2008 Forecast

The Real Estate market has been on a wild ride over the past several years. With the huge gains that were experienced for several years it is only natural that the market has now readjusted. Although the readjustment has not been kind to many people, it will be an important factor in the future health of our Real Estate market. In 2006 we had a 45% decrease in sales compared to 2005. Many of the so called economists predicted that the sales would continue to slide for years to come. Not so fast, 2007 sales were up 7.5% over those of 2006. I can only see this as a positive sign of what is to come in 2008.

Will we have another increase in 2008? I believe the answer is . . . . absolutely so! Many investors and those looking to purchase second homes have been patiently waiting on the sidelines for the past 5 years. People are beginning to see the deals available and buy them up now. There are many properties priced below the cost to rebuild and many back to pre-boom prices. This is just another indicator that we are near the bottom of the market. Many foreign investors are working with local developers to buy up stagnant projects, just another key sign that we are close.

Despite all of the positive signs that the market has leveled off, it will still take time to eat up the outstanding inventory. I think we are looking at two to three years before our inventory is back in line with the sales. The day of the flip is over for now, but this will continue to be a great investment for the future. I tell of my clients that if they are looking for an investment to hang on to for the next five years, the time to buy is now. You can't beat everything we have to offer in this area and we are still very undervalued compared to other regions of Florida. Look for sales to be stronger than we saw in 2007!

Question # 1: Is Florida still a strong growth market?

Answer:  Long-term economic and demographic trends continue to favor Florida.  The state’s economy remains fundamentally strong and continues to diversify.  The state’s population is expected to increase approximately 75 percent by 2030.(1)

Florida has a long history of strong growth through periods of economic expansion and contraction.  It has been one of the country’s ten fastest growing states for each of the past seven decades (most decades it was in the top four).

Since 1970, Florida’s annual rate of growth has exceeded the U.S. average by 100 percent.(2) 

The U.S. Census Bureau projects that in 2010 Florida will move past New York to become the nation’s third most populous state.  The Bureau projects Florida’s population will increase to 28.6 million by 2030, an increase of 12.7 million people over the state’s population in 2000.(3)

In the next decade, Florida, California and Texas’ population growth will represent half of the population growth in the entire United States.(4)

Florida’s strong, diversified economy has regularly outperformed that of the nation. According to Enterprise Florida, Inc.(5):

1 U.S. Census Bureau, Population Division, Interim State Population Projections 2000 to 2030, April 21, 2005
2 Woods & Poole CEDDS U.S. Census Bureau, Population Division, Interim State Population Projections 2000 to 2030, April 21, 2005, Table 1.
3 The Florida Legislature Office of Economic and Demographic Research, June 14, 2007.
4 U.S. Census Bureau, Population Division, Interim State Population Projections 2000 to 2030, April 21, 2005.
5 Enterprise Florida, www.eflorida.com
6 National Center for Health Statistics, U.S. Dept. of Health and Human Services; Permar Inc., 2004
7 MapInfo Corporation, 2006

Question # 2:  Most of JOE’s land is in Northwest Florida.  What’s it like there?

Answer:  Northwest Florida’s beaches are the state’s second most popular tourist destination, behind only Orlando.  They draw seven million visitors each year, more than any other stretch of beach in the eastern United States.(8)

Beaches in Northwest Florida have been rated as some of the most beautiful in the nation and the world.  Beaches in Walton, Bay and Gulf Counties have been awarded the number one ranking by Dr. Stephen P. Leatherman, an authority on beach quality and author of America's Best Beaches. (9)

There are a number of strong economic indicators for Northwest Florida. For example, Walton County has one of the lowest unemployment rates in Florida and the nation. (10)

According to a study  conducted by the University of Florida’s Bureau of Economic and Business Research, for most of the state’s history the strong growth rates in Southeast and Southwest regions of the state pulled the center of Florida’s population steadily south.  But since 1980, this trend has stabilized as growth in the north part of the state, from Jacksonville in Northeast Florida to Pensacola in Northwest Florida, became more balanced than in the past. (11)

Northwest Florida enjoys a very favorable climate, with mild winters, sunshine and clear days.  Northwest Florida is located in U.S. Climate Zone 8, the same climate zone as exclusive and highly successful resort/residential areas such as Hilton Head (SC), Amelia Island (FL), Kiawah Island (SC) and St. Simons and Sea Island (GA). (12)

Florida’s beauty and diversity is legendary.  Northwest Florida has a distinct geography, culture and cuisine that is very different from Miami or Orlando.  JOE is working to make our part of Northwest Florida even better.

