Florida Market Update - July 24’
Blue Bay Fund I
“Helping investors make more informed, wiser investment decisions.”
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Happy July, I trust your 4th was memorable and encouraging. Election years always seem to bring out the worst in people; I’ll be glad when it’s over. In the vein of being patriotic, I would encourage you, STRONGLY, if you are not registered to vote, then do so NOW! There is no more incredible privilege that we have as Americans than our ability to elect our officials. Say what you will about our politicians’ loopholes and failures, at the end of the year, for now, we have the great hope and knowledge that we can direct our nations’s course through the electoral process. I trust that you will participate this year, as well as in all election year cycles.
This past month was a great month. Starting last month, my wife and I headed up to Nashville, TN, to attend the DME “Diversified Mortgage Expo” conference. I was a guest speaker and panelist, and I thoroughly enjoyed my time. We arrived in Nashville, and my wife, Carolina, knows what I enjoy: good food and a great cigar. She did not disappoint! We ate at a Mexican Cantina (I won’t go into how it was; let’s just say we have had better), but then she found a great little spot called the Red Phone Booth. We also found out that The Red Phone Booth will be opening a new location in …. TAMPA, FL! Woohoo! It is a classy establishment with good cocktails and the elegance and charm of a sophisticated British lounge. I would highly recommend that you swing by if you're ever in Nashville, or you can wait a few months, and it is projected to be opening in Tampa, FL, late 2024. Later in the weekend, we went to the Sinatra Bar & Lounge… it DID NOT disappoint! As you can see the singer even serenaded Carolina. Classic Frank S. songs, as well as many others from that era. Their old-fashioned was solid, and of course, they had almost all of the Jack Daniels line of sour mash whiskey. That evening was truly remarkable. We also had time with an acquaintance, Scott Pollman. He is truly a scholar and a gentleman and looking to expand his investment operations in the note investing space.
June also allows my wife and me to spend time with my boys. My oldest son is 17 and working, so his ability to spend four weeks out of the summer with us is pretty restricted. However, my youngest son, Elijah, who just turned 14, could spend time with us from June 15th until July 14th. While with us, he attended a church camp, secretly took a dozen photos on my phone, and generally had a blast. We also joined a buddy of mine and his son for a day out on the water and barely made it back before a storm completely enveloped us… pretty intense! I also had the privilege of meeting Brian Gordon, CEO and Founder of Guns & Gars and the 2A Cigar line of cigars. You can find them at most central FL Corona Cigar Lounge stores. If you have not had a chance to enjoy one of his small batch, custom-made Nicaraguan cigars, I would highly recommend you check his website out https://gunsngars.com
We have officially wrapped up Q2 of 2024. The FED has indicated that inflation seems to be heading toward a more controlled target rate of 2% (if you believe that), which some analysts have stated means that there are up to EIGHT rate cuts being projected by these analysts… Mind you, these same analysts confidently and ardently stated that 2024 would see five rate cuts, and here we are in July 2024 and not one rate cut, so you can take that for what it is.
At the end of the day, where the market heads in the next couple of quarters is up to anyone's guess. Unfortunately, this year's presidential election cycle may influence more economic ways than any other. At the end of the day, my capital investing partners need to be aware and confident that I am firmly positioned that investing by, with, and through the Blue Bay Fund I, can be one of the best ways to preserve your capital in the coming months. So, what does the SFR market look like in FL? How have the past couple of months performed, and where are we tracking market correction in FL? Welcome to the Florida Market Update Report; enjoy!
JULY 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.
As we head into the middle of summer, and begin Q3 2024, the Monthly Inventory does not show signs of curtailing. Across the board we are seeing monthly inventory continue to increase, with only two MSA’s reflecting a decrease in monthly inventory, that being the Tallahassee FL MSA, and the Sebring/ Avalon Park Florida MSA. Most of all other MSA’s have continued to see an increase since April of this year.
