With many Puerto Ricans making their way to Central Florida after a devastating 2017 hurricane season, there is an expectation that the local real estate market could see changes.
The 2017 hurricane season was devastating for many, and Puerto Rico was impacted in an extreme way. At the time of this writing, one-third of the island’s power is still out, clean water is scarce, and thousands still are not able to inhabit their homes. Full power to the island is estimated to be restored by May. The islands power grid already was aging and presenting maintenance issues, so Maria had the worst possible timing. An estimated 200,000 Puerto Ricans already have flown to Florida since Oct. 3, with more residents anticipated in the coming months. What does the influx of people mean for our local real-estate market?
I’ve spoken with several homeowners expecting to see an increase in their property values because of more people seeking refuge in Florida. Many of the refugees from Puerto Rico likely are to settle here in Central Florida, but the fact remains that most will be renters instead of homebuyers — at least initially. For example, a medical professional currently living and working in Puerto Rico wanting to relocate to Orlando would need to procure employment here to obtain a home loan as an owner occupant. Cash buyers, of course, would be able to purchase more quickly. The reality is however many of the islands residents are in need of assistance and not able to just leave and pay for housing out-of-pocket.
The primary impact I see is in the rental sector. In a recent survey by Fannie Mae called the Home Purchase Sentiment Index, Americans still are optimistic about the housing market (if slightly less so than at the start of 2017) but overall confident that rents will rise.
As reported on HousingWire.com, Doug Duncan, Fannie Mae senior vice president and chief economist said, “Housing affordability remains a persistent challenge, particularly in rental markets, where consumer expectations for price increases over the next 12 months reached a new survey high.”
Nowhere is what Doug’s saying more true than here. The impact of Maria on Puerto Rico will mean more people renting in Central Florida, making the already-low levels of available housing even more competitive. With so few housing choices and even more people vying for the chance to rent property, we likely will see a rise in rental prices.
But does this uptick in the demand for rentals mean an increase in home prices? Possibly, but in an indirect way. As rents continue to rise, and inventory is low, many renters are choosing to make the move to become homeowners, because it is simply less expense per month to do so. Buying a home is a way to freeze your housing costs: Once you’ve locked in your interest rate and mortgage payment, the bank cant raise it. As a homeowner, you do have to contend with the maintenance costs of your home, but you are also able to write off things such as mortgage interest and property taxes, which can offset some of those expenses. In the big picture, many renters can save thousands each year by owning a home.
Many of those coming from Puerto Rico are veterans and senior citizens needing medical care. The government is working to expedite affordable housing for these citizens, as well as all others according to Alex Barrio, district director for Congressman Darren Soto. Officials have been working overtime to create safe and reasonable housing solutions but the job is far from done.
Without question, both Central Florida and Puerto Rico both will be altered by the damage caused by Maria. How permanent that change is will take time to determine.
In the meantime, Central Floridians can expect to see a continued influx of families from Puerto Rico and that most of them will be renters of some type for the next two years. This may buoy the rental market and spur some fence-sitters to buy their home instead of rent.
In addition, some investors may benefit from the sparse rental inventory through increased rents and an ever-consistent tenant pool. There won’t be an overnight spike in home values because of the arrival of citizens from Puerto Rico — many will need to get situated and secure employment prior to buying — but you can count on many of the evacuees looking to call Orlando and the surrounding areas home.