Housing Shortage | Top Florida Markets for Big Returns! Local Market Specialist Reveals Hidden Gems!
In episode 1991, Jason Hartman hosts a market‑profile interview from Quito, Ecuador, with a Florida market specialist (Speaker B). The conversation begins with a vivid backdrop before diving into the U.S. housing inventory crisis: national inventory sits around 414,000 homes—far below historic norms—while demand is muted by high mortgage rates. Hartman introduces his proprietary Hartman Risk Evaluator and the Land‑to‑Improvement (LTI) ratio, arguing that markets with low land‑value and high improvement‑value (linear markets) are less volatile. The hosts then examine the acute shortage of entry‑level homes, citing NAR’s 5.3 million‑unit deficit and the disproportionate impact on homes under 1,400 sq ft. They explain why builders avoid this segment due to thin margins, and why 3D‑printing is not a near‑term solution. The discussion shifts to three Florida markets—Jacksonville, Palm Coast, and Ocala—highlighting strong economic and population growth, favorable affordability indices, and robust demand. Comparative metrics are presented: median home values and household incomes in Salt Lake City, Boise, and Cape Coral illustrate Florida’s relative affordability. Institutional interest is noted, with JP Morgan’s joint venture, America’s Home from Rent, and unnamed large investors pursuing bulk land acquisitions for build‑to‑rent projects. The specialist emphasizes the resilience of new‑construction, hurricane‑resilient building standards, and the low insurance loss record across 278 active projects, positioning build‑to‑rent as a low‑maintenance, cash‑flow‑positive strategy. Throughout, Hartman stresses that the entry‑level housing shortage is structural and will persist without a major technological breakthrough or a demographic decline. He urges investors to focus on markets with low LTI ratios, strong rent‑to‑income dynamics, and new‑construction that mitigates hurricane risk. The episode concludes with a call to action for listeners to contact Hartman’s investment counselors for opportunities in the highlighted Florida markets.
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Greetings from Quito, Ecuador, and welcome to episode 1991. If you're watching on video, you can see the beautiful background. This is actually a polo field. A friend of mine, her family owns a resort, a polo resort here in Ecuador. And one of the cool things about this place is there are all these dogs that roam around. I love dogs, as you know. And so here we've got one. They just kind of come up and greet you wherever you are around the resort. It's pretty great. Anyway, today we have got a Florida market profile for you. We're going to be looking at Florida with one of our local market specialists here. And, you know, it's interesting when you look at, especially the Miami market, a very cyclical, cyclical market. Historically, ups and downs, broad swings, glorious highs, ugly lows. But that's been largely insulated by the fact that so many people have been moving to Florida, of course, and we've all followed that trend over the years. But before we get to our market profile, let's talk a little bit about inventory. And it is continuing to be very low, and that is plaguing the market, that is keeping home sales down at lower levels because, of course, there's less to sell. But of course, at the same time, demand has dropped quite a bit as well with these higher interest rates. Remember the metaphor of the. The sink? The faucet on the sink represents new listings or new inventory coming onto the market. The sink itself, what's in the sink? The water in the sink represents the existing inventory, and that currently stands just a little higher than it was last week, actually. So inventory did bump up just a little bit to 414,000 homes for sale. 414,000, but again, much lower than it has been in prior years, with the low being about 249,000 homes. I believe that was the lowest point in inventory, but again, a normal market being about 1.2 million homes. So again, the market is really plagued by this low inventory problem. And it's also interesting how many of the Wall street pundits, in talking about the home builders, were saying, oh, the home builders are suffering and they're doing terribly. Yet to a large extent, the opposite happened. The home builder is doing much better than expected by many of the pundits out there. So we will continue to look at how this inventory plays out. But one of the things I want to just remind you of is one of my core teachings, and for the last 19 years or so, I have been talking about this, and that is the Hartman risk evaluator Remember, when you're looking at markets, the markets that fairer the best are those linear markets with low land values rather than high land values. Because land value is where the volatility is. If you want to insulate yourself from volatility in the real estate markets, if you want to insulate yourself from risk, you want to look at low land value markets. These are the linear markets. And remember that ratio I created that speaks to this. That is what the LTI ratio. Now, of course, you're all familiar with the LTI LTV ratio, the loan to value ratio, when, when getting a mortgage. The loan to value ratio is a commonly used metric that you're always wanting to look at and think