StateofHousingReportSantaRosaCounty,Florida

May2017

Producedby:

HomeBuildersAssociationofWestFlorida4400BayouBlvd.,Suite45Pensacola,Florida32503

850-476-0318

www.WestFloridaBuilders.com

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TableofContents

AMessagefromtheHomeBuildersAssociationofWestFlorida............................................5Figure:MapofLocationofPotentiallyAvailableResidentialCapacity................................................6

ExecutiveSummary................................................................................................................7Figure:RatioofVacantLotSalestoNewHomeSales,1992-2016....................................................7Figure:HistoricalandProjectedPopulationGrowthbyAgeSegment..............................................10Figure:NewHomes,Pre-1950to2025..............................................................................................11

KeyFindings..........................................................................................................................12

HowCanCountyGovernmentAddressHousingIssues?.........................................................15Figure:MapofParcel-specificPotentialResidentialAvailability......................................................16

Introduction..........................................................................................................................17PurposeandScopeofthisStudy.....................................................................................................17

NationalHousingMarketTrendsandTheirImpactonSantaRosa.........................................18Figure:MedianSingleFamilyHomeValueforSantaRosaandtheNation,1994-2016..................18Figure:MedianValueperSquareFootforSingleFamilyResidencesinSantaRosaasaPercentoftheNationalValue,1996-2016........................................................................................................19Figure:RateofInterest,30-YearConventionalMortgageLoan,1972-2017...................................20Figure:RateofInterest,30-YearConventionalLoan,2016-2017....................................................21Figure:AnnualizedInflationinResidentialConstructionInputs,1994-2017...................................22Figure:HomeownershipRatesbyAgeSegment,1982-2016...........................................................23Figure:DelinquencyRateonSingleFamilyResidentialMortgages,1991-2016..............................23Figure:MortgageDebtServiceExpenseasPercentofDisposablePersonalIncome,1980-2016...24

LocalHousingMarketDriversAffectHomesPricesandAvailability.......................................24EmploymentTrends.......................................................................................................................25

Figure:EmploymentSharebySector,1970and2015.......................................................................26Table:ProjectedGrowthinJobsLocatedinSantaRosa,bySector,2016-2021..............................27Table:ProjectedGrowthinOccupationsLocatedinSantaRosa,2016-2021..................................27

CommutePatterns.........................................................................................................................28Figure:NetCommutingFlows,2002-2014......................................................................................29

WheredoResidentsWork?............................................................................................................29Table:WhereSantaRosansWorkedin2002and2014....................................................................30Figure:MedianAgeofPopulation,1970-2105................................................................................31

DemographicsoftheHousingMarketplace...........................................................................31PopulationandHouseholds............................................................................................................31

Figure:HistoricPopulationGrowthRatesforSantaRosa,Florida,andtheNation,1990-2015......32Figure:ComponentsofPopulationChanges,2001–2015................................................................33Figure:SourceofPersonalIncomeforSantaRosaResidents,1970-2015......................................34

FuturePopulationGrowth..............................................................................................................34Figure:PopulationGrowthforSelectedNorthwestFloridaCounties,1990-2015..........................35Figure:PopulationChangeperYear,1971-2016.............................................................................36Figure:NewResidentPopulationperNewSingleFamilyHomeSold,1991-2015..........................36

AgeCharacteristics.........................................................................................................................37Figure:PopulationGrowthbyAgeSegment,1970-2015................................................................37

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Figure:PopulationbyAgeSegment,2016and2025.........................................................................38Figure:HistoricalandProjectedPopulationGrowthbyAgeSegment..............................................38

IncomeTrends...............................................................................................................................39Figure:PersonalIncomeperCapita,1991-2015..............................................................................39

TheAffordableHousing/WorkforceHousingSituation..................................................................39Figure:GrowthinValueforTopTier,BottomTier,andAllHomes,1996-2016..............................40Figure:LowerIncomeHouseholdsasaShareofTotalHouseholds,County,State,Nation..............40Figure:MiddleClassHouseholdsasaShareofTotalHouseholds,County,State,Nation................41Figure:UpperMiddleClassHouseholdsasaShareofTotalHouseholds,County,State,Nation.....41Figure:HighIncomeHouseholdsasaShareofTotalHouseholds.....................................................42

