Florida Market Update - August 24’

August 16, 2024 Edwin D Epperson III

Hello investors, I trust your August is going smoothly and now I’m sure most of the kiddos are heading back to school. As always, my monthly Florida Real Estate Market Update is for the previous month’s data. So, just as a reminder, we are always trailing by 30 days or so. With that being said, July was no smooth month. Commercial real estate continues to fall off a cliff, with massive commercial office space being sent receivership and MF syndicators handing back the keys of their assets to Presidential upheaval and the entire political spectrum that seems to infect every aspect of our lives. When I say that I hope your August is going smoothly, I definitely compare this month to last month!

If you are not subscribed to The Real Deal, then I would highly recommend it. They have multiple MSA’s that they track all over the US, and it will give investors a high-level overview of the Commercial and MF asset classes. Tune in to my Florida Market Update to keep track of the SFR space. In Oct, I and one of my Board of Advisors, Josh Weis, will be hosting the 6th Beans & Bullets event. This will be our first fall event, and we are excited to be now moving to hosting 2x per year. If you’re interested in learning more about the Beans & Bullets event, then click on the photo below and read up on what the events are all about. If you are free the last Saturday of October then we would love to have you out to the event.

Last personal piece, if you enjoy cigars then I would HIGHLY recommend that you check out Reformed Cigars. It's a non-profit that will send you a thank-you gift for your donation. You can select a box of cigars, and then donate to receive a box of Estelli, Nicaraguan, hand rolled cigars. The non-profit has a very missional focus and drive AND… because its a non-profit, a registered 501c3, you get a donation slip every year! How great is that! You donate and get both a box of cigars plus a tax write-off! If you or a loved one enjoys a good cigar, then please consider donating to Reformed Cigars, and tell Al Gomez, the President I said hello!

Florida continues to offer some incredible surprises. We are near the end of summer and, we have not had a major hurricane yet! Thats a big relief, but not so much. Our “busy” season actually kicks off at the beginning of Sept through Oct, so we have yet to see what the weather holds for us. As far as real estate goes, there is some encouraging news, as well as not so encouraging, but we are not seeing any large corrections yet. Read below our MLS market updates as well the general Florida market update when compared to the rest of the nation in the second segment. I trust this month’s report brings confidence and some clarity about the real estate market, and how you as a real estate investor or as a passive investor, can take advantage of the information within this report to further your family’s generational wealth-building goals.

AUGUST 2024 FLORIDA SFR MARKET REPORT

FLORIDA SINGLE-FAMILY RESIDENCE MONTHLY INVENTORY

MONTHLY INVENTORY

This data is based on spot data for a specific time period and market. It is a measure for Active Listings for current month divided by Sold + Expired listings from prior month. This data is a RAW Score report, reflecting the actual numerical value for that particular Metropolitan Statistical Area "MSA". Raw scores do not rank or compare a market’s score against any other market; multiple markets could have the same or similar raw scores.

The Heat Map Key to the left indicates what the corresponding MSA colors mean. Red equals very few months of inventory, <1, while pink equals the most months of inventory, >8.

Overall, the Florida Monthly Inventory for Single Family Residences continues to creep up, but not at a super fast pace. To be honest, right now, Florida is averaging 3.7 month’s worth of inventory, which is still historically below our 4 - 4.5 months. The MSA with the highest amount of monthly inventory was the Crestview/ Fort Walton Beach/ Destin MSA. While they did decrease by half a month from Junes report, they are still leading the state with the number of listings.

Good news…. there were three MSA’s that fell over 10% in their monthly inventory; Deltona/ Daytona Beach/ Ormond Beach MSA fell from 4.4 months to 3.7 months, Sebastien/ Vero Beach MSA fell from 4.5 months to 3.8 months, and Punta Gorda (which has been a tough cookie to crack) fell from 4.7 months to 4.1 months. However, if you look at the chart below, you will see our two rock star MSA’s from last month, Sebring/ Avalon Park and the Tallahassee MSA’s both made gains from last month’s inventory drop. Sebring/ Avalon Park MSA basically regained all the inventory they got rid of in June from May, and Tallahassee regained half the monthly inventory. So it goes in Florida. This is another reason why we track MSA’s for longer than a 3-month cycle. While 3-month overviews are important, nothing can better prepare you for market movements than looking back 6 months and even a year.