For our real estate investors looking to borrow capital from Blue Bay Fund I, you should be planning accordingly. The more monthly inventory that is available the more properties your project will be competing with. Slapping paint and new carpet will not do. You must be adding true value to the asset, and this should reflect in higher renovation costs.
For my fund investors, just know that the likelihood that a project is completed and sold in under 6 months has all but vanished. Not to say that every project will need an extension, look to see what projects you have invested in through your portal, and take note of the comments section of those investments.
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.
Just as the Florida Single Family Residence Monthly Inventory has been increasing, so too have the average Days On Market. Overall, we averaged 64 DOM throughout most of the state, with the Naples/ Marco Island Florida MSA leading the charge with 85 DOM. As a note, while this may cause some investors, and even the average person, to be concerned, I would like to point out that the historical trend for Florida is closer to 90 - 120 DOM. The past 8 - 6 years were definitely an anomaly. Right now, the Tallahassee MSA is leading the charge with steaming hot DOM. Most likely, this is due to the proximity to Georgia and Alabama, which provide a free-from-state tax relocation option for those seeking more favorable political environments. As well as being the seat of government here in Florida, and offering some of the most affordable housing costs, I do not expect this metric to change anytime soon.
To our real estate investors, if you are not actively investing in Tallahassee, I recommend starting an outreach campaign to those currently invested in Tallahassee who are looking for solid off-market deals. Also, begin getting properties under contract to wholesale to these local professionals. We can help you connect the dots if need be.
To my Blue Bay Fund I investors, know that we are factoring in the DOM, structuring our loans accordingly, and setting expectations. We want our real estate investors to have plenty of room to complete, list, and sell their projects, yet at the same time, not expose ourselves to too much market volatility. Should you have questions about Blue Bay Fund I, our underwriting processes, and how we structure investment loans to real estate investors, then let’s discuss.
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.
The Average List Price fell slightly after holding steady at $750+/- in March, April, and May. The West Palm Beach/ Boca Raton/ Boynton Beach Florida MSA continues to see the most consistent decline in listing prices. While the monthly adjustment was steady from April to May, we saw another drop in the average listing price in June. If you were to only look at month-on-month adjustments, this is not that concerning; however, the 3-month trailing average consistently shows a double-digit decline in average listing prices. For example, April shows a -14.29% correction from 3 months prior. So, let's look at January’s average list price. We know that the West Palm Beach/ Boca Raton/ Boynton Beach MSA averaged $1,600K, and consistently, over the previous three months, the average list price has continued to decline. Now, this is a VERY high-level metric and is not indicative of specific counties or neighborhoods in this MSA that are significantly declining or increasing. Yet, it does provide us with a trend, and that’s what we are interested in.
For our real estate investors, be aware of which MSAs you are currently buying and renovating/ building in. If your MSA is seeing an increase in monthly inventory, an increase in DOM, and lower List Prices… you should definitely be ultra-conservative, even to the point of not acquiring a project that does not have very healthy margins, think 35 - 40%.
For the Blue Bay Fund I, capital investors know that I am alert and tracking the economic changes in the MSAs. Things tend to shift slowly, so having a running track record of what has been happening in the Florida real estate market over a long period helps us make real estate investment loans where we shift the risks and cover the downside on our investments. You also have the benefit of knowing every loan we list on your fund portal for participation; I have already created and loaned out 100% of my capital. This provides an extra layer of confidence to my fund investors that I am fully committed and believe in the loans I create.
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.
The average amount of listings that dropped their prices from last month decreased by one. The Miami/ Miami Beach/ Kendall MSA is only second to Tallahassee as far as list price adjustments. The Punta Gorda MSA continues to lead the pack as far as total List Price Drops, at 66 (indicative of overpricing and market saturation),) yet this MSA is also leading the state in the reduction of the number of price drops. So we need to take the totality of the information presented and make sound decisions. What do these metrics present to me? Well, both the Punta Gorda and the Naples/ Marco Island MSAs are reflective of properties finding their natural list price and the values staying in line with what the market demands. Overall, this is a good movement by the numbers for real estate investors as well potential homeowners moving into or around the state.