SantaRosaHomeownershipRates.................................................................................................42Figure:MapofHomesteadStatusforGulfBreeze............................................................................43

PerformanceoftheSantaRosaHousingMarket....................................................................44Table:ActualYearBuilt,SingleFamilyResidentialParcels,byCity...................................................44Table:NumberofResidencesbyType,RatioofSingleFamilyResidencestoVacantResidential,allSantaRosaParcels,byCity................................................................................................................45

BuildableLots.................................................................................................................................45Figure:RatioofVacantLotSalestoNewHomeSales,1992-2016..................................................46Figure:MapofPotentialResidentialAvailabilityforNavarre...........................................................47Figure:VacantResidentialLotSalesandMedianPrice,1991-2016................................................48Figure:NumberofBuildersandAverageNumberofHomesSoldperBuilder,1991-2016.............49

NewHomeSalesandPrices............................................................................................................49Table:MostRecentYear(2015):NewResidencesbyArea(City),Type,andPrice(JustValue)........49Figure:NewHomes,Pre-1950to2025..............................................................................................50Figure:NewHomes(SpecandPresold),PriceandNumberofUnits,1991–2016..........................50Figure:SingleFamilyBuildingPermitsbyMonth,January2000–February2017............................51Figure:RateofAnnualIncreaseinMedianSalePriceforNewHomes,1992-2016.......................51

TheMarketforResalesofExistingSingleFamilyHomes.................................................................52Figure:SalesperMonth,ExistingSingleFamilyHomes,September1990–February2017.............52Figure:MedianSalePrice,ExistingHomeSales,1990-2017...........................................................53Figure:MedianPriceperSquareFoot,ExistingHomeSales,1990-2017........................................53Figure:MapofQualityofImprovementsforMilton.........................................................................54Figure:For-SaleResidentialInventory,January2010–February2017,s.a......................................55

TrendsinLoantoValueRatio.........................................................................................................55Figure:AnnualMortgageOriginationbyTypeofMortgageLoan,1991-2016................................56Figure:MedianLoantoSalePriceRatioforNewHomeswithMortgages,1990-2017...................57

InterestRateIncreasesHaveImpactsonAffordability....................................................................57

TheJobCreationimpactofHomebuildinginSantaRosaCounty............................................58

ConcludingRemarks..............................................................................................................59

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AMessagefromtheHomeBuildersAssociationofWestFlorida

SantaRosaCountyhaslongbeenoneofthefastestgrowingcountiesinoneofthefastestgrowingstates

inthenation.Regionaljobcreationandaswellingnumberofretireeshavecombinedtocreateadynamic

environmentwheredevelopers,builders,realtors,andotherbusinesseshelptheCountymeetits

commitmenttoprovideahigh-qualityhomeforallnewSantaRosaresidents.

AspartofthecollaborationbetweenCountygovernmentandthebusinessesthatmeettheneedsof

residents,theBoardofCountyCommissionersagreedtosolicitinputfromcommunitybusinessleaders

intothecomprehensiveplanningprocess.Thefollowingreport,commissionedbytheHomeBuilders

AssociationofWestFloridaandperformedbyUWFeconomistDr.RickHarper,providesdetailed

informationabouttheSantaRosahousingmarket.

Amongthekeyfindingsthatemergefromtheresearchare:

• Theestimatedannualeconomicimpactofproductionof1,500newhomesperyear,atthecurrent

medianpricepernewhome,is$288millioninlocalincome,alongwith$25.8millionintaxesand

otherrevenuestolocalgovernments.Thiscreates5,327netnewjobsinthelocaleconomy.

• Inventoriesofhomesforsaleweredownby53percentinFebruary2017relativeto2010,with

declinesfromJuly2015onwardpickinguppace.Ofsignificantimpactoninventorylevelsisa

significantdecreaseinthenumberoflotsavailablefornewhomeconstruction.

