For anyone living under a rock for the past decade, the real estate market took a decided downturn in 2008. If you were living under a rock at the time (and there was no mortgage on your rock), you were actually better off than most homeowners. Residential property values, which had risen meteorically to unsustainable heights in the preceding 10 to 15 years, took an unprecedented nosedive.
According to economists, the housing crisis had many causes: low mortgage interest rates coupled with increased family income, relaxed screening standards for borrowers, the increased issuance of sub-prime loans, outright mortgage fraud, an influx of foreign investors into the American mortgage market—and the list goes on. Whatever the cause, it hit homeowners hard, decreasing property values substantially and starting a chain reaction that nearly destroyed our entire financial system.
Homeowners—and the entire American financial system—have spent the last decade recovering.
Locally, property values have been slowly edging their way back up, and the housing market that was glutted with foreclosed homes has been showing signs of renewed life. This means more new-home construction, an increased need for home building materials and more labor to build new homes. That, in turn, means more money circulating in the system, enabling more people to afford homes. This increase in home sales (both new and established homes) means increased lending for home mortgages… and that is how the system is supposed to work.
Does this mean we have weathered the storm? Will “how I survived the crash of’08” be something we tell our grandchildren, much like “I used to walk two miles to school in the snow” was told to us by our grandparents? Exactly where do we stand in the local housing market, and is our future as rosy as it seems?
According to Dave Harden, executive officer of the Marion County Building Industry Association, things are looking great for area builders.
“From a builder’s viewpoint, we look at the housing industry a little differently than the real estate market does,” Harden says. “They look at it from the position of how many homes are sold; we look at it from the perspective of how many new homes are being built… and from our vantage point things are looking very good. If you are a builder and the area is full of foreclosed homes that can be bought at a much cheaper price than a new one can be built, then it isn’t a good market. And for five or six years that is how the market was in Ocala—but those times have passed for us.
“The number of quality foreclosures on the market that are available to prospective homeowners has dwindled, and because of increased demand, the prices on those homes have risen to the point that new home construction is once again a very, very good option. And with new home construction, the homeowner knows exactly what they are getting and can build exactly where they want to live. What is also great is the fact that building a new home today is in some ways even cheaper than in the past because of technological advances and some of the new materials in use.”
According to numbers posted on the association’s website, there were 497 new-home permits issued in 2013 valued at almost $93 million. Those numbers have been steadily on the rise, and in 2015, 921 new home permits were issued, valued at almost $167 million—and, according to Harden, those numbers are expected to keep increasing.
“Ocala is full of growing families, and because this is such a great area to live, once the kids are grown they stay here and build a home of their own,” he says. “And in our business, it is well known that commercial growth follows closely behind residential growth. What makes our future even brighter is the fact that this area has been designated by national economists as a key future employment area. We are ideally located near the Florida Turnpike and Interstate 75, it is just a short drive to Interstate 95 and we are also near the ports in Tampa and Jacksonville. With those things in our favor, family growth on the rise and this being such a great place to live, we see nothing ahead but blue skies for the building industry in Ocala.”
“We are well on our way back from the housing market drop in 2008. We are seeing the real estate market stabilize somewhat, and we are in a well-balanced market, which is good for everyone,” says Randy Alvord, recent past-president of the Ocala/Marion County Association of Realtors (OMCAR). “We are at a five-and-one-half to six month supply in our area, and that is a good thing.”
According to Alvord, six month’s supply means that at the current pace of property sales, it would take approximately six months to sell the current inventory on the market today. According to the National Association of Realtors, this number is an indicator of whether it is a “buyer’s” or “seller’s” market.
“We consider anything under six months to be a seller’s market and anything over six to be a buyer’s market, and balance shows stability… and stability is good,” he says. “There are homes to be bought, and there are buyers out there, so the future is looking very good.”
Alvord says that with lower fuel prices and the growing economy, local residents have more disposable income available for home purchases. With construction of new homes increasing and homes available on the market, everything is in place for future growth in home sales.
He echoes Harden’s point that the number of foreclosures available on the market is dwindling, and this fact is helping to restore a sense of normalcy.
“It isn’t as easy to find the $30,000 foreclosures that were so prevalent a few years ago, and most of the foreclosures on the market today are more high end. This is good for the building industry and good for the economy as a whole,” he says.
According to OMCAR’s website, there were 3,112 property listings on the market in December 2015 (the last compiled data available) and 503 properties closed (a number down very slightly from the previous December). On the whole, OMCAR stats over the last four years show a slow but steady increase in properties sold and a dramatic decline in properties listed for sale. This is indicative of the market stabilizing, creating a more balanced market and setting the stage for a full recovery.
“This area is going to continue to grow,” says Alvord. “We are seeing a growth in commercial business, such as the new FedEx hub coming to Ocala, and this will accompany residential growth also. I would say the future looks quite bright for the real estate market in Ocala and the entire area.”
If things are looking this good for area builders and Realtors, how are things looking for the area financial institutions that will provide the much-needed cash for home sales?
“Things are looking very good for us also,” says Community Bank and Trust Vice President Jo Lukas. “Over the last five years or so, we have seen a slow and steady increase in the number of property mortgages we provide. We are receiving a lot more phone calls and applications.”
Many economists think that shortcomings in the financial aspect of the housing market pertaining to mortgages was the primary cause of the meltdown of ’08. Lukas says changes have been made in the industry to ensure that such a problem doesn’t happen again.
“The rules and regulations concerning home loans are much more stringent now, especially when it comes to the ability to repay a home loan based on income,” she says. “Regulators have put the burden on the banks to ensure that borrowers qualify and have the ability to repay that loan with cash derived from income and not just use equity in the home as a possible repayment source. Along with this, borrowers must also meet strict guidelines concerning their debt-to-income ratio. Safeguards such as this should help protect homeowners and the economy in the future.”
How does that future look for the financial institutions?
“I see nothing but improvement ahead,” Lukas says. “Building is on the increase, there aren’t as many foreclosures or short sales and interest rates are remaining low. It is a great time for prospective homeowners to come in and apply for a loan. A lot of people thought that the Fed’s short-term rate hike would raise interest rates on home loans, but we are actually seeing them drop a little bit. Property values are starting to go up again, so, yes, it’s a great time to buy a home.”