|Housing Market Profiles|
| Orlando, Florida
The Orlando metropolitan area includes Lake, Orange, Osceola, and Seminole Counties in central Florida. The population in 2000 was 1,644,561, an average annual increase of 42,000 persons, or 3 percent, since the 1990 Census. The current population as of April 2003 is estimated at approximately 1,755,000, an increase of 37,000 per year since 2000. The lower rate of population growth from 2000 to 2003 reflects the effect of the economic slowdown beginning in early 2001 and very slow growth during most of 2002.
Nonfarm employment in the metropolitan area averaged 914,800 during the 12 months ending June 2003, an increase of 8,600 jobs compared with the same period a year ago. Employment in 2002 declined by 6,400 jobs to 907,600 as the rapid economic expansion of the late 1990s came to an abrupt halt.
Orlando is a major tourist destination, but a local study attributed one-quarter of all its visitors to business, including meetings and conventions. With the economic slowdown tourism continues to decline based on several measures, including theme park attendance, hotel occupancy, and tourism-related tax receipts. In May the unemployment rate stood at 4.8 percent, down from a year earlier because of a labor force decline, not employment growth.
Because reluctance to fly is still a major concern the strongest tourism sector is composed of visitors who drive to the area. Economic weaknesses in Latin American and other countries that are a traditional source of tourists have likewise reduced the number of international tourists. Because a significant share of tourism is related to business travel, the weakness in the national economy has had a significant effect on the area.
The University of Central Florida in eastern Orange County has greatly affected the local economy. The 2002 academic year revealed a full-time equivalent enrollment of almost 23,000 students, which has almost doubled in the past 10 years. The university is the home of the Center for Research and Education in Optics and Lasers, and the nearby Central Florida Research Park is the location of the Naval Air Warfare Training Center, which trains military pilots using simulators. The presence of the optic research center and the Naval Training Center has prompted several firms that build or perform research on simulators and lasers to locate at the research park. Although these sectors are not as large as the tourism sector in terms of current employment, they pay higher wages and have growth potential based on a renewed emphasis on national defense.
A 2002 study published by the Orange County Office of Economic, Trade, & Tourism Development reveals that in 2002 the metropolitan areas high-technology employment was 7 percent of total employment compared with 24 percent for tourism-related employment. However the average salary in the high-technology sector was estimated at $54,000 compared with $22,000 for tourism.
Single-family detached homes comprise more than 90 percent of the new sales market in the Orlando area. Based on past trends condominiums and other forms of multifamily ownership make up only approximately 8 percent of the new sales. No conversions of existing multifamily rental projects to condominiums are occurring, but no quantitative data on the extent of the activity is currently available.
Like most of the other local markets in the nation the Orlando sales market has remained strong through the first half of 2003 despite weaknesses in the local economy. For the 5-month period ending May 2003 sales of existing homes as reported by the Florida Association of REALTORS® totaled 11,419, an increase of approximately 3 percent over the same period in 2002. However the rate of increase in existing home sales appears to have cooled substantially. Sales for 2002 increased 11 percent compared with 2001. Conditions in the single-family sales market have been supported, in part, by the shift of homes to the rental inventory at a significant rate, thus reducing the supply of available homes for sale. The number of renter occupied single-family units increased by more than 650 homes annually between 1990 and 2000.
In the context of a strong existing sales market and new home sales, the number of single-family building permits issued during the 12 months ending June 2003 increased by 18 percent to 19,664, up from 16,000 in 2002 and an indication that both builders and buyers expect the strong market to continue. The inventory of unsold single-family units is reported to be minimal as there is little speculative construction in the area.
The number of multifamily units authorized by building permits declined steadily from a peak of 13,225 units in 1999 to 6,619 units in 2001. But in 2002 the number of units increased to 8,902. Multifamily building permit activity for the 12 months ending June 2003 totaled 6,195 units compared with 7,732 for the same period in 2002. Apartment occupancy rates increased during the 1990s; with the significant in-migration and economic growth, new units were absorbed as rapidly as they came on the market. During the past 2 years, however, multifamily production exceeded the reduced demand resulting from the downturn in the economy. Builders did not reduce production quickly enough to maintain a balanced market. As a result the rental vacancy rate increased from 7.7 percent in 2000 to a present rate of approximately 11 percent.
One contributing factor to the weakening rental market is a significant shift of renters to homeownership as a result of low interest rates and affordable prices. Older projects are now experiencing declining occupancy as the effects of the weaker market filter down. Concessions are becoming widespread as competition intensifies. Two months free rent is common, and a few instances of 3 months free rent have been reported. The net effect of concessions is not clear as nominal rents continue to increase, if only by small increments. More than 7,000 units are currently in the development pipeline, including units under construction and units permitted but not begun. This current volume of construction will delay the return of balanced market conditions for at least the next 2 years, if not longer.
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