• Aswithhousingmarketsnationwide,affordabilityinSantaRosawillbechallengedbyexpectations

ofincreasesinmortgageinterestrates,ascarcityofinventoryandafinancialregulatory

environmentnotasconducivetorealestatelendingasitoncewas.

• TheSantaRosaresidentialrealestatemarketiscurrentlyhealthy,witharisingnumberof

transactionsinboththenewandexistinghomemarkets.Priceincreaseshavebeenstrongestin

theexistinghomemarket,withpricesrisingtomorecloselymatchnewhomeprices.

• Concentrationisincreasinginthehome-buildingmarketovertime,possiblyreducingcompetition.

Thenumberofbuildersdeliveringnewhomestocustomersislowerthanitwasagenerationago,

in1991.However,survivingbuildersarelarger,withtheaveragenumberofhomesdeliveredper

activebuilderperyearbeingtriplewhatitwasagenerationago.

• Higherrequiredcapitallevelsforso-calledhigh-volatilitycommercialrealestate(HVCRE)assets

suchasundevelopedlandarethelawofthelandforlenderstoday.Thishasstymiedfinancingfor

theflowofnewlandprojectsthroughthepipelinethatwouldhavekeptthesupplyofbuildable

lotshigh.

• Localjobgrowth,withtheongoingshiftintoservicestargetedatthegrowingretireeandthe

tourismsectors,willnotbesufficienttosupportneighborhooddevelopmentsimilartothatofthe

lastdecade.SantaRosawillneedtocontinuetoattracthigher-incomeregionalcommuters.

ThestudywillbefascinatingforanyonewhocaresaboutthefutureeconomicvitalityoftheCountyandI

encourageyoutoreadit.

Sincerely,

DavidPeaden

ExecutiveDirector

HomeBuildersAssociationofWestFlorida

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Figure:MapofLocationofPotentiallyAvailableResidentialCapacity

Source:FLDOR,NAL67F201602VAB

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ExecutiveSummarySantaRosahastraditionallybeenamongthefastestgrowingcountiesinFlorida.Itssuccessinattractingresidentshasbeenduetostrongschools,affordableandnewerhomes,lowtaxes,safestreets,andagreatqualityoflife,amongotherthings.ThesearethefactorsthathaveledpeopletovotewiththeirfeetandtheirwalletsandbecomeSantaRosaresidents.Theyarethefactorsthatwillcontinuetodrawnewresidentsinyearstocome.Becauseitisnotyetahigh-wageemploymenthub,thegrowthoftheCountyhasbeen,andwillbe,tiedtotheeconomicsuccessesofitsneighbors.ThesesuccessesareincreasingandSantaRosawillbenefitinthesamewaythatitalwayshas.Duetothequalityofamenitiesthatattractwell-educated,high-earningresidents,themostrecentdatashowthatSantaRosahasthehighestmedianhouseholdincomeofanyFloridacountywestofJacksonvilleandthefourthhighestamongFlorida’s67counties.However,thereareworriesthattheCountyrisksbecomingavictimofitsownsuccess.Manyneighborhoodsindesirableareasarelargelybuiltout.Buildersreportthatincreasesinbuildablelotpriceshaveledthemtoholdbackonotheramenities,includingsquarefootage,astheyattempttomatchhomepricestoavailablehouseholdincome.Figure:RatioofVacantLotSalestoNewHomeSales,1992-2016

Giventheregionaljobgrowththatistocome,andSantaRosa’sroleasthepreferredhomeforthefamiliesthatfillthebestjobs,potentialnewresidentswillsoonfacepriceincreasesandorhomeamenitydeclinesunlessdevelopersareabletobringbuildablelotstothemarketatagreaterrate.Theratesofnewlotcreationandsalesofthelastdecadewillnotbesufficienttomeetanticipatedhousingdemandataffordableprices.WhileSantaRosa’spopulationdensitymightnotappeartobelargerelativetootherpartsoftheState,thelargeamountoflandtiedupinparks(BlackwaterRiverStatePark,GulfIslandsNationalSeashore),andmilitaryinstallations(EglinAFB,WhitingField)meansthatscarcityconstraintsarereal.

