Florida Market Update - March 24’
Blue Bay Fund I
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Investors, I trust your March is starting off to a great cadence. Spring break is right around the corner for many of our children, and in FL, this marks the beginning of the vacationing crowd and the preparation for many snowbirds to begin getting ready to head back North. This past month Carolina, my wife and I had a great Valentines day meal, we went to Eddie V's here in Tampa, and enjoyed live jazz and a great seafood tower. We do enjoy a great bottle of red wines, and Sequoia Grove, a Napa Valley wine is definitely a great pour. We would highly recommend that you try this bottle if you have not yet.
Last month, I also had the distinct privilege to attend a Mastermind with other fund managers in Ft. Lauderdale, Miami, before the ALC (American Lending Conference) hosted by Matt Rosen. If you are not connected with him on LinkedIn, you should definitely consider it, especially if you are in the Fund Management Space or looking to attend a leading lending industry conference. The Mastermind I attended was hosted by Beth Jonson from Flynn Family Lending, the L2L Mastermind. It seems that there is a plan to host a mastermind prior to industry-level conferences, so if you are a new or emerging fund manager, then I would HIGHLY recommend that you reach out to Beth Johnson on LinkedIn as well and inquire about upcoming dates.
As we enter into March and wrap up our first quarter of 2024, how are we fairing? I do want to remind you the data we are able to pull is a full 2 months trailing. This means the most recent complete data is two months in arrears. Due to this delay, I am only able to compare the most recently completed month to the most recently completed Quarter. So with that little disclosure laid forth, here are some thoughts and data points on data aggregated from the MLS as well the over all market for FL.
MARCH 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.
Last month, when I compared January 24 to December 24, there was a "blip" in the monthly inventory for Punta Gorda and Naples. Monthly inventory shot up to almost 7.5 months respectively. That came back down in January, but we are continuing to see a rise in Monthly inventory across the state. Punta Gorda, Naples/ Marco Island, and the Cape Coral/Fort Myers MSA's are all above four months of inventory, along with Sebastian Beach MSA. Investors need to know that your hold time, especially once the project is complete, could be much longer than expected. Be sure your lender is willing to offer an extension, and if not, begin looking for a refinance for those short-term loans.
For Blue Bay Fund I investors know that the fund is closely watching these metrics to adjust the terms offered to our debt products to investors. We want to be in the best position possible to be flexible yet pivot should the economy take off or begin a severe correction. Currently, capital partners in the Blue Bay Fund I are enjoying a solid 7.5 - 9% return annualized on 1st position loans secured to investment properties. If you want your investment capital SECURED and backed by real estate paying steady monthly returns, then I would welcome a phone call to discuss our customizable fund and how our unique and proven approach to diversification can help shore up your retirement and investment accounts heading into Q3 and Q4 of 2024 and beyond.
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.
In February, Days On Market, "DOM," has decreased across the board. The Tallahassee MSA is in the 45 or less DOM category. For the most part, DOM is hovering around 60 as of February. Remember, we are only able to look at the most recent data, which is still two months in arrears, so the actual data on the ground right now may be longer or shorter for the current DOM. Florida is known for slowing market movement during the winter months. As we enter spring and soon summer, properties may very well begin to fly off the shelf. This could cause the market inventory (previous section) to decrease as more and more properties are bought and sold. We will be keeping an eye on the average DOM
in the coming months and have a more historically accurate approach by late May or early June. My caution to real estate investors is to continue to be slightly bearish in your estimations for listing timelines and overall hold timelines. It’s best to set expectations early on. We still have several national and regional headwinds to face this year, including inflation and the presidential election cycle. These, among other factors, could negatively or positively impact FL residents and relocatees.
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.
Since last month’s report, which displayed January's data, not much has changed. All MSAs are holding their values from January, with an overall slight downtick of approximately $10K for the entire state’s average. I would not see this as any real key indicator, except that property values have plateaued, which is a good thing for home buyers. For our real estate borrowers, you will need to take this into consideration when calculating after-repair value appreciation. The market is not the same as it was back in 21-22'. Perceived value by the end homebuyer must be real and meaningful. Simply slapping paint, new carpet, and countertops will not get you a massive appreciation for the property.
