2014 Gainesville-Alachua County Annual Review

    I hope this extended analysis provides you with information that will both educate and prepare you to make the best real estate decisions possible in 2015. The data presented in this report were accumulated from the GACAR MLS and FloridaRealtors.org through 12/31/14. Some of these statements are forward-looking and actual results may differ materially.

    2014 was a year that further strengthened our local real estate market and rejuvenated the animal spirits of local home buyers and investors. As home sellers celebrated an average and median home value increase of approximately 3-5%, some thought-provoking questions have started to surface that lead to an intriguing outlook for 2015.

    What Fueled Our Continued Upward Momentum in Prices Over the Past Year and Will It Continue?
    The overall supply of homes for sale has been steadily declining for approximately six months. This inventory reduction may be one of the prime factors responsible for last year’s strength. Also, extraordinarily low interest rates and easier lending standards continue to fuel the fire of affordability for many buyers. Just last week, President Obama announced that the FHA would be reducing mortgage insurance premiums for new FHA loans. This ruling will reduce mortgage costs by approximately $900 per year and may give many home buyers additional incentive to buy soon. This change goes into effect in late January of 2015. Current owners who have FHA loans at rates over 4.5% may want to evaluate refinancing in order to remove the discontinued mortgage insurance premium they are currently paying.

    Another major influence affecting our values has come from robust new home sales in Alachua County which jumped last year by close to 10% while total home sales paced themselves at a more temperate 3% rate. As existing neighborhoods open new phases and large, new residential housing communities, such as Oakmont (SW 24th and Parker Rd) and Finley Woods (SW 62 Ave), come on line in 2015, I suspect their influence will have myriad effects on the market. First off, home builders are experiencing a pronounced increase in construction costs due to appreciation in the price of building materials, land acquisition, governmental impact fees, and competition for subcontractors. This in turn is causing consumers to have to pay more on a price per square foot basis than we have seen in many years. Higher priced, newly constructed homes ultimately become comparable sales and competition for the re-sale homes market. This may fuel an upward surge in value for previously owned properties that will seem like a relative bargain in comparison to the elevated cost of a new home. Newly constructed home supply may also start to ease some of the inventory crunch that we have seen in certain locations and price ranges.

    Our local commercial market certainly launched itself into recovery mode during 2014. The number and volume of transactions has increased markedly as more consumers with a renewed faith in the overall economy have undertaken owner-occupant commercial purchases. Investors have also been out in force seeking stronger cash flows and diversification away from the turbulent stock and bond markets. Owners willing to sell and lease back their properties have been finding extremely strong demand. This is particularly true for office, retail and small industrial spaces where owners are willing to sign 3-5 year leases.

    Exciting, new, commercial developments that will reshape much of Gainesville’s prominent retail space are also in the works such as Butler Plaza 2, Celebration Pointe (Archer Rd and I-75) and the new Publix shopping center at I-75 and 441 in Alachua. The addition of massive amounts of mixed-use inventory as well as the arrival of new, marquis, anchor tenants such as Bass Pro Shop will unquestionably alter the retail and commercial landscape of our town. One wonders what effect these sizeable projects will have on Gainesville’s population, employment and existing commercial inventory. A concerning trend over the past 3-4 years is Gainesville’s lack of population and job growth. If this stagnancy continues it would seem rational to question the future outlook for real estate values. Hopefully these new developments will help to stimulate a more favorable trend.

    Looking Forward
    I suspect that 2015 will be a moderately positive year overall for Gainesville real estate, barring any unexpected economic crisis or geo-political catastrophe. I believe home builders will have a strong showing and that the new inventory coming on line will help to boost values. Interest rates will inevitably play a major role but presently there are strongly conflicting opinions as to whether they will rise in the next 6-12 months based upon tightening by the US Federal Reserve or drop based upon global influences from weakening international economies and exceptionally low European bond yields. If you are looking to buy, my advice is to act quickly. If you are a seller then the market is working in your favor in most locations and sectors, but your optimum timeline for the best marketing starts now.

    Please contact me if you have any questions and I hope you have a fantastic 2015!

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