0.60.81

1.21.41.61.82

1991

1992

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cantlotssoldpern

ewhom

ebuilt

Source:MetroMarketTrends,FLDept.ofRevenueNALfile,author's calculations

RatioofVacantLotsSoldtoNewHomesBuilt,1991- 2016

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Muchofthedisruptionofthehousingboom/bustcyclethatconsumed2003-2013isbehindus.BoththenumbersoldandthemediansalepriceofnewhomesintheCountybottomedin2009,at482and$189,350,respectively.In2016,thosenumbershadincreasedto999,and$220,900.ThenumberofexistinghomessoldintheCountyin2016wasup90percentfromits2011troughof2,127homes,andthe2016medianexistinghomesalepricewasup31percentfromits2013trough.Salesofexistinghomesin2016,at4,037units,wereonlyslightlybelowtheboom-inducedhighof4,143reachedin2005.Lookingforward,thechallengesforSantaRosawillcenteraroundavailabilityandaffordability.Theseconcernsaremovingtotheforeasinventoriesofhomesforsalehavedeclinedandpricesforexistinghomeshaverisen.Affordabilityimproveswhenfamilyincomesrisefasterthanhouseprices,andwheninterestratesfall.Housepricescanstaylowaslongasbuildershaveaccesstoaffordableinputs,includinglabor,materials,andland.Goodjobcreationinthetwo-countymetroareaoverthenextseveralyearswillletwagesgrowandwillkeepinboundmigrationfromothercountiesandstatesathealthyrates.AhealthynationaleconomymeansthatthetraditionalretireedynamicthatletsnewhouseholdsmovesouthtoadopttheFloridalifestyleandNorthwestFloridaaffordability,isinplace.However,thestrongincreaseinthesalespriceforexistinghomesinrecentmonthsisconsistentwithdeclininginventories,anderodeaffordability.Themoremodestincreaseinnewhomepriceshelpsaffordability,butrisingbuildablelot,materials,andlaborpriceswillforcepricesupovertime.Mortgageinterestratesarepoisedtorise.FinancialmarketsexpecttheFedtoraiseinterestratesgradually,whichwillkeepmonthlypaymentsaffordable.Conventionalwisdomholdsthatsomepotentialhomebuyerswill“getoffthefence”andtrytobuybeforepricesrisemoreandbeforeinterestratesrise,soitwillbea“seller’smarket”forthenextseveralquartersandperhapsbeyond.However,asbothhomepricesandinterestratesmoveuplaterthisyearandin2018,fewerbuyerswillqualifyforthemortgageloanstheyneed,puttingaslowdownonsalesandpricegrowthatthatpoint.Itistooearlytosaywithconfidencewhenwewillhitthatpoint.Thisnotonlyhurtsaffordabilityfornewhomebuyers,butitalsostiflesmobilityofexistinghomeownersintheregion,asmoreofthembecomelockedinplace.Thisisbecauseanewmortgageforpurchaseofaneworexistinghomewillcomewithahigherinterestratethatraisesthemonthlypayment,evenwhenthedifferenthomebeingconsideredcomeswithapurchasepricenohigherthantheirexistinghome.AmongthefactorsthatargueforcontinuedrobustgrowthinthedemandforhomesistheongoinghiringassociatedwiththemultiyearexpansionofNavyFederalCreditUnion(NFCU)facilities,locatedsome17quickmileswestofAvalonBoulevard.Analysisdonein2015bytheUWFHaasCentercalculatedthatNFCUhiringwouldincreasejobgrowthratesforthetwo-countymetroareaby78percentrelativetotheirlongrunaverage.Additionally,thegrowthinmilitarybudgetsunderdiscussioninearly2017inWashingtonwillundoubtedlybringincreasedspendingtoSantaRosaanditsneighbors,particularlytothesouthendoftheCounty.The