about and the lenders are always talking about. But this is the LTI ratio and it stands for land to improvement ratio. Because when you buy a property, you're not buying one thing. It's really two major components, the land and the improvement sitting on that land, the house, the apartment complex, the office building, whatever it is, whatever type of improvement is on that land that is speaking to the LTI ratio. So what we want as conservative, prudent investors is we want this LTI ratio to be mostly improvement because that insulates us from downside risk. When we're looking at the materials or the ingredients that it takes to build, say, a house, we're looking at lumber, we're looking at copper wire in the walls, petroleum products, glass, steel, concrete. These are traded globally. They're not attached to any one currency, and they have intrinsic value. Who cares what inflation does? Who cares how many currency units, how many dollars or euros or yen they create out of thin air? These commodities are needed by every human on Earth because every human needs shelter, right? And that's what shelter is made of, that is the ingredients for shelter. All of these building materials, and so they are largely insulate us from downside risk in the marketplace. So we want high improvement value and low land value as a ratio. Hopefully this ratio is around 70, 30 or 80. 20 would be even better, where you've got 20% land value and 80% improvement value because the land is the part that fluctuates the most. Cyclical markets always have high land values and low improvement ratios as part of that LTI ratio. So we want this to be the opposite way. The linear markets have low land values, high improvement values. That's where you'll insulate yourself from big risk and big swings in the market. And when we look at the recent activity in the market, this was published by realtor.com. and it says new listings, a measure of sellers putting homes up for sale, were down again this week. Now, again, that's the prior week to the graph that I just shared with you, but only by 5% from one year ago. The number of newly listed homes has been lower than the same time in the previous year for the past four, 41 weeks. Wow, that is just amazing. I mean, there's 52 weeks in a year, so that's almost a year. And again, we're seeing this reluctance of people to put homes on the market because they don't want to trade in those 25% of the people that have a mortgage at or below 3%. And the 65% of the people that have a mortgage at or below 4%, they don't want to trade them in for a mortgage of six and a half or seven percent. Why would they? So they're just hanging on to those cheap mortgages they have. And this trend is going to be with us for a long, long, long time. Remember, when you're looking at purchasing a property, you marry the property, but you date the rate. I do think, and as many do, but there are some that oppose this idea, too. You know, there's always varying opinions. I think the Fed is going to be forced to, to pivot on these rate hikes at some point. I think maybe the next meeting they do nothing. And then after that, they start to bring rates down just by a little bit. It depends how much they want to keep breaking things in the economy. It depends how much risk they want to put on the banks. Oh, here we've got a polo pony coming by. Look at that. Beautiful, isn't it? Beautiful. So it depends how much they want to do. I think they will pivot and then that'll be the opportunity to refinance. And it's interesting, if you look at treasury rates and you look at CD rates, certificates of deposit at banks, they are generally paying higher rates on shorter terms and lower rates on longer terms. The inverted yield curve. Right. And so that tells us that the elites, the banksters, they think rates are coming down. Right? That's what they're telling us. So I think you can look at that as a good prospect. Nobody knows what rates will do, of course, but you can look at that as probably, probably a pretty good indicator of what rates will do in the future and your opportunity to refinance mortgages for lower rates in the future. So with that, let's get to our market profile and let's talk about the Florida market. That has just been incredibly, incredibly strong. One of our busiest markets, along with several Alabama markets as well, also very, very strong. We have great properties in both of these markets. So reach out to us through J jasonhartman.com or you can pick up the phone and call if you're in the U.S. we, of course, we have clients from around the world, but US number one, 800, Hartman Feel free to reach out to us that way on the good old fashioned telephone or of course, through the website jason hartman.com and let's get to our guest with a market profile on Florida. It is my pleasure to welcome one of our local market specialists back to the show and he is going to talk to us about three really great Florida markets and I'm anxious to dive in. And he has got some really interesting, interesting statistics for us because one indicator of the health and the future of any housing market is what is the income of people in that market versus the housing prices. And you're going to see some really, really interesting statistics on that today. So let's go ahead and dive into it. And which florid market would you like to talk about first?