8 Visit Florida, www.visitflorida.org
9 See www.drbeach.org
10 Agency for Workforce Innovation, The State of Florida, Economic Indicators, November 16, 2007.
11 Florida Population Growth: Past, Present and Future, dated June 2005, by Stanley K. Smith, Bureau of Economic and Business Research, University of Florida, Appendix Table 3
12 United States Department of Agriculture, Climate Zones, 1990.

Question # 7:  Describe the demographics of the region and JOE’s potential customers.

Answer:  Northwest Florida’s demographics are strong and improving. More importantly, the demographics in JOE’s feeder markets are very strong.

The portion of Northwest Florida where most of JOE’s land holdings are located attracts approximately seven million visitors each year. According to Visit Florida, the state’s tourism and visitor agency, 33 percent of these visitors are from households with incomes over $75,000 and 16 percent are from households with incomes over $100,000.(14)

There are approximately 620,000 high net worth households (net worth of $5 million and up) in JOE’s feeder markets.  The number of high net worth households in these feeder markets is expected to increase 13 percent annually.(15)

The number of exclusive resort communities in Northwest Florida is increasing.  At communities like Seaside, Rosemary Beach, and JOE’s WaterColor and WaterSound Beach, gulf-front lots have sold for $40,000 per linear beachfront foot to high-net worth individuals who have chosen Northwest Florida.

JOE has attracted a number of national developers, retailers and strategic allies to the region that target high-income/high-net worth households, including Orvis, Southern Progress Corporation (publisher of Southern Accents and Coastal Living) and Simon Property Group.

JOE is also engaged with allies in the region to stimulate economic development designed to expand the economy and grow per capita income.

14 Emerald Coast Visitor Profile and Analysis, Fishkind & Associates, August 2007.
15 Survey of Consumer Finances, 2001; Premar Inc, 2006 (age qualified households are defined as head of household ages 45-74).

Question # 8:  What is the status of the relocation of the Panama City airport, and how is the new airport likely to impact economic growth in the region?

Answer:   The Panama City – Bay County Airport and Industrial District (Airport Authority) announced in December 2007 that it had completed the $312 million financial package for the new airport in western Bay County.  With the financing complete, the airport now holds all permits, approvals and funding to construct the airport.  See the most recent Airport Authority news release.

There is a legal challenge (now resolved) to the Federal Aviation Administration’s Record of Decision recommending and approving the relocation of the airport.   The issue is currently before the United States Court of Appeals for the Second Circuit Court in New York.  This, and subsequent legal action could impact the Airport Authority’s construction schedule.

Dr. Hank Fishkind, one of Florida’s leading economists (16), believes a new Panama City airport is very likely to become a strong economic development engine for the region.
Throughout history airports have an impressive track record for accelerating economic development activity. 

The new Panama City airport will be the first built in almost 15 years.  As a large-scale greenfield airport site, it provides unique opportunities and unmatched flexibility for companies dependent on aviation and logistics infrastructure.

There are strong analogs for the development of this airport in Huntsville, AL, Savannah, GA, Jacksonville, FL, Fort Myers, FL and Northwest Arkansas.  All of these airports have recently seen significant adjacent development.

Using the State of Florida’s standard economic development forecasting model, Fishkind forecasts that over its first 10 years, the new airport would create 8,000 new jobs and at build-out a total of 13,000 jobs. (17)

According to Dr. Fishkind’s research, the opening of the new Southwest Regional Airport in the Ft. Myers/Naples area had a tremendous impact on real estate values.  Fishkind found that since the opening of the airport in 1983, the aggregate residential real estate values have increased an average of 11 percent per year in the region. (18)

16 See www.fishkind.com.
17 Fiscal and Economic Impacts on Bay County of the West Bay SAP, State of Florida “Fiscal Impact Analysis Model,” Fishkind & Associates, July 2003.
18 Comparative Market Study of Ft. Myers and The Emerald Coast, Fishkind & Associates, U.S. Census Bureau, March 2007. Read the full article

We have no idea whether the Florida real estate market has hit rock bottom. What we do know is that eventually it will bounce back. Demographics demand it, with the Census Bureau projecting a 33% population increase for Florida- the equivalent of six million new residents- between now and 2020.

And when Florida real estate does rebound, investors will be kicking themselves for not recognizing today's $28 stock price for St. Joe Co (JOE).- Florida's largest private landowner - as a rare opportunity. The stock traded as high as $82 in July 2005.

At $28, says Third Avenue Real Estate Value fund manager Michael Winer, whose firm owns 20% of St. Joe shares, "this is a fire-sale price that basically assumes the Florida market will never come back."  Read the full article

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