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continuedgrowthintourismspendingforthelocalareaandtherevitalizationofthePensacolaurbancorewillalsobringgrowth.NocountywillbenefitmorethanSantaRosafromeachofthesetrends.TheMarch24,2017U.S.BureauofLaborStatisticsreleaseofbenchmarkrevisionsforthelastthreeyearsoflocalareaemploymentdatashows2016jobgrowthforEscambiaandSantaRosatohavebeenlargerthanhadpreviouslybeenreported.Further,hiringcommitmentsbymajorbusinessesintheregion,particularlyinNFCU,butalsoelsewhere,alongwithgoodlevelsofcapitalinvestmentintheregion,suggestthatgrowthwillcontinue.Giventhatboth2015and2016sawdecentinboundmigrationandwagegrowth,currentforecastsforlocalhousingmarketdemand,andthusunitssoldandmedianprice,willlikelyneedtoberevisedupward,particularlyiftheunusuallyhighjobgrowthissustainedoverseveralyears.Thesignsarethatitwill.Thepresenceoftheabovefactorsleadsustoviewtheslowdownof2008–2013astransitoryintheEscambia-SantaRosa-Okaloosalabormarket.Riskstoexistinggrowthforecastsaretotheupside,andthemostlikelypatternforSantaRosaincomingyearswillbetocontinuetoattractadisproportionateshareofhigher-incomepurchasersemployedacrosstheregion.Salesofnewhomeswillbeabletoexpandatratespreviouslyassociatedwiththe2003–2005housingboom,ifcapacityallows.Historically,salesofnewhomesinSantaRosaCountyaveraged654peryearforthe10yearsfrom2007to2016,whichincludedthehousingbust.2015and2016newhomesalesaveraged920,showingrecoveryfromthedepthsoftheGreatRecession.However,newhomesaleshadaveraged1,115peryearforthe10yearsfrom1997to2006,whichincludedthehousingboom.Populationgrowthforecastsbasedoncontinuedstrongjobgrowth,whencombinedwithtypicalnewhomepurchaseratespernewresident,indicatethat1,379to1,623newhomesperyearfromnowuntil2025willbeneededifprojecteddemandistobemet.Thus,whilehousinggrowthwillbeslightlylessthanitwasduringthepeakoftheboom,theCountymustbeready,withsufficientlotsinthepipelineforbuilderstobuy,forconstructionrateswellabovetheaverageofthelast10years.Fromtodayuntil2025,itisclearthatalmostallpopulationgrowthwillbeduetotwodemographicgroups.Oneisindividualsbornin1964orearlier(primarilyBabyBoomers)seekinghousingappropriateforahouseholdwithnochildren,andtheotherwillbeyoung(adultsaged30–45)familieswithchildren.Thatcomponentofthepopulationmadeupofadultsaged20-29and45–59willactuallydeclineoverthistime.Thus,theforecastsindicatethatasignificantpartofnewhousingdemandwillcomefromBabyBoomers,includingalargegroupofthoseaginginplaceandseekingsomethingdifferentfromtheirlongtimefamilyhome,aswellasfrominboundnewresidentswhofitFlorida’straditionalretireeprofile.Itappearsthatthereisrelativelylittleproductcurrentlyonthemarketdesignedforspecificappealtothiscohort.TheotherlargedemographicistheonethathaspropelledSantaRosagrowthoverthelastseveraldecades,whichisadultsaged30–45withchildreninthehome.

