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Florida
is one of the largest second home markets in the United
States, with an estimated 700,000 temporary residents
over age 55 spending 30 consecutive days or more there
each year.
Florida,
and in particular central Florida, remains the number
one vacation destination in the United States and
the Orlando region is the most visited destination
in the world. Sales of vacation homes have been strong
in recent years due to low interest rates and a weak
dollar, which has helped fuel purchases from overseas.
One
third of international purchases of homes in Florida
chose locations in Central Florida - the region where
Feltrim Developments operates. The Orlando area is
particularly popular for British purchasers who prefer
single family home units and account for one third
of Florida's home sales to international purchasers.
The
supply of housing has lagged behind demand in recent
years. The chief impediment to new construction has
been a shortage of developable land. Even though residential
construction has soared to record highs recently,
the supply of housing has still lagged behind demand.
This has been particularly true for single-family
homes, where population growth, a rising homeownership
rate, and strong demand for second homes and vacation
properties created a demand for 560,000 new single-family
homes between mid 2000 and mid 2004. During this period
builders delivered 540,000 units. When you add in
the growing demand for townhouses and condominiums,
buyers were looking to purchase 675,000 new homes
during this period, while builders were supplied just
570,000 units.
The
Orlando region's robust employment growth is pulling
in plenty of inward migrants, which is fueling demand
for new and existing homes in the region. The four-county
Orlando metropolitan area has added 265,000 new residents
over the past five years, which translates into 100,000
new households. On the surface, construction looks
as though its has more than kept pace with demand,
with builders delivering a total of 135,000 new homes,
townhouses, condominiums and apartments during this
period. Orlando, however, is a very unique market,
and must also accommodate exceptionally strong demand
for second homes, vacation properties and visitor
numbers.
With
an average 4% per annum expected growth rates in tourism
over the next 4 years, an additional 7 million visitors
per annum are expected to visit Orlando by 2010, creating
significantly increased demand for accommodation and
all related tourism and living services.
With
demand for homes running well ahead of supply, prices
of existing homes have been driven significantly higher.
The median price of an existing home sold in the Orlando
area surged 45% in the period 2004/05 to $247,900.
The price jump was the largest among the State's 21
metropolitan areas and brings the cumulative increase
in home prices in the previous five years to 124%.
Moreover, Orlando area housing, which traditionally
has been priced well below the national average, now
sells for 17% more than national average.
The
increase in prices coupled with the ever present demand
for housing has forced buyers to consider more cost
effective locations, such as the four county region,
approximately 35 miles to the west of Orlando where
Feltrim Development has its principal focus. This
will remain the principal market focus for Feltrim
Developments during the terms of this investment,
as it is in this region that the greatest population
and price increases are expected. This is already
being reflected in the rapidly increasing cost of
development land in the area.
With
recent increases in interest rates (while remaining
at affordable levels) and an increase in development
activity, it is expected that Florida's housing markets
will move into better balance in coming years but
sales are expected to remain strong for the remainder
of the decade but not at the exceptional rates of
increases seen over the past four years.
Higher
home prices in Florida are not expected to snuff out
Florida's housing boom. Prices are still significantly
lower in most Florida markets than they are in the
Northeast United States, where many of Florida's inward
migrants come from. This is particularly the case
in the geographic region where Feltrim Developments
has its main focus.
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