In part 3 of the Southwest Florida 2020 Market Report we’ll dive deeper into the changes impacting the local economic and social changes impacting Southwest Florida’s Real Estate market.
The Southwest Florida Big Picture Look Like?
Minimum Wage Increase: Florida voters approved a gradual minimum-wage increase to $15 per hour phased in through Sept. 30, 2026. No matter what your opinion is of this politically and economically, we don’t expect it to have any kind of meaningful impact on the economy anytime soon (because of the nature of the increase). However, longer-term it might be something to keep an eye on in terms of small business growth, which historically has been at the center of this areas’ economic growth.
Unemployment: Since April lows, 12.1 million jobs have been recovered with another 10 million jobs needed to return to pre-pandemic levels. In October employment increased by 906,000, mostly driven by the service providing sector (worst hit by pandemic) with gains in leisure and hospitality (+271,000), professional and business services (+208,000) and retail trade (+104,000). As many locals are experiencing, we’re seeing a ton of normal snow-bird activity and things have mostly returned to normal at restaurants and other retail establishments.
International Buyers: A somewhat surprising result of the pandemic has been the reduction in the share of international buyers. Although this previously hot segment of the Florida Real Estate market has dipped, it’s being eclipsed many times over by domestic buyers. I expect things to pick back up shortly so there will be pent up demand for this audience within the next year.
Real Estate Issues & Potential Concerns:
Builder Concerns: The biggest concerns for builders heading into 2021 likely will be lot & labor shortages, land prices, new-home affordability, the aftermath of the election, and building material costs. About 57% of the builders foresee supply disruptions and 29% predict labor shortages that will continue to press on timelines. Although I hope some of these “issues” are actually opportunities in disguise, as this scenario will allow for a US manufacturing uptick, along with new opportunities for trade schools (helping those out of work regain employment). Southwest Florida does seem to be better isolated than many areas because of our unique position in the building development world, as well as area initiatives to increase resources to trade schools.
Investment Market (Commercial): Commercial investment spending remains depressed through the double digits. If there was a true horror story to come out of the political, monetary, and health issues we’ve seen this year commercial real estate is it. Unfortunately, we do see this trend continuing until a time where the general public feels safe again.
Real Estate Related Items to Watch:
Housing-Related Taxes: With the election still being uncertain at this point – one can only speculate on what’s to come. However, if placed in office Biden plans to roll back Trump’s tax cuts, including mortgage interest and local and state taxes deductions. His plan also states that his overall $640 billion investment in housing will be “paid for by raising taxes on corporations and large financial institutions” it’s currently unclear what this means, but it’s bound to affect small businesses the most, so they may need to button things up even tighter than they are already.
Biden’s $15,000 First-Time Homebuyer Tax Credit: Before any tax credit would be put in place, it must first be hashed out in a bill passed by Congress.
1031 Exchanges: Biden has proposed abolishing 1031 “like-kind” exchanges with annual incomes above $400,000 which is a much favored benefit within the industry and a strategy very relevant here in SWFL.
Protect Independent Contractor Status: Most real estate agents are independent contractors rather than employees at their brokerages, which does affect their tax status and there have been recent challenges to that classification on the federal and state levels. Many experts feel this will be a tough one to overcome but nonetheless something to keep an eye on.