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Figure:HistoricalandProjectedPopulationGrowthbyAgeSegment

Withaveragehouseholdincomegrowthlikelytobeinthe3to3.5percentrangefromnowuntil2025,housingwouldbecomelessaffordableifhomepricegrowthweretobeinexcessofgrowthinpurchasingpowerofhouseholds.Tighteningsupplyinneighborhoodsservedbythebestschoolsandwiththebestcommutes,willkeephousepricegrowthinthoseareasaboveCounty-wideaveragehouseholdincomegrowth.Asintherecentpast,themajorityofthenewfull-timeresidentpopulationthatworkswillhavejobsoutsideSantaRosaCounty.Ifjobgrowthandcommutingpatternsoftherecentpastholdinthenearfuture,thenforeverynewresidentlivingandworkinginSantaRosa,therewillberoughly7newresidentswhochoosetoliveinSantaRosawhileworkingelsewhere.ThispointstothedesirabilityofSantaRosahomes,schools,affordability,andqualityoflifetofamiliesacrossNorthwestFloridaandbeyond.ItalsomeansthatthereisnocountyinNorthwestFloridathathasabiggerstakeintheeconomichealthoftheregionthanSantaRosa.Further,itmeansthatSantaRosagrowthisnotguaranteed.IftheCountydoesnotcontinuetoinvestintheschools,infrastructure,andservicesthathavemadeitattractive,thosepotentialnewresidentswillsettleelsewhere.ThebottomlineisthatSantaRosamustworktoprovidehighqualityoflifewithoutcompromisingthetraditionalaffordabilityofnewhomes.Ifitisabletodoso,itwillcontinuetobethecountyofchoiceforpotentialnewresidents.ThefollowingFigure(reproducedlaterinthereport)showsthattherecentupwardtrajectoryoftheSantaRosahousingmarkethasthepotentialtocontinue.Ifconditionsareright,thehousingmarketwillenablethequalityoflife,andtheeconomicimpactthathaveputSantaRosainthetoptierofFloridacountiesacrossarangeofincome,health,andeducationmetrics.

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65yrs+

55- 64yrs

45- 54yrs

35- 44yrs

0- 35yrs

Source:Woods&PooleEconomics, CEDDS,2016

PopulationGrowth,inthousands, byAgeSegment

2005- 2015

2015- 2025

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Figure:NewHomes,Pre-1950to2025

Furtherparcel-specificdetailonresidentialavailabilityandotherdescriptorsareprovidedinaMapAppendixfortheCountyoverall,andforPace,Milton,GulfBreeze,andNavarre.Thesedescriptorsinclude:residentialavailability(improvedvs.vacantresidential),ageofstructure(yearbuilt),qualityofimprovements(minimumtosuperior),homesteadstatus,Improvedresidentialpricepersquarefoot(appraised),andvacantresidentialpricepersquarefoot(appraised),amongothers.ALaborMarketForecastAppendixcontainsdetailsonprojectedoccupationalgrowthfortheSantaRosacommutingregion,aswellasdetailsonexpectedemploymentgrowthbyindustrysector.TheseappendicesareavailableontheHBAwebsite.

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Source:NAL67F201602VAB,FloridaDeptofRevenue,author's calculations

NewHomesBuiltAnnually, Pre-1950- 2015,andProjected,2016- 2025

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KeyFindings• PopulationgrowthinSantaRosaCountyisprojectedtoaverage1.9percentperyear

overthe2017–2025period.Thisgrowthwillbeconcentratedintwocohorts.Oneistheretireeagecohort,primarilyduetothesizeoftheBabyBoomerpopulation,andtheotheristhedual-earnerwithschool-agechildrencohort,whichhasbeenatraditionalsourceofSantaRosagrowth.

• Afteraccountingformultifamilydemandandreplacementofaginghousingstock,Santa

Rosahomebuilderswillneedtoprovideanaverageof1,498newsinglefamilyhomesperyearfrom2017to2025inordertomeetthedemandgeneratedbyprojectedpopulationgrowth.ThiswillrequiremorenewhomesperyearthanhavebeenbuiltandsoldinSantaRosainanyyearsexcept2003–2005.

• Therewillbesufficientdemandfornewsinglefamilyhomestosupportabsorptionofup

to760netnewunitsperyearthatmeetthelifestyleneedsoftheage65+population.Thesemightbeage-restrictedorage-targetedcommunitiesandmightincludeaclubhouse,walkingtrails,hobbycentersandrecreationalspace.Otherneedswouldlikelyincludesmallerlotsize,outdoormaintenance,andtheywouldperhapsbegated.Thiswillbethefastestgrowingsegmentofthepopulation,bothinpercentagetermsandinabsolutenumbers,overthenext10years.However,whiletheseniorcohortisalreadysubstantialinSantaRosa,asofyetthereseemtoberelativelyfewneighborhoodsthatprovidetheseamenities.