For our real estate investors keeping track of the monthly inventory in your MSA is critical to accurately projecting the amount of time needed to be able to resell or refinance your properties into long-term loans. Keep in mind that the amount of time to complete your construction budget will average about $750 worth of work per calendar day. This means that for a $75,000 project you should expect that project to take 3.33 months. In the past, you would be able to turn that project and have it sold in <2 months. Taking a 6-month loan from your lender would have been feasible, as well as earning you a rate discount. Now… you may want to go ahead and request a 9-month or even 12-month loan, even if the rate is slightly higher, just to keep you from paying extension fees. For our passive investors in the Bleu Bay Fund I know that I am on top of the market, and we are watching how we originate loans to account for these longer-than-expected hold times in the market.

FLORIDA SINGLE-FAMILY RESIDENCE DAYS ON MARKET

DAYS ON MARKET

This data is based on spot data for a specific time period and market. The Days On Market metric is the median number of days between a property’s listing and when it is noted as ‘sold’ or ‘off the market'. This data is a RAW Score report, reflecting the actual numerical value for that particular Metropolitan Statistical Area "MSA". Raw scores do not rank or compare a market’s score against any other market; multiple markets could have the same or similar raw scores.

The Heat Map Key to the left indicates what the corresponding MSA colors mean. Red equals very few days on the market, <45, while pink equals the most days on the market, >180.

All I can say is OUCH! While the heat map is nice, it really doesn’t do it justice. Days on Market for Florida Single Family Residences has continued to increase, moving from an average of 64 DOM in June up to 69 DOM in July. Remember the historical average is between 90 - 120, and we are already starting to see some MSA’s near or even rest at 90 DOM. Consider Naples/ Marco Island MSA they are at 91 DOM up from 85. Other big movers in the Florida real estate market, who all had an increase of 10%+ from last month, are; Crestview/ Fort Walton Beach/ Destin MSA, Tallahassee MSA, The Villages MSA, Orlando/ Kissimmee/ Sanford MSA, Palm Bay/ Melbourne/Titusville MSA, Tampa/ St. Petersburg/ Clearwater MSA, Sebring/ Avalon Park MSA, and Port St. Lucie MSA. Thats 8 MSA’s out of 24 that saw an increase of over 10%. There were no decreases in the average DOM, and Ocala is the only MSA that had 0% change from June.

Real estate investors need to take into consideration both the DOM and monthly inventory when accurately estimating their hold time for a project whose exit strategy is to sell. Our passive real estate investors, will actually benefit from this extended DOM and monthly inventory as this simply means more time that they will collect monthly interest payments and generate passive income.

FLORIDA SINGLE-FAMILY RESIDENCE AVERAGE LISTING PRICE

AVERAGE LIST PRICE

This data is based on spot data for a specific time period and market. The Average List Price metric is the average price of all properties listed during the month. This data is a RAW Score report, reflecting the actual numerical value for that particular Metropolitan Statistical Area "MSA". Raw scores do not rank or compare a market’s score against any other market; multiple markets could have the same or similar raw scores.

The Heat Map Key to the left indicates what the corresponding MSA colors mean. Red equals very inexpensive properties, <$200K, while pink equals luxury properties, >$800K.

Interestingly enough, even though we are seeing longer days on market, and higher monthly inventory, sellers are still listing their properties for sell at or near top dollar. This of course does not count in price adjustments (which I will review in the next section) yet it does speak to the resiliency of the market here in FL. If you reference the tracker below you will see that most of the MSA’s have not moved very much at all, as it pertains to the average list price. What does this mean? It could mean that sellers still believe they can get top dollar for their property and are willing to hold out for a longer time (higher DOM and more monthly inventory) to get what they are asking, or they are listing the property based on older data that is not allowing them to see where the market is headed. Either way, this metric, in and of itself, is not that important until you take into consideration the next section, which is the number of price drops per 10K in the resident population. I believe that combining this with the next section will provide greater insight as to why there is an increase in DOM and monthly inventory.

FLORIDA SINGLE-FAMILY RESIDENCE PRICE DROP PER 10K Pop.

PRICE DROPS

The number of properties with the list price lowered per 10,000 people. This is simply a metric that tries to provide insight into how many listing for every 10K residents dropped their listing price. Large MSAs, such as Miami and Ft. Lauderdale, may naturally have a higher amount of list price adjustments, while your smaller MSAs, such as Ocala, Sebring/ Avalon Park, will generally have smaller price drops simply because they do not have that many residents.

