When it comes to investing in real estate, we all know that location is extremely important. But the question is: What makes a location suitable for this kind 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 will probably be able to find good ones. opportunities of investment. And within the United States, there is one city that possesses all those qualities and has been showing its great tourist and economic potential in recent years. It is Orlandowhich has been voted the #1 city in the world in the "Best Places to Buy a Home" category for two years running.
Speaking of opportunity jobsOrlando is showing strong numbers in this regard. The state of Florida has clearly stood out in recent years, with a growing labor market above the national average. And in the State of Florida, Orlando was the city that successively created the largest 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 at a projected annual growth of 3,44% per year for the next 10 years. Naturally, all of these factors have contributed to the decrease in unemployment rate of the city, which was 2.5% before the pandemic, that is, below the national average of 3.5%.
With the pandemic, Orlando has had a greater impact on the unemployment rate when 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 it was before.
There is also a perception mistaken that Orlando is a city almost entirely focused on tourism. In this perspective, if we look at the data for that city, we can see that the perception is not confirmed. The chart shows us the percentages of each sector of Orlando's economy so that the participation of each sector can be identified:
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Looking at official information it is clear that Orlando is much more than just tourism, being a well-developed city in many sectors.
O population growth of Orlando showed astounding numbers, growing 252% more fast than the national average in the last eight years. And with all the new jobs that are to come, the tendency is that this will continue in the coming years.
In addition to people who are looking for new job opportunities, many retirees are choosing Orlando as a place to live. No wonder, since Orlando has many attractionsThe State of Florida does not charge income tax, and has 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:
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Real Estate Pricing
An important consideration is the accessibility of a property, since the more expensive the investment, the less people will be able to go ahead with the purchase of 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 are talking about a pretty big difference, as the average home prices in that city are around $657.637.
How the US real estate sector is behaving during COVID?
To answer this question, we analyze some economic indexes 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 amount of existing homes sold per month, divided 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 now.
By looking at the chart above, which was taken from the National Association of Realtors website, we can clearly see how the level of home sales dropped during the months of March, April and May, a period where there was still a lot of uncertainty due to the pandemic. However, we can also see how quickly the recovery was, because of the high demand for homes that followed in the following months.
Lawrence Yun, chief economist for the National Association of Realtors, commented in regards to the new data, "home sales continue to climb in the first month of the year as buyers quickly snatch up nearly every new listing that comes on the market." In the Southern region, which is where Orlando is located, we can see this well, where annualized sales came in at 2,940,000 for the month of January. This region is extremely important for the US real estate market, since 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 what the future outlook is for the single-family home market. To do this, they ask members of the homebuilders' association to see how the market is doing and what their expectations are 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 previously analyzed index, one advantage of this one is that we have information from the most recent months. The table below is 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 as of April due to the uncertainties of the moment. However, it did not take long for the scenario to change, showing a very heated real estate market.
All these factors bring optimism to those who have invested or want to invest in real estate in Orlando, and for the time being in the long term we still expect the positive expectations to be realized.