Hey, Jason. Yeah. Good to be back. Well, we're going to kind of talk in unison about three of our most popular market with the Hartman gang, and that's Jacksonville, Palm coast and Ocala. Three of our markets that we're very active in. A lot of the investors are active and had a lot of success with. You know, we keep getting these questions, you know, are you still moving forward and bullish on Florida? And the answer is yes, because as we know, the five factors we look for is that economic growth, the population growth, a good affordability index, something desirable. I think Florida has a lot of desirability now and healthy supply and demand. We're on a shortage of housing and the shortage of housing. Jason, this is pretty interesting. Between January 2012 and June of 2021, there were 12.3 million American households formed. So new households formed in the US but there were only 7 million new homes built. So think about that for a minute. Almost two and a half, 12 and a half million new households, but only 7 million built. And we were at a shortage before that since 2000, 2008. So that's a really positive statistic for you and I and our investor base.
So this, this is a statistic we've heard a lot and NAR has promoted a lot, talking about how we're about 5.3 million homes short in the, in the United States. And that's interesting. But Wait, there's more. And here there's even more to it. If you segment this by price range, this shortage gets more and more acute the lower the price range. So think about it. So when a new household is formed and they go out into the marketplace and they buy an entry level home, right? Or maybe they rent it, but let's just assume they're buying it. The seller of that home goes and buys their next step up home. They buy a more expensive home. So, for example, this entry level buyer goes and they buy a 350, $50,000 home as an example, which is, you know, the new entry level. Because you can't get anything for less than that anymore, right? Definitely not. Maybe more. You're probably going to pay. So they buy that and then those sellers go out and buy a $550,000 home. Okay. And so it pushes up and up and up the market. Right. And that makes the housing shortage throughout all the different price ranges, but it is so acute in the entry level. And that housing shortage is even more pronounced than it sounds when you talk about the 5.3 million. Because the builders have not by any measurable degree been building entry level houses. Oh, yeah, 12 years.
Well, absolutely. And look at this, Jason. Supply and demand on top of the shortages of new builds, the number of new homes, like you just said, under 1400 square feet. So that's a lot of what we focus on with some of our smaller single families and duplexes and quads, they've steadily declined since 2008, resulting in less than 10% of all new builds. So one of the most needed inventories has been less than 10% of the new build focus since 2008, when we were already in a shortage at that time.
And the reason for this is that there is so little margin for builders to build these smaller, more economical entry level homes. There's just not a lot of margin in it. You know, if you're going to build a 3,200 square foot house and you're going to sell it for $800,000 and you're a builder, you've got margin in that house that can play. Right. You can make money with that. It works. But in this segment of the market, there's just so few builders building it because it's just not that profitable.
Yeah. And that's, as you know, we've always been a low margin builder, but taking Sam Walton's approach, we tried to make less on each deal but make up for it in volume. And the Walmart approach is, is working for us, that's how we went from one market to 14 now. But looking at our 14 markets, let's just do a general thing where a lot of people say to us, Jason, well, it's topped out. The real estate market is topped out. And I always laugh, and I know you laugh when people include the real estate market as one giant thing. And it's not that it's individualized or localized. You and I know that. So I like to compare. We work with a lot of people in California where you and I escaped from, and we were able to show them simple escape places versus our Florida market, Salt Lake City, great market. A lot of people going there out of California. But if you look at these simple numbers that I have up and I'll tell them for people who are only listening, we wanted to compare Salt Lake to Cape Coral popular market that a lot of you are invested in. The median value right now in Salt Lake City is 581,000. The median household income, little over 60,000. The average rent, a little over 1400. Compared to Cape Coral, the median home value is right now 339. So think about that for a minute. 581 versus 339. That is a monster difference in affordability.