The Heat Map Key to the left indicates what the corresponding MSA colors mean. Red equals equal or less than two price drops per 10,000 residents, a good indicator of a strong seller’s market. Pink indicates a weak market, where the buyers are able to set the price, and sellers have to adjust their listing prices. Higher than 18 indicates a very strong buyers' market, and more than likely, real estate investors will not be able to sell their assets at the value they thought they could 6 - 9 months ago.

Across the board most of the MSA’s saw a REDUCTION in the number of price drops per 10K. What does this mean? Well, it is indicative that sellers truly believe that their property is worth what they are initially listing it for, therefore, there are not as many price-reduced listings from June. We saw a pretty significant jump in fewer price drops in the Panama City MSA, with a decrease in price drops from 57 to 47. That is a strong showing for an MSA that has really been struggling over the past year and half. Also, another MSA that has been struggling in most of the metrics I am tracking has been the Cape Coral/ Fort Myers MSA, and they also had the second strongest showing, reducing their number of price drops from 46 in the month of June to only 37.

AUGUST 2024 FLORIDA SFR MARKET REPORT

FLORIDA RESIDENTIAL MARKET OUTLOOK

MARKET OUTLOOK

The anticipated future health and vitality score for each individual State, Metro, County, and Zip Code market is based on recent (shorter-term) transactions.

Generally, scores below 30 anticipate new or continued weakness. Scores between 30 - 70, if stable over the last several years, anticipate a continuation of current market conditions. If the score is TRENDING up within this 30 - 70 range, it may indicate an improving market; if trending down, a weakening market. A score above 70 anticipates a strong or strengthening market.

The past performance of any indicator, score, or algorithm is not indicative of future results. Do your own analysis before entering or exiting any market.

The Heat Map Key to the left indicates what the corresponding MSA colors mean. Red, >90, means a very strong MSA when compared to all 400+ MSA’s across the United States. The opposite is pink <10, which means it is one of the weakest MSAs when compared to all other MSAs across the United States.

Oh boy oh boy…. the Market outlook for Florida continues to decline. Overall, out of 400+ MSA’s across the nation, most of Florida’s MSA’s rank in the bottom 23rd percentile. The best-performing MSA is the Ocala MSA, which is in the 33 percentile when compared to the rest of the nation. Most of our MSA’s are in the su- 30 percentile. Now this could be caused by many varying factors; property values, cost of living, insurance (which we know is an absolute killer here in the state). So this metric, like all of our others, is not to be taken as a stand-alone metric but as part of the whole. This is also NOT to say that real estate investors cannot make a sound profit from their investments. This just means that finding those good deals is going to take a little bit of digging, good ole’ sweat and tears, and door-knocking.

Some of the MSA’s that saw the biggest change from June to July are; Tallahassee MSA dropping from the 27th percentile to the 20th percentile, Jacksonville MSA dropping from the 37th percentile to the 29th percentile, Tampa/ St. Petersburg/ Clearwater MSA dropped from the 31st percentile to the 26th percentile, and the Ft. Lauderdale/ Pompano Beach/ Sunrise MSA dropping from the 19th to the 13th percentile.

FLORIDA REAL ESTATE INVESTOR WEALTH PHASE

WEALTH PHASE

Simply put, Real Estate "Wealth Phases" are when you can make the most money with the least amount of effort, capital, and risk.

This is because:

Real Estate values/prices are appreciating.
Appreciating markets are VIBRANT; there are more buyers and sellers, deals are easier to do, real estate is (temporarily) more 'liquid'.

Real Estate is Cyclical. All real estate prices rise and fall over time. These cycles occur at the LOCAL (city) level. EVERY local market is different. (There is no such thing as a 'National' real estate market, only an average of hundreds of divergent local markets.).

Note: the 'Law of Small Numbers' can produce very large 'percent increase' stated results if the prior period starting value was very small. While this large stated percent increase is accurate, it can easily be misinterpreted.

Simply put, this is a binary metric. Either the MSA is currently in a wealth phase or it is not. This metric SHOULD NOT be read and interpreted in isolation. This should be used in comparison with all other metrics presented. Keep in mind this metric does not let you know whether the MSA in question is at the beginning of a Wealth Phase, in the Middle, or near the tale end.

The Wealth phase has not changed in three months here in FL. This metric allows a 30,000 ft. view across the 24 MSA’s throughout FL and helps investors know which MSA’s provide an overall target of making money, whether flipping, new builds or rentals. You specific strategy will determine your success, and in the following two sections I dive into housing values and cashflow within specific MSA’s. You will want to take into consideration all the metrics in my report to help you determine which MSA’s to break into and using which strategy but it is a fair estimate that there are MSA’s here in FL where you can make a sound profit using several, if not all, the strategies listed.

