Jacksonville Economy Showed Hopeful Signs in 2010

Economic Trends for 2010

Jacksonville’s economy showed hopeful signs in 2010, but remained mired in real estate value losses and double-digit unemployment.

The result was a truly mixed picture showing some economic trends improving, while others continue patterns set in 2008 and 2009.

“We’re in a very slow recovery,” said Paul Mason, University of North Florida economist.

It could be years before unemployment returns to a new “normal” — and that new normal could be closer to 7 percent, rather than the previous 4 percent jobless rate, Mason said. And even accomplishing that could take four years of healthy growth at 5 percent or better, he said.

Unemployment sank but rose again in 2010, but always remaining at levels higher than 10 percent. Jacksonville’s recovery has been slower than the national average, because the local economy is more reliant on real estate and tourism to begin with, Mason said.

According to the Florida Association of Realtors and the Northeast Florida Association of Realtors, home and condominium sales rose mid-year — perhaps in response to bargain prices — but both fell again toward the end of the year.

Foreclosure filings and mailings mirrored 2009 and then fell late in 2010. According to data from real estate aggregator RealtyTrac and the Duval County Clerk of Court, that drop could have been because financial companies froze foreclosure proceedings in the light of evidence many had been processed improperly.

The story in new home construction has remained much the same since June 2008, when monthly starts fell below 500. After a tepid increase early in 2010, new home starts in the area fell below a monthly volume of 200 late in the year, according to data from the Northeast Florida Builders Association.

There was good news for the year’s first three quarters in commercial real estate: Inventories fell and vacancy percentages remained static. And although industrial real estate inventory rose, vacancies remained flat — about 12 percent.

A rosy spot amid the lackluster economic news was tourism. Hotel occupancies rose from 2009 according to data from Visit Jacksonville, and area tourism and the Florida Department of Revenue reported that tourism and recreation spending picked up in 2010 from low points at the end of 2009.

Monthly hotel and motel occupancy rates from February to November showed increases from the year before, according to Visit Jacksonville data: up by 7 percent in June and July, 6 percent in September and October, and 5 percent in March, May, June and November .

Business travel increased as did personal vacations as people, cooped up in 2009, hit the road in 2010, said Visit Jacksonville spokeswoman Lyndsay Rossman.

When it came to local spending, 2010 didn’t offer a lot to get excited about, according to the Florida Department of Revenue. Regional sales of automobiles and auto accessories remained on par with low levels set in 2009 and well below spending levels from 2002 to 2007.

Like auto sales, purchases of consumer durables — items such as home appliances and other goods expected to last at least several years — were much the same or slightly lower than sales in 2009, which themselves marked the lowest point of the decade for that indicator. Sales of products for shorter-term use remained flat and largely unchanged since 2008.

In overall economic activity, however, the Florida Department of Revenue noted, 2010 reflected a slight improvement over 2009 based on overall sales in all measured categories for the Jacksonville metro area.

Looking ahead to 2011, there may be more room to fall before the real estate market hits its bottom and rebounds. Stan Humphries, economist for Zillow, blogged last week that the bottom won’t come until the second or third quarter of 2011 and that home values will fall another 5 to 7 percent nationally.

Recent performance would suggest that the Jacksonville area will follow a similar trend.

“We’ll experience a very long, protracted bottom before home value appreciation returns to historically normal rates,” he wrote.

In 2010, Jacksonville area homes lost some $7.9 million in value to sagging market prices, according to Zillow.

Even so, that was slightly better than the $8 million in value lost the year before.

Source: Northeast Florida Association of Realtors, Florida-Times Union and Zillow.com

Northeast Florida Sales Volumes Up, But Prices Still Down

The third quarter in sales of single-family and condominiums went up in Northeast Florida.

Sales prices were stagnant or continued to drop in all but a handful of ZIP codes in Clay, Duval, Nassau and St. Johns counties, while sales volumes picked up – by 20 percent or more in 14 ZIP codes.

