Nov. 22, 2016
FORT LAUDERDALE, Fla. – Nov. 21, 2016 – South Florida's real estate market stands to benefit if President-elect Donald Trump follows through on campaign promises to reduce taxes, increase jobs and spend money to rebuild roads and bridges, industry leaders say.
Trump's proposals likely would strengthen the economy, providing a lift for housing and construction – but watch out for interest rates, which have been expected to inch higher no matter who was voted into the White House, according to local analysts, builders, economists, lenders and real estate agents.
"If [Trump's plan] is really happening, it will all be a boost for the economy," said Eli Beracha, a professor of real estate investment at Florida International University in Miami. "When you are spending money over a short period of time, especially for a good purpose, then it makes the economy more efficient. When you see that, it's prosperity."
Ben Solomon, president of the Builders Association of South Florida, is counting on "responsible" government deregulation under Trump that would trickle down to South Florida builders, allowing them to move more quickly to obtain necessary permits for projects.
"First of all, he's a builder," Solomon said of Trump. "The building industry is top of mind for him. I'm optimistic."
However, some real estate analysts think historically low interest rates will rise during the Trump presidency, affecting home sales and prices. Democratic nominee Hillary Clinton would have faced the same reality because interest rates were due to climb after being so low for eight years, analysts say.
Jim Flood, regional manager for Supreme Lending in Plantation, said robust job growth in recent months likely will prompt the Federal Reserve to raise rates when it meets in mid-December.
"Certainly, that's not going to help more [home] loans take place," Flood said. "But people are going to have to get used to the concept that 4 1/8 or 4 1/4 [percent] is OK. Anything below 5 percent is still a great opportunity for buying a home."
Ken Johnson, a professor and real estate economist at Florida Atlantic University in Boca Raton, said an increase in rates would make homebuying less attractive and serve to soften demand while at the same time fueling concerns about affordability.
Over the past four years, prices have risen steadily as the market has recovered from a historic meltdown.
In September, the median price for an existing, single-family home in Palm Beach County was $316,000, 41 percent higher than in September 2012, the year the market started to recover, local Realtor data show. Broward County's median of $325,000 was up 58 percent over September 2012, while Miami-Dade's median soared 66 percent to $314,500.
Interest rates of below 4 percent have kept many buyers from feeling the sting of those price increases, analysts say.
However, if interest rates were to rise from 4 to 5 percent, the principal and interest portion of a typical monthly mortgage payment would jump by about 25 percent, FAU's Johnson said.
"That's devastating to someone on the edge of qualifying to buy," he said. "That would make it very hard for firefighters, teachers, mail carriers to afford homes."
Howard Elfman, president of the Greater Fort Lauderdale Realtors, agrees that higher interest rates could price more first-time buyers out of the market and keep them as renters. Still, Elfman said he's not concerned about a dramatic pullback in housing.
"It's not going to kill the market," he said. "It'll just make it tighter."
Foreign investment has played a large role in South Florida's housing recovery, but some analysts say Trump's stance on immigration may deter foreign investors from buying in the United States. A strengthening U.S. dollar also could discourage buyers from other countries by making real estate here more expensive.
Still, Sean Snaith, an economist at the University of Central Florida in Orlando, doesn't expect foreign investment to drop sharply.
Snaith thinks profit potential – not campaign rhetoric – will carry the most weight among foreign investors.
"Strong economic growth, in the long run, will cause the value of their investments to go up," Snaith said.
On the other hand, Jack McCabe, a Deerfield Beach housing consultant, is predicting a U.S. recession in 2017. And the outcome of the election has done nothing to change his opinion.
McCabe points out that the tri-county housing market already is slowing down, as price increases shrink and buyers lose the urgency they once had.
The softening is part of an inevitable real estate cycle that would have continued even if Clinton had won the election, McCabe said.
"Most of the real estate community is hopeful and cautiously optimistic that Trump's economic plan will have benefits for our marketplace," McCabe said. "But the truth is, it depends on global economics.
"In the next couple of years – Trump or no Trump, Clinton or no Clinton – there's nothing they can do quickly to influence the global economics of South Florida real estate."
Copyright © 2016 the Sun Sentinel (Fort Lauderdale, Fla.), Paul Owers. Distributed by Tribune Content Agency, LLC.