FLORIDA REAL ESTATE CASH FLOW MARKET OUTLOOK

MARKET OUTLOOK + CASH FLOW

This indicator attempts to identify markets with both relatively higher cash flow potential AND a relatively higher potential for appreciation.

The combined score is expressed as a Percentile from "0" (weakest) to "99" (strongest). For example, a score of "93" means THAT micro market scored higher (stronger) than 93% of all similar U.S. micro markets. The score is based on all markets nationwide. This allows you to see how your market(s) compare relative to ALL markets in the U.S.

NOTE: This COMBINED score is subjective in that it gives equal weight to Gross Rent Ratio and Hot Market Score. Use it as a 'shortcut' to filter through thousands of micro markets with likely above average cash flow AND appreciation.

The Heat Map Key to the left indicates what the corresponding MSA colors mean. Red, >90, means a very strong MSA for Cash flow Investing when compared to all 400+ MSA’s across the United States. The opposite is pink <10, which means it is one of the weakest MSAs for Cash flow Investing when compared to all other MSAs across the United States.

In the Cashflow section we look at MSA’s where owning real estate rentals is lucrative. We can also see that there are some MSA’s whose rental values have declined. Now, this also takes into consideration MSA’s whose primary rental ability may be more seasonal (think Orlando for Disney park visitors) or College towns such as Gainesville and Tallahassee, as well as long-term rentals. Lets dive in.

Interestingly enough most of the MSA’s which saw a sharp decline from June to July were all in the Panhandle and North Florida. Tallahassee and the Jacksonville MSA’s saw the largest drop in cash flow growth, down by 23%, respectively, when compared to the national average. July is a good month for the parks in Orlando, however, even this season, that MSA is down by almost 40% from May, not a good sign. The Central Florida MSA’s have generally seen an increase in the national average for rental income, while South Florida MSA’s remain very low in the nationla average for rentals. There are four MSA’s within the Central Florida market that have consistently improved their national ranking since May of this year; Ocala MSA improving from the 49th percentile to the 58th percentile in the nation, Homosassa Springs MSA improved from the 31st percentile to the 36th percentile, the Palm Bay/ Melbourne/ Titusville MSA improved from the 21st to the 25th percentile, and the Sebring/ Avalon Park MSA improved from the 42nd to 46th national percentile.

FLORIDA REAL ESTATE VALUE MARKET OUTLOOK

MARKET OUTLOOK + HOUSE VALUE

This indicator combines each market's relative house value with its relative "Market Outlook Score" to help identify potential markets with both lower-priced properties AND a relatively higher potential for appreciation.

NOTE: This COMBINED score is subjective in that it gives equal weight to House Values and Hot Market Score. Use it as a 'shortcut' to filter through thousands of micro markets when searching for low property values AND some likelihood of above average appreciation.

The House Value Market has been pretty stable, with most of Florida remaining in the Mid-teens and lower in national ranking. However, there are some outliers. The Tallahassee MSA, which saw a slight improvement in national ranking from the 16th to 18th percentile in May to June, saw July wipe out its gains, landing even lower than its May ranking in the 15th percentile. The Jacksonville MSA has seen a steady decline since May, and we saw in July the housing value market outlook land at 10th percentile ranking in the nation down from the 15th percentile to the 10th percentile. The Villages MSA wiped out all gains seen in June landing lower than they were in May, the same with the Tampa/ St. Petersburg/ Clearwater MSA.

The market outlook for Florida home values remains very low, which is a key indicator there is not much more room for appreciation, even forced. So real estate investors need to be aware that if they are looking on the MLS for their “screamin hot deals” they simply won’t be there. Bruch up your contacts with wholesalers and with your own off-market marketing channels to ensure you have opportunities with plenty of margin. For capital investors, be sure you are doing your due diligence on any investments you are placing money towards, especially if you are playing on the debt side of the capital stack. If you are a passive investor looking to place underperforming capital to work, secured to real estate, consider reviewing the Blue Bay Fund I pitch, and become a passive investor in my customizable fund.

This wraps up my August 2024 Florida Real Estate Market Update Report. As always, I appreciate you stopping by and reading through. If receiving information like this seems agreeable to you and helps with your investing strategy then consider joining my investor club. It is free, and every week you will receive investment advise, tips, and strategies that I and my capital partners use to build, protect and preserve our families generational wealth.

With Honor,

Edwin D Epperson III,
Manager& CEO
- Soli Deo Gloria

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