Volumes rose sharply in two Westside ZIP codes and one in the downtown Jacksonville core. In Baldwin’s rural 32234 ZIP, sales rose by 62.5 percent; in the adjacent 32220 ZIP, they rose by 61.9 percent; and in downtown’s 32202 they rose by a sizable 77.8 percent.

While those increases are an encouraging sign – particularly for downtown’s condominium market – prices dipped during the quarter. In the downtown 32202 ZIP, median prices fell by 15 percent. In the two Westside ZIP codes with a volume increase, prices dipped as well, by 11.4 percent in 32234 and by 16.9 percent in 32220.

That isn’t to say median prices fell in every ZIP code in the Jacksonville area during the third quarter. Median prices rose by 33.7 percent in Arlington’s 32211 ZIP; prices also took an upward turn in the Northside’s 32254, by 27.3 percent, and in St. Johns County’s 32095, by 27.9 percent. There also were median price increases in Callahan’s 32011 in Nassau County, seeing a 14.7 percent increase; in the 32223 ZIP code on the St. Johns River in Mandarin, with a 16.9 percent increase; and in the St. Nicholas-centered Southside 32207 ZIP code, where median prices rose by 18.8 percent.

Median sales price losses of between 20 and 40 percent in the third quarter were concentrated in a ring of suburban and urban ZIP codes around the city’s center. They included Mandarin’s 32257; San Jose’s 32217; Orange Park’s 32073 and Argyle’s 32244; 32205, 32209 and 32206 on the Northside; and 32216 and 32246 in East Arlington and Southside.

Farther-flung ZIP codes experienced softer median value drops in the third quarter – with the exception of a 24.1 percent drop in Nassau County’s 32034, which includes Amelia Island and Fernandina Beach; and 32656 in Clay County, where median sales prices fell by 43.2 percent.

Qtr3 Median Sales Price and Sales Volume in Northeast Florida

Source: The Florida Times-Union

Pending Home Sales Jumped 10.4 Percent in October

Pending home sales jumped 10.4 percent in October, showing another positive uptrend since bottoming in June, according to the National Association of Realtors.

The Pending Home Sales Index (PHSI), a forward-looking indicator, rose to 89.3 based on contracts signed in October from 80.9 in September. The index remains 20.5 percent below a surge to a cyclical peak of 112.4 in October 2009, which was the highest level since May 2006 when it hit 112.6.

The latest surge also reflects market strength, since buyers had an additional push to close quickly in October 2009 to qualify for one version of the first-time homebuyer tax credit that expired in November. The data reflects contracts and not closings, which normally occur with a lag time of one or two months.

The data also surprised economists who had expected a decline in pending home sales given current troubles within the housing market. However, Lawrence Yun, NAR chief economist, says excellent housing affordability conditions drew in more homebuyers.

“It is welcoming to see a solid double-digit percentage gain, but activity needs to improve further to reach healthy, sustainable levels,” Yun says. “The housing market clearly is in a recovery phase and will be uneven at times, but the improving job market and consequential boost to household formation will help the recovery process going into 2011. More importantly, a return to more normal loan underwriting standards and removal of unnecessary underwriting fees for very low risk borrowers is needed and could quickly help in the housing and economic recovery.”

Recent loan performance data from Fannie Mae and Freddie Mac clearly demonstrates very low default rates on recently originated mortgages – much lower that the vintages of 2002 and 2003 before the housing boom.

The PHSI in the Northeast jumped 19.6 percent to 71.3 in October but is 27.3 percent below the tax credit peak in October 2009. In the Midwest, the index surged 27.3 percent in October to 81.7 but is 24.8 percent below a year ago.

Pending home sales in the South rose 7.1 percent to an index of 93.8 but are 18.4 percent below October 2009. In the West, the index slipped 0.4 percent to 104.3 and is 15.6 percent below a year ago.

Near term, Yun expects home sales to continue climbing from their cyclical low this past summer.

“Even so, we now have some consumer concerns regarding the mortgage interest deduction, an important component in housing affordability,” Yun says.

Source: National Association of Realtors