FLORIDA SINGLE-FAMILY RESIDENCE
ANNUAL HOME PRICE APPRECIATION
ANNUAL HOME PRICE APPRECIATION
This data is based on spot data for a specific time period and market. This is the 1-year percent change from the last quarter of the corresponding year being reported compared to that same quarter one year prior in home value for a typical house in this market. Higher Scores (towards RED colors) indicate higher appreciation rates. 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.
Here, we can see what the last quarter in 2021, 2022 & 2023 reflected in home price appreciation. In reality, FL is still on the high side. Nationally speaking, the average home appreciation in the United States has been consistently between 4 - 5% over eight decades. With that in mind, even if the heat map reflected mostly light blue to dark green, we would technically still be average historically. The problem with protracted appreciation is that humans have very short-term memories. Seeing where FL has been, even if over a longer period than I typically write about, is a good practice.
A few MSA's of note. The Naples/ Marco Island, Miami/Miami Beach/ Kendall MSA's are (on an annual basis) holding to very healthy appreciations, but this is based on an annual metric. On the other side of the spectrum, we have Pensacola/ Ferry Pass/ Brent, the Crestview/ Fort Walton Beach/ Destin, and The Villages MSA's lagging. In all reality, these MSAs have been more tempered historically in their appreciation, yet you can still see that even those MSAs held historic appreciation in 2021. We will be keeping these MSA's on our radar.
FLORIDA SINGLE-FAMILY RESIDENCE
QUARTERLY HOME PRICE APPRECIATION
QUARTERLY HOME PRICE APPRECIATION
This is the change in home prices from 3 months earlier and then annualized (i.e. - multiplied four) to get an annual equivalent appreciation rate.
Quarterly comparisons have more 'noise' in them and will tend to bounce around a lot more than annual comparisons. However, quarterly data can also spot market reversals and changes quicker because it only looks back 3 months, instead of a year.
The Heat Map Key to the left indicates what the corresponding MSA colors mean. Red equals a very high appreciation %, >15%, while pink equals a very low depreciation %, <-6%. This is the change in home prices from 3 months earlier and then annualized (i.e. - multiplied four) to get an annual equivalent appreciation rate. These heat maps have more "noise" in the data and are not necessarily a reliable marker for long-term trends. However, they are excellent tools for viewing quick shifts in the MSA that may not appear in annual metrics.
As you can see, the quarterly appreciation data varies wildly. Also, Q4 2023 data is compared to Q3, and Q3 is compared to Q2. I would like to point out how much some of the MSA's swung from the end of Q2 to the end of Q4. By clicking on the photos above, you will see what that quarterly appreciation was for MSAs I would like to highlight. The variances are DRASTIC! Just remember this is a measurement of just the past quarter, not a true annualized return (Panama City is going to be a doozy!). Some of you may be wondering, “So how in the world am I supposed to use this information? This scares the living daylights outta me!” I’m glad you asked. It’s important not to let these drastic “swings” in appreciation stop you or tell you investing in real estate is not optimal. It is all this simply should tell you, based on a three-quarter trend (previous nine months), how you should be adjusting your offers to purchase and your expectations of selling. We currently have a loan against a beach renovation in Panama City. I will tell you right now that the investor who bought that property and is closing in on his ability to sell that asset will NOT be able to sell it for the proposed ARV he is expecting. Now I underwrote that loan very conservatively, we are in a 1st position less than $350K, on a projected ARV of $650K, from our appraisal. Based on the data from the summer of 2023, he thinks he will be able to get close to $800K on the project. I’m letting you know right now that I don’t think he will be able to get more than $750K. But this…. 1st position lending is why I strongly encourage capital investors, those of you looking to put money to work passively in real estate, that you should have a healthy portion of your real estate investment capital invested in Debt… and more of it should be moving over from equity to debt as the markets are changing, from good to bad.
This wraps up my April Florida Market Report. I trust you enjoyed your time with your family during the Spring Break. If you found this monthly Florida Market Report valuable, please share it on your social media and with your friends. Life is always better with friends! I’m looking forward to providing Blue Bay Fund updates and what the future holds for those in my investor club!
With Honor,
Edwin D Epperson III,
Manager& CEO
- Soli Deo Gloria
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