler is a different market: The median rent is $1,068, with only about 6,800 rental households.
At his realty firm in Daytona Beach, Kowitz said rental demand is strong for big, traditional family homes.
“When we get a 3-bed, 2-bath at LPGA, or your typical owner-occupied neighborhood, there’s a lot of competition,” Kowitz said. He said people who used to own their homes still want their old lifestyle, but as renters.
The disparity in homesteads is even sharper in Volusia’s condominium market, which naturally is tied to investors and part-time residents. In 2000, 75 percent of Volusia’s condo sales were non-homesteads. So far this year, almost all of them were: close to 93 percent.
The numbers are not unique to Volusia County. In Southwest Florida, the Sarasota Herald-Tribune recently found new homestead exemptions are off almost 50 percent from their peak during the housing boom. And “unlike the last housing run-up almost a decade ago,” the newspaper reported, “the majority of sales increases this year have been driven by investors scouting homes for their rental portfolios and winter residents who only live here part-time.”
“Those home sales just don’t have the same impact on the economy,” Paul Mason, an economist with the University of North Florida in Jacksonville, told the Herald-Tribune. “Renters living in investor-owned properties typically spend less than a homeowner would. And when winter residents are not there, that money just isn’t circulating.”
In Flagler, property appraiser Jay Gardner was not surprised by the numbers, considering where the market has been.
“People that owned houses just packed up and left” as the crisis got worse, he said. “There was a time in life when homes were places where you actually lived. Then it became: everyone’s a real estate mogul, buying homes and selling them... Then by 2012, they lost their houses (to the banks). And banks don’t get the homestead.”
“I’m not sure there’s a clean way to look at all of this data and say this is a good thing, or this is not a good thing,” the Volusia appraiser Gilreath said. “I think right now real estate activity is good, prices are going up, and that’s a very positive thing for our marketplace.”
But homestead buyers are important, particularly in places like downtown Daytona Beach, areas that are trying to become vibrant again: “Until those areas have a higher percentage of homestead people living there, you’re going to see some of the same problems persist,” Gilreath said. “And that’s true anywhere. When you have families living near downtown and walking the streets at night, and insisting that their streets be safe, that’s when the area turns around.”
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