Let me unpack this a little bit. So if you want to predict where the value of a stock is going or where the value of a piece of real estate is going, you know, if it's in the stock market, you might look at the PE ratio, the price to earnings ratio. So here in real estate, if we look at Salt Lake City, which has been a very hot market for many years now, definitely cooling off like most markets are. But you've got a $60,000 median household income and a $582,000 house. And in Cape Coral, Florida, you got a median income that is $1,000 higher of 61,000, basically $62,000 rounding. Okay. But that house price is like 150 grand lower. It's 339. Okay.
250 lower.
Oh, sorry. Yeah, you're right. Yeah. 250. See, it's late in the day here and my coffee is wearing off. Yeah. So I mean, just look at the difference there. Right. And I remember when we first started talking about this exact ratio was many years ago when I was helping people buy a lot of properties in Indianapolis. And I pointed out how out of balance that house price to income ratio was in a good way, like Cape Coral in Indianapolis, and prices shot up compared to the rest of the Country. So it was this exact same example. So I'm really glad you brought that to us today. I think you have another one, right?
Yeah, I got one more that's really applicable because a lot of people from California, again, we work with a lot of Californians.
They went to Boise, Idaho.
They went to Boise. Beautiful market. But that has had quite a run up. And now the median value there is 538. Median income again, 60,000. Same about a Salt Lake. And average rents a little over 1500. Let's compare it to Jacksonville, our hub market. You know, Jacksonville, the median value is 299. So we're. We're still sitting $240,000 less at a median value. And our median income is within $4,000, within $3,000.
That's amazing.
Of their median income. Yeah. And the rents are a little bit higher here. So that's what I look for. When people say, is the market tapped out? I always say, which market? That's kind of the difference. And that's why, again, you and I are in Florida.
If someone listening or watching this. If you're watching this on one of the video platforms, please comment below. On the podcast, you can't do that. I know, but on the video platforms, comment below. I would love it if someone would tell me where the real estate market is. I don't know if it's in Jacksonville, Boise, Los Angeles, Miami, Chicago. Where's the real estate market? You know, it's in a country this large and diverse. There's no such thing as a national housing market.
It's like the national weather average that just doesn't tell the weather. So anyway, right now, you know, our company, we've worked with you. I think we're the longest standing provider for the Hartman Group and done the most properties. We have 637 million under asset management, producing 47 million in recurring revenue. And we stick to build to rent. We did the older properties. Now the new ones are what we like to focus on. And they're continuing to be ranked by groups like Wall Street Journal as one of the most secure investments. And why, especially down where we are, we're in a housing shortage still and we can't keep up with demand. And this is attracting many investors. And I know you asked me to share with this, Jason, because you and I have always been trying to be that little fish that swims next to the big fish and gets really well fed. Who's got the big analyst departments that I want to follow and have a lot of money that us things Before I do. Well, there's a couple of groups right now. So right now, you know, JP Morgan just announced they formed a joint venture with a group called Haven Realty Group, put in over a billion dollars to build, to buy, build to rent properties. They bought their first two developments in Atlanta, Georgia and they bought their first development in Florida with our company here. It's a large subdivision. So that's always a good sign when JP Morgan is backing a group that wants to invest more in Florida. Along with that, a few weeks ago, America's Home from Rent, who we've done a number of projects. They did a recent land acquisition for a subdivision here in Jacksonville that we assigned to them and are helping them build out. So that's another group and then we're currently negotiating with two large institutions and I can't share right now who they are, but they're looking to acquire a bulk of our scattered home lots in our main markets. So these guys are still buying. Again, I like to work with the individual investor more than these big guys, truth be told. But there is a good one, two punch with this. And they are, when we asked them why are you buying? They said because we believe in the long term growth of Florida and interest rate hikes are short term. So that's, that's been there overall. So I try to follow.
But the housing shortage is long term.
Yes. Yeah, we're, I don't see how we're going to catch up. I mean with, with the system of permits and everything. It's, it's going to be quite interesting.