• Duetothesizeofthemillennialgeneration,andthetraditionalattractivenessofthe

SantaRosacommunity,therewillbesufficientdemandtosupportthepurchaseofupto352homesperyearthatmeettheneedsofyoungerfamilies,includingavailabilityingoodschooldistrictsandwithacomfortablecommuteandsafestreets.ThisisSantaRosa’straditionalsweetspotintheregionalhousingmarket.

• Theestimatedannualeconomicimpactofproductionof1,500newhomesperyearat

thecurrentmedianpricepernewhomeis$288millioninlocalincome,alongwith$25.8millionintaxesandotherrevenuestolocalgovernments,and5,327netnewjobsinthelocaleconomy.Toputthisinperspective,totalearningsfromjobslocatedinSantaRosain2016wereabout$2.16billion.

• SantaRosaisprimarilyasinglefamilyresidencemarket,highonneighborhoodquality

oflifeandlowonurbanamenities,andthiswillonlychangeslowly.U.S.Censusdataindicatethattheshareofmultifamilystructurebuildingpermitsissuedoverthe2001–2106periodwasonly4.2percentoftotalpermitsissued,versus26.8percentinEscambiaCounty,and28.7percentinOkaloosa.

• SantaRosa’sstrongappealcanbeseeninitscommuterbalance.U.S.Censusdatashow

thatthe21,795SantaRosanswholeavehomeeverydaytoworkinothercountiesisa

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largernumberthanthecommutingoutflowsoftheother12NorthwestFloridacountiescombined.

• TheSantaRosaresidentialrealestatemarketiscurrentlyhealthy,witharisingnumber

oftransactionsinboththenewandexistinghomemarkets.Priceincreaseshavebeenstrongestintheexistinghomemarket,ascompetitionhasletpricesrisetomorecloselymatchnewhomeprices.

• Inventoriesofhomesforsaleweredownby53percentinFebruary2017relativeto

2010,withdeclinesfromJuly2015onwardpickinguppace.

• Whilepricegrowthinuppertierhomesdominatedtherealestateboom,bottomtierhomeshaveexperiencedafastervaluegrowthratesincethetrough.Therearemarketopportunitiesatboththehighandlowendsofthespectrum.

• Aswithhousingmarketsnationwide,affordabilityinSantaRosawillbechallengedby

expectationsofincreasesinmortgageinterestrates,ascarcityofinventoryandafinancialregulatoryenvironmentnotasconducivetorealestatelendingasitoncewas.

• Affordabilitywillbechallengedbylocalfactorsincludingrisingcostsattributablebothto

thecostofbringingbuildablelotstomarket,andtohighermaterials,subcontractor,andlaborcosts.Theongoingrecoveryofconstructionvolumeandnewhome,aswellasexistinghomesales,pointstoapendingscarcityofinventory.

• Concentrationisincreasinginthehome-buildingmarketovertime.Thenumberof

buildersdeliveringnewhomestocustomersisactuallylowerthanitwasagenerationago,in1991.However,survivingbuildersarelarger,withtheaveragenumberofhomesdeliveredperactivebuilderperyearbeingtriplewhatitwasagenerationago.

• Higherrequiredcapitallevelsforso-calledhigh-volatilitycommercialrealestate

(HVCRE)assetssuchasundevelopedlandarethelawofthelandforlenderstoday.Thishasstymiedfinancingfortheflowofnewlandprojectsthroughthepipelinethatwouldhavekeptthesupplyofbuildablelotshigh.

• Itisestimatedthatrecentmovestakingthemortgageinterestratesfrom3.5to4.5percentwouldeliminateabout4.1percent,ormorethan2,600,householdsfromqualifyingforthatloan.Anincreaseto5.5percentwouldkeepanadditional3,000householdsfromqualifyingtopurchasethelate-2016medianpricedhome.

