Understanding the influences of Volusia County’s
housing market
By RICK MICHAEL
Director, Volusia County
Department of Economic Development
There’s a lot of talk and
concern these days about the area’s housing industry and how it has
declined over the past year. We need to ask: Is this a real decline
or is the market simply adjusting to early levels of performance?
Residential permitting activity
was off by 48 percent during the first quarter of 2007 as compared
to the period a year ago and more than 67 percent lower than the
same period in 2005. In 2005, Volusia County’s housing market
experienced an unprecedented number of new residential permits for
single family homes and condominiums. A record 6,850 new permits
were issued making 2005 the most robust housing market ever in our
community of just over 507,000 residents.
Everyone involved in the local
housing boom benefited from the push to build new homes, provide
mortgages, inspection services, landscaping, real estate sales and
closing services. Even retailers benefited from real and anticipated
increased furniture, home furnishing and fixture sales.
The truth is 2005 was a very
unique year, one that was responding to the continued demand for new
single family homes needed annually for families moving to Volusia
County. An additional factor was that our market also was being
influenced by investors who discovered that local real estate was
under valued and an excellent opportunity to cash in on what was
perceived by many as a hot market for real estate.
National publications such as
INC and Money Magazine touted the greater Daytona Beach area as a
hot real estate market with opportunities to gain double digit
appreciation and profits. This media attention also found its way
into stories in the New York Times and the Wall Street Journal.
Many investors were being
introduced to our market for the first time by these stories. An
increased marketing initiative by many of our condominium
development companies and homebuilders helped to strengthen this
perception by attracting millions of dollars in new sales.
Understanding today’s area
housing market requires a review of the area’s construction activity
for the past five years. In 2002, the number of new residential
permits issued by local permitting authorities was about 4,800 for
the year. This number increased slowly in 2003 to about 5,600 and by
2004 leveled off at 5,509. The increasing demand for new homes
stimulated the demand for new construction. As the market adjusted
to this demand, so did the prices of existing home sales.
The county’s need for new
single family residential housing can be measured by two primary
market factors. The most important is the continued attractiveness
of the Volusia County market as a new home to a growing number of
families moving here from other areas of the United States. In 2002,
more than 24,000 new residents moved to Volusia County. This number
has continued to grow each year since 2002 and will
top 29,000 new residents here this year.
The second primary factor
behind new residential construction is the growing need for
multi-family alternative housing.
This market is being driven by
the aging of our existing population and is represented largely by
young first-time buyers or renters and by a growing need for
workforce alternative housing opportunities.
While new residents come from
all over the United States, the vast majority come from other
Florida counties. Since 2002, more than 30,000 new residents have
moved to Volusia County from Seminole and Orange counties,
accounting for an annual average of about 22 percent of the county’s
overall new residents. Similarly, we also are experiencing a growing
number of new residents relocating from southeast Florida
particularly from the Palm Beach and Fort Lauderdale area.
This in-migration influences
the continued strength of the new and the existing housing market.
While we expect about 29,000
new residents to move to Volusia County in 2007, we will also
experience an out-migration of approximately 20,000 residents.
This exchange of local
population will continue to create a need for existing home sales
but also will require homebuilders to construct new homes to
accommodate the expected net gain of about 9,000 new residents.
The Volusia County Department
of Economic Development tracks new permitting activity for the 16
cities and the unincorporated area of the county and has done so
since 2003 as a means of gauging the impacts of new construction on
our market. In a similar review, the department also tracks
migration trends of Volusia County’s population to determine
potential shifts or trends that can have many direct and indirect
impacts on government services or policies.
Currently, inventories of new
homes are up relieving some of the need for new construction and
explaining the softer than expected number of new residential home
permits issued in the first two quarters of 2007. However, area
homebuilders can expect to construct between 2,500 and 2,800 new
homes this year.
Similarly, we expect that much of the current inventory will be
absorbed this year encouraging new home construction to return to
its normal annual level of around 4,000 new residential units in
2008.
It should be
clear that 2005 was a robust year for new residential construction
and it should not be seen as a benchmark for normal or expected
activity.
What we are
seeing today is an adjustment of the market that is returning to the
annual trends that existed prior to 2005.