For our real estate investors, just know that from January to March of this year the number of properties listed for sale and then the owners having to adjust their prices downward significantly increased; thats why the 3-month trailing column is solid red for the entire state. It should be expected that prices continue to fall in line with the market, and we will not see too many price drops in the future, although nothing is a sure bet.
For my fund investors, I work to calculate this metric into the probability that should a real estate investor need to request a loan extension, we look to see where their list price is, what type of competition they are facing, and how they should adjust course.
JULY 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.
The market outlook for Florida single-family residences continues to diminish. When compared to the other 400+ MSA’s across the US, Florida currently ranks in the bottom 25 percentile with the best-performing MSA coming in at a 37 percentile health when compared to the rest of the US. You must remember this is a forward-looking metric, taking into consideration all the metrics I have covered here, as well as dozens of other metrics we look at. While this may not line up with current metrics, such as the first four, this metric is a key indicator of where MSA’s could be headed in the next couple of quarters. Only time will tell. Does this mean that you should NOT invest in real estate? Absolutely not! You simply need to approach your real estate investing game with a well-defined strategy and approach every deal with a healthy dose of skepticism.
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, the middle, or near the end of a Wealth Phase.
Some MSAs I may be hesitant to enter based on all the previous metrics; Naples/ Marco Island, the Ft. Lauderdale/ Pompano Beach/ Sunrise, and the Punta Gorda MSAs. I would keep my eye on the Miami/ Miami Beach/ Kendall MSA to determine if I would enter right now or in the near future. Again, this is NOT a Go/ No Go metric; this is simply a metric that, when taken in conjunction with all other metrics, will help me make a wiser, more informed decision.
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.
Overall, cash flow is pretty tight when comparing purchase prices to the average collected rent in Florida MSAs. I do want to highlight a few MSAs that are of note. Next month, I will have at least three months of data to track, so I will provide the tracking sheet so that you can monitor the specifics of the MSAs. Those MSAs of note this month are the Tallahassee, Florida MSA, which went from a national strength of the 28th percentile up to the 33rd percentile; increasing by 15.15%. A few MSAs have not faired well in relation to national rankings for cash-flowing MSAs. Gainesville Florida, fell from the 42nd percentile to the 36th national percentile, a drop by -16.67%. The Orland/ Kissimmee/ Sanford MSA fell from the national 38th percentile to within the 30th percentile, a drop of -26.67%. Also of note, a historically strong MSA during the past four years for cashflow, Lakeland/ Winter Haven Florida, fell from the national 47th percentile to land within the 40th percentile, a drop of -17.50%.
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 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.
Honestly, there is not that much movement within the Florida MSAs as it pertains to the national strength ranking of property values. Florida shot to the moon over the past four to five years, and now things must level out to find their equilibrium. Generally speaking, most of Florida is in the very bottom percentile, which you can see here. Almost every MSA is pink, with a few outliers. Orlando/ Kissimmee MSA saw the biggest drop in national strength, dropping -14.29% from the bottom 12th percentile to the bottom 7th percentile. Another MSA whose drop is quite unexpected is Lakeland/ Winter Haven MSA. This MSA fell from the 26th national percentile (not that great considering) to the 20th percentile, a -17.74% drop.
This wraps up my July 2024 Florida Market Update Report. I trust that you find these valuable and that the data presented is helping you make wiser, more informed decisions. If I can help you, please don't hesitate to reach out. If you would like to receive these reports as well as additional real estate investment education, then please subscribe to my Investor Club! It’s free, and you will find tons of great content.
With Honor,
Edwin D Epperson III,
Manager& CEO
- Soli Deo Gloria
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