The media will report it as though we caught up in a couple of years. Right. They'll say, okay, the housing market is more imbalanced now, but the reality will be that they don't segment by price. And if you're talking about the entry level home market, unless there is some major disruptive technology. And folks, I've done the shows on 3D printed homes. That isn't the technology. Okay. Because that's just hype largely. I've interviewed one of the leading experts on the show. He's been on twice. We've looked into that extensively. When I got excited about it, I thought I was going to buy a large scale 3D printer and start a 3D printed home construction company to solve my real estate company's problem. Right. They need more houses for investors to buy and it's just not there. It doesn't work for a whole variety of reasons I've covered. Unless there is some disruptive technology. I would actually argue either we have to have that or we have to have a major decline in the population. One of those two things we will never catch up. In terms of the entry level housing shortage.
Yeah, it's just on a focus.
Make sure you hear that. The entry level housing shortage will never be resolved without a major decline in the population or a major disruptive technology of some sort that none of us can even imagine that's going to provide a lot more houses.
Yeah, we looked at the 3D printing too, as a builder and it just is, is pretty far off the mark of being able to.
Oh, it's a total, it's, it's, it's just complete hype.
Yeah, I agree. And we're still recording strong sales though, with our individual investors, you know, all the people out there listening. We did do 125 million in sales last year. That's across 14 markets, of course. And it's not just Jacksonville, but that is all in Florida. We, we decided to go all in in Florida. We like the landlord laws, the atmosphere, we're big Florida fans. So that's where we're staying again currently. Just focus on those high growth markets again. So we're getting those warm returns when a lot of other things have cooled off. This was interesting, Jason, I wanted to share this where people said, oh, well, there's so much more on the market. And I guess they compare it to when it got to that unhealthy level in the pandemic where things went down to a ridiculous level of two months on the market of inventory. You know, it just was unhealthy.
That was not a benchmark, folks. That was a total anomaly. Once in a lifetime, if not once in, you know, a couple hundred years anomaly, that's just not a benchmark. You can't measure against the COVID era.
I agree, I agree. And so what I did is I actually went back and I said, okay, a normal market. And everyone agreed. The fall of 2019 was a normal real estate market. This is before all the craziness of the pandemic and everything. So I looked up Jacksonville. Jacksonville, October of 2019, the Greater Jacksonville area. About 9,200 listings on the market. This is a normal market for our size scenario. But In October of 2022, when everyone said, oh my gosh, there's so much back on the market, there's so many, there's so much inventory. We're at 7, 500 listings. So we're still 25% below what we were at a normal market of October of 2019. I think that's an important fact for people to look at when they're saying, oh, my gosh, the, the inventory levels have gone so high. And I'm saying, really? There's still 25% below what it was in the normal market of end of 2019. So I think that's a good thing for all of us to take heat on as well. Yeah, we're in again. Jacksonville, Palm Coast, Ocala, Citrus Springs, Inverness, Fort Myers, Englewood, Punta Gorda, Port Charlotte, Lehigh Acres, Cape Coral. Jason, you've been to almost all those markets with me personally or your team has, and hurricanes. I know you'd said, I appreciate it. Right after the hurricane, I think I was probably one of your first calls because of where we are and what we were doing together. The hurricanes, you know, new construction. Do you remember, Jason, when you'd be driving in high school and your mom would go, put on your seatbelt, put on your seatbelt, and you're like, fine, fine. And then you get in that first t bone where someone hits you, and you're like, wow, I'm glad I had my seatbelt on. That's kind of what happened with our new construction model, to be very honest with you, because with 278 active projects, we only had four that needed insurance claims. That was more than $5,000 worth of damage. No flooding on any of them. And the reason these four needed it, it was just the freestanding walls that had been put up as the beginning stage of construction, where the roofs hadn't been tied on with the fasteners, so we weren't able to have that, that safety release. So we only had four out of 278 projects. And this is right in Fort Myers and right in Punta Gorda, where both properties, both areas had the eye of the storm of Ian go right over from. But we have a couple of things going for us. You know, new construction. And I know you know this, Jason, in 2004, when Hurricane Charlie hit Punta Gorda, had an uncle living down there. It got decimated. It got absolutely decimated. But when you look at the. The flyover videos of Punta Gorda after this last one, it doesn't look bad. It looks like, oh, there was some heavy wind here. The reason why is they completely changed the new construction standards. If you were going to build something new, you had to use extra fasteners, extra types of materials. It was just a totally different thing. And also, you know, which is expensive right now, but we got a haul in all sorts of dirt. You know, we're building up 12, 13 more feet to make the lot higher to protect from that flooding, because flooding is one of the worst things that can happen. So with these new styles of construction, with these, with these new qualifications and building up higher also, although we build in coastal areas, most of our properties are at least five miles inland. And once you hit that five miles inland, the insurance underwriting goes to a better level, which is great for everyone. So we're really happy that we're in new construction because we watch the older houses really get decimated. And again, we weren't too excited about all the extra work we had to do. But now, like, like that old seat belt analogy, we're glad we did.
