That’s how far it is from my house in Tampa to the Alabama state line at the Western edge of the Florida Panhandle. We have family in Alabama, Louisiana, and Texas, so we’ve made the trip past that milestone often. And every time we reach it, we breathe a sigh of relief.
When we travel back home, we take a breath and prepare for what comes next: 200 miles of sheer boredom to Tallahassee. Then another 150 miles of more boredom from there to Gainesville, broken only by one right turn.
It’s a land of endless trees and little development, particularly from Tallahassee to Gainesville. This stretch goes around the armpit of Florida, which meets the Gulf of Mexico in a swampy mess that’s far removed from the fabulous beaches to the west and south.
So imagine my surprise when I found out that this 560,000 acres of hardwood trees and wood pulp forest is worth almost $1 billion.
The current owners have had the property for 20 years. They run limited timber operations but mostly just wait for the land value to appreciate. With Florida back in growth mode and limited availability elsewhere in the state, it seems their time has come…
After the invention of air conditioning, land in Florida has always been attractive, especially to retiring baby boomers.
While the oldest of the generation have already called it quits, the largest part of the population cohort, born from 1957 to 1961, have yet to retire. When they do, they’ll find winters in Ohio inhospitable, and like those who’ve retired before them, they’ll flock to warmer climes.
While Texas and other energy-rich states have gained a lot of media attention for creating jobs and attracting workers, Florida is still in the business of attracting retirees and those that serve them.
From July 2013 to July 2014, six of the fastest growing metropolitan areas in the U.S. were in Florida. The state added almost 200,000 people during that time, and passed New York as the third most populous state, with just shy of 20 million people. The fastest growing metropolitan area in the country was The Villages, a retirement community in Sumter County, FL whose population jumped by 5.4% over the course of the year.
Naples, Fort Myers, and Sarasota were also among the other top-growth spots.
This ever-growing Florida population will eventually fuel a steady rise in real estate prices. We can already see this in the number of vacation homes sold. According to the National Association of Realtors (NAR), people bought 1.13 million vacation homes last year! That was 57.4% more than 2013, which had experienced a 30% increase from 2012.
The numbers might be inflated a bit — the association has an obvious interest in positive real estate data — but there’s no denying the trend. People are buying vacation homes… and that’s often a precursor to using the properties for retirement.
This trend is not new to us, though. It fits the consumer life cycle we’ve been explaining to readers and audiences for years.
As people join the workforce around age 20, they drive the need for office space. In their early 20s they tend to live in apartments, increasing the need for multifamily units. Marriage in the mid-to-late 20s motivates the purchase of starter homes around age 30, and then we move to larger homes in our early 40s, when our kids are young teens.
Watching the largest group of boomers go through these stages is like a scan course in American real estate.
We had a boom in corporate real estate in the late 1970s and early 1980s. Then we had a boom in apartments. In the early 1990s, starter homes were all the rage, and we all know the McMansion story of the early 2000s.
After buying larger homes to house our kids and all their stuff, in our 50s we turn our attention to vacation property. This doesn’t mean that everyone in their 50s will buy vacation property, only that this is the age when demand for vacation property peaks.
Over the next 10 years, increasing numbers of boomers will not only decide when to retire, but where. As I said, sunny and warm trumps cloudy and cold any day!
This means the current real estate trends in Florida should only accelerate in the years to come.
Eventually, this trend will be the friend of real estate investors and traditional homeowners in Florida (and other typical retirement areas). But don’t construe this as the precursor to another bubble like the one in the 2000s.
First, we have to get through the economic winter season. We still have years of low economic growth, low interest rates, and deflationary pressures ahead of us.
Second, after we get past this turbulent economic time, even real estate markets in desirable areas shouldn’t repeat the last bubble. Hopefully we won’t see that intersection of increasing demand, lax lending standards, cheap money, and greed repeated in our lifetimes. Instead, current trends should eventually mark a return to steady, if not spectacular, growth rates in property prices.
So if you think you might one day be interested in a place in the sun, start your research now. Over the next couple of years there should be some good buying opportunities. After that, the markets will most likely resume a steady gentle rise for years.