Last month I was talking to a CFO of one of the large regional banks in the Tampa Bay area and we were comparing notes on the state of the market here in the Tampa Bay area. While we both agreed that the real estate market had taken a hit, both of our companies had discovered a bright spot in the current economic downturn. MILLIONAIRES. IRS data that was released back at the beginning of September showed that the number of people with a net worth of greater than $20 million dollars was up 62% from just ten years ago. In addition, a Claritas study reported that the number of millionaire households in Tampa reached 62,613, an increase of more than 4000 households in 2007. They also went on to say that the number of Millionaire households in the area is expected to increase another 27.5% over the next five years. The number of $1 million + homes in the Tampa Bay market has increased from 3,688 in 2000 to 24,525 in 2007 and the number is expected to exceed 43,436 in 2012.
With the turbulence in the stock market and the extreme discount we're seeing on homes from just a few years ago, it's pretty easy to see why the people with money are starting to buy choice homes at prices they may never see again. Dollar for dollar, home ownership is a solid investment and the single largest creator of wealth for many Americans. Over the long-term, real estate has consistently appreciated even through periodic adjustments in local markets in response to economic conditions. On a national level, home appreciation has historically increased 5-6 percent annually, according to economists at the National Association of Home Builders. In Florida, the average was closer to 6.5% since they started tracking in 1940.
Five percent may not seem much at first, but here's an example that will put it into perspective: Say you put 20 percent down on a $2,000,000 home, for an investment of $400,000. At a 5 percent annual appreciation rate, that $2,000,000 home would increase in value $100,000 during the first year. Earning $100,000 on a cash investment of $400,000. An extraordinary 25 percent annual return. In contrast, putting that $400,000 down payment into the stock market and getting a 5 percent gain would only yield a $20,000 profit.
Florida is still attractive to Baby Boomers and has unmatched weather and lifestyle advantages. The baby boomer generation represents 39% of the U.S. population, including the influential 35 to 55 year old demographic, and more than 30% of all Americans will be older than 50 by 2010. As the current baby boomer generation ages, its members will begin to retire. According to a recent study, it is estimated that the Tampa area will become one of the most popular retirement destinations within the next 15 years. In fact, Kiplinger Magazine said that Tampa was the #1 place to retire in their June 2007 issue and Forbes ranked Tampa the #1 place to retire in their November 2007 issue.
With another 331,000 people pouring into the State Of Florida last year, it won't be long before we pass New York as the third most populous state. Add it all up........money, lifestyle, sunshine, beaches, arts, professional sports, home to the 2009 Super Bowl......Tampa is the place to be!
Steve Eckhardt, Broker/Owner
Cornerstone Properties & Investments, Inc.
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