When it comes to investing in real estate, we all know that the location is extremely important. But the question is: What makes a location suitable for this type of investment?
Generally, the best places for real estate investment have three main characteristics: an increase in the number of jobs, a growing population and affordable prices. When you find a market that has all three, you'll probably be able to find good opportunities for investment. And within the United States, there is a city that possesses all these qualities and has been showing its great tourist and economic potential in recent years. It is Orlandowhich has been voted the number one city in the world for two consecutive years in the "Best Places to Buy a Home" category.
Job market
Speaking of jobsOrlando has been showing strong numbers in this regard. The state of Florida has clearly stood out in recent years, with growth in the labor market above the national average. And in the state of Florida, Orlando was the city that successively created the larger number of jobs. From 2016 to 2019, Orlando created 128,600 jobs, with a growth of 11% over that period. In addition, it is still projected to grow by 3,44% per year over the next 10 years. Naturally, all these factors have contributed to the decrease in unemployment rate of the city, which was 2.5% before the pandemic, i.e. below the national average of 3.5%.
With the pandemic, Orlando has suffered a greater impact on the unemployment rate compared to the average, as it is a city where the tourism and travel industries are very strong. However, as people get vaccinated and things return to normal, we expect the unemployment rate to return to levels close to what they were before.
There is also a perception wrong that Orlando is a city almost entirely focused on tourism. From this perspective, if we look at the data for that city, we can see that this perception is not true. The graph shows the percentages of each sector of Orlando's economy so that we can identify the participation of each sector:
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Looking at official information, it's clear that Orlando is much more than just tourism, being a well-developed city in many sectors.
Population growth
O population growth Orlando showed astonishing numbers, growing 252% more fast than the national average over the last eight years. And with all the new jobs that are to come, the tendency is for this to continue over the next few years.
In addition to people who are looking for new job opportunities, many retirees are choosing Orlando as their housing option. This is no wonder, as Orlando has various attractionsFlorida has a lot to offer, such as low property taxes, the fact that the state does not charge income tax, and a very pleasant climate compared to the rest of the United States.
The president of the Florida Chamber of Commerce said in early January 2020:
Property pricing
An important consideration is accessibility the more expensive the investment, the less people will be able to afford to buy their own home. With that said, real estate in Orlando is still priced at very affordable values when compared to some metropolitan centers. According to the "Zillow Home Value Index", the average price of a home in Orlando today is $277,218. If we compare this to a city like New York, for example, we're talking about a big difference, as the average price of real estate in that city is around $657,637.
How the US real estate sector is behaving during COVID?
To answer this question, we analyzed some economic indices that measure the performance of the real estate market.
Existing Home Sales
The index that measures existing home sales is published every month by the National Association of Realtors, and shows the number of existing homes sold per month, broken down by region. With the information already available, we can see the recovery of this sector after the most critical period of the pandemic, and it is even stronger at the moment.
Looking at the graph above, which was taken from the website of the National Association of Realtors, we can clearly see how the level of home sales fell during the months of March, April and May, a period when there was still a lot of uncertainty due to the pandemic. However, we can also see how quickly it recovered, because of the high demand for homes that followed in the following months.
Lawrence Yun, chief economist for the National Association of Realtors, commented on the new data: "Home sales continue to climb in the first month of the year, as buyers quickly snap up almost every new listing that hits the market." In the South region, which is where Orlando is located, we can see this well, where annualized sales reached 2,940,000 in the month of January. This region is extremely important for the US real estate market, as it corresponds to the area where the largest number of existing homes are sold (today, the South region is responsible for 44% of all sales).
Real Estate Market Index (NAHB/Wells Fargo Housing Market Index)
This index shows us the future outlook for the single-family housing market. To do this, they ask members of the home builders' association to see how the market is doing and what they expect for the future. According to the answers, they arrive at a number from 0 to 100. 0 means that everyone believes that market conditions are not good, and 100 means that everyone believes that market conditions are good. Compared to the index analyzed earlier, one advantage of this one is that we have information from the most recent months. The table below was taken directly from the website of the National Association of Home Builders:
Analyzing the information above, we can clearly see how the market became much more pessimistic in all regions from April onwards due to the uncertainties of the moment. However, it didn't take long for the scenario to change, showing a very heated real estate market.
All of these factors bring optimism to those who have invested or want to invest in real estate in Orlando, and for now in the long term we still hope that the positive expectations will come true.
Did you like the article? Keep an eye on our blog! Looking to live or invest in real estate in Florida? See the list of houses for sale in Florida we've selected for you!
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