You know, I'm glad you mentioned the seatbelt metaphor there, because if anybody remembers a little bit of the history of the auto industry, Ralph Nader, who ran for president in later years, he was consumer advocate, okay. And he basically changed auto safety single handedly. Okay. And you know, love him or hate him doesn't matter, right? The point is, it happened, okay? If you compare a 1950s car and some of those cars were just death traps, okay, compared to a 2020 car with all the modern safety features, it's just not even a comparison person. That's why most of those old cars have ended up in the junkyard. They needed to be junked. And it sounds callous because you're talking about, you know, people's houses, right? But this is nature's way of just clearing out these old houses with really bad construction quality so that something new and better can be built there. And, you know, it's just not a comparison like people, I don't know, I don't think anybody makes that poor comparison, at least not any of our investors. So they're not worried about it. I mean, I mean, like my house in Florida, this house is built like a tank. I don't think anything could knock this house down. It's so incredibly well constructed. You know, in terms of its hurricane construction, it's very, very solid.
Yeah. And that's something you want to look for when you're going, you know, being out in California for those years, I got used to earthquakes. But then being here for the last almost 20 in Florida, you know, we had to look at, okay, how do you handle these hurricanes? And yeah, the new construction, building on higher ground. And it's just, it's a game changer. And so we felt very lucky through Ian. We had a lot of people invested with us, you know, and even our Fort Myers projects, we had no Insurance claims there which was you know, quite telling of, of how do you defend yourself against these unknowns? New construction has been great for us and a lot of people and overall just to build to rent model, you know. Well, you know when you have these insurance companies going to big analyst departments and they, they like the measure risk factor and we get lower insurance costs than any other properties because of the way that we're building them. You know, when you're going in to build to rent as you know that first year property taxes, since the first year you're buying a new property, it can be taxes just the land price and not the, the building price which is a nice extra add to cash flow. You know, you've done the numbers with me Jason, on at events and on stage. The, the lower cost of maintenance and turnover is stunning. Going with the new construction and we've had a lower vacancy and credit loss. So that's been huge. So build to rent again. I as you know did, did my rehabs for about 15 years and I hung up the shoes about eight years ago and I have no regrets.
Build Direct and, and folks, for those who don't know what he's just referencing is that he used to do renovations and rehabbing old houses, fix and flips and selling them to investors and now just new construction. Okay. Yeah.
Real estate I still think is the main game but I've definitely niched down now just to focus for myself and, and the people we work with on the new construction because I think being a long term player it just makes all the sense in the world to stay within what, what plays out the longest and that's new construction. Well, good. That's really all I had to go over, Jason. You know, my, my ending finale is always this one and you and I say this over, over and over to each other. You've had you know, ITR economics on a bunch and when they said we're gonna have a billion more people on the planet and 100 million of them are us alone and they need shelter, you can be a part of that supply chain for those people and sometimes you don't have to have a business plan any more complicated than that. And I'd say that's been definitely my plan and a lot of your plan. And that's what we continue to want to do here in Florida, especially the main markets we're in and discuss today.
Yeah, when you've got housing, you've got the asset that everybody needs and wants and they will be to path to your door. So it's a very good position to be in. When I put one of my houses up for rent, it's just there's just so many people that want it every single time. It's just such a great asset class. Well, thank you so much for joining us today. We appreciate it. And if you're interested in any of these properties we talked about or any of our other markets or just have any questions, reach out to our investment counselors through the Jason hartman.com website and we will talk to you soon. Happy investing, everybody.