• NoothercountyinNorthwestFloridaisasconnectedtoneighboringcountiesasSanta

Rosa.MoreSantaRosansgetupandgotoworkoutsideSantaRosathaninsidetheCounty,andthistrendhasgrownovertime.U.S.Censusdatatellusthatfrom2002to2014,thenumberofSantaRosansworkinginSantaRosaincreasedby1,075,or6.2

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percent,butthenumberofSantaRosansworkingoutsideSantaRosaincreasedby7,473,or22.4percent,overthe12-yearperiod.Thismeansthatforevery1newjoblocatedinSantaRosaandheldbyaSantaRosaresidentoverthe2002–2014period,therewere7newjobslocatedoutsideSantaRosaandheldbyaSantaRosaresident.

• ContinuedprosperityoftheCounty,includingeventualdevelopmentofadditionalhigh-

wagelocalbusinesses,willrelyontheabilityoftheCountytocontinuetomeetthehousingneedsofcommuting,dual-income,middle-classandupper-middle-classfamilieswithchildren,andofretirees.

• Localjobgrowth,withtheongoingshiftintoservicestargetedatthegrowingretiree

andthetourismsectors,willnotbesufficienttosupportneighborhooddevelopmentsimilartothatofthelastdecade.SantaRosawillneedtocontinuetoattracthigher-incomeregionalcommuters.

• Familieswithchildrenneedhighqualitypublicschoolsthatserveneighborhoodswitha

reasonablecommutetimetohigh-wageemploymentcenters.Newschoolsmustbeplannedandbuiltwiththisinmind,asschoolsarounddesirableexistingneighborhoodswiththesecharacteristicsareatenrollmentcapacity.

• WhileOkaloosaiswhereFlorida’smilitaryworks,SantaRosaiswhereFlorida’smilitary

choosestolive.ThevalueofSantaRosa’sdeployedservicememberpropertytaxexemptionasashareofassessedvalueis26timesthestateaverageandis24percenthigherthantheshareinneighboringOkaloosa,thesecondhighestcountyinthestate.MilitaryhouseholdsareparticularlyconcentratedinNavarre,with72percentofmortgageloansfornewhomepurchasebeingVAloansin2015/2016.

• Becauseitsrapidgrowthhasbeenfocusedonthehousingneedsofcommutingworkers,

SantaRosadoesnotyethavealonghistoryofmeetingtherealestateneedsofseniors.Whilethecurrentseniorpopulationissubstantial,thereismuchuntappedmarketpotentialremaining,giventheprojectedgrowthinthiscohort.Theseresidentsdonotplacedemandsontheschoolsystem.

• Thereentryofthepublicly-tradednationalbuildersintotheSantaRosamarketprovides

alargevolumebuilderwithaccesstolowercostcapitaltopurchasebuildablelotsfromsubdivisiondevelopers.Theyhavebroughtfinancialexpertiseandascaleofoperationsinconstructionthatallowsvolumediscountsinpurchaseofconstructionmaterials.Thishasputcompetitivepricepressuresandbuildablelotavailabilitypressuresontootherbuildersinthenewhomemarket.

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HowCanCountyGovernmentAddressHousingIssues?Competitionisimportantinhomebuildingtoencouragethechoiceandpricecompetitionthatensuresaffordability,particularlyintheentrylevelmarket.However,concentrationinSantaRosahasincreasedovertime.Theaveragenumberofhomessoldduringayearbyabuilderincreasedfrom3.6peryearin1991to11.1peryearin2016,atthesametimeasthenumberofbuildersactiveinthemarketduringanygivenyearfellto79percentofits1991level.In2016,fewerthanadozenofthe90activebuilderssoldmorethan20homes.Onlythreesoldmorethan100,and51ofthe90soldtwoorfewer.TheCountycanencouragecompetitionandaffordabilitybystrikingthebestbalancebetweenpublicinterestsanddeveloperandbuilderinterests.Becausedelayiscