Here we go with my second installment for the FNC Blog.

Significant changes in the South Florida market since last week: First of all, it was published that unemployment in south Florida is up 30% from last year. That is to suggest that the 2008 unemployment rate of 7% has increased to 10% in 2009. Some of the articles in the local papers have suggested that this will be a benefit for employers who will now be able to hire workers for even less.

What does this mean for the real estate industry? Well, I suggest that this will have a continued negative effect on property values. The buying power of prospective homeowners has decreased. A 3% increase in unemployment might not seem to be much, but in this current climate, every little bit causes a further negative reaction in the market. This not only affects the single family market but also the income property market.

It was also published in the fall of 2009, that there was a 3% reduction in the enrollment for public schools. This is also a disappointing announcement. We are in a time of strained finances. Parents are transferring their children out of parochial schools and private schools and placing them back in public schools. This 3% reduction in public schools is significant. School enrollment is a sign of a general x-migration of the population in this south Florida area.

This reduction in population, in my personal opinion, is from higher taxes, higher insurance rates, and tropical storms. Property taxes in south Florida are almost unchecked. During the boom years of 2002 to 2005, property assessments increased approximately 40%. The taxing authorities changed the millage rates only a very small amount. This created a windfall of income for the cities, counties, and the state--more money than they had ever seen. New parks, new buildings, new streets (named after the politicians) were developed, but of greatest importance was an explosion in public workers' concessions.

There is now a significant reduction in the total assessment for real estate. The city, county, and state want to increase the millage rates significantly in order to make payments to the public workers. I understand that one city in south Florida, Hollywood, has $180 million in unfunded pensions. This is a great concern for homeowners and investors.

Property insurance rates have also “skyrocketed”. Since Hurricane Wilma hit our area in late 2005, many insurance companies have left the state. At one point, the insurance quote on my own home (a modest 2600-square-foot home built in the 1970s) went up to $7,200 per year.

All of this gets back to our main basis for home purchasing, PITI. As the one side of the equation, Taxes and Insurance, increases substantially, there is not much left over for principle and interest. This again affects the value of real estate.

There is also “talk on the street” that the federal government has already implemented a plan of mass immigration to south Florida. Some people are talking about the immigration of as many as 100,000 Haitians moving to tent cities in south Florida. There is also a change in immigration policy that now people with HIV/AIDS will also be allowed to come. It is not that we are uncaring for people in need but that it will have a significant effect on the social services of south Florida. This increased cost of social services will continue to drive up the tax rates and the effect will be a decrease in the ability for people to purchase homes.

South Florida is a great place to live. The weather is fabulous; the people are friendly. We have had hurricanes and immigration demands in the past. We will survive this but we need to plan on these unexpected expenses and budget for these great needs.

This is all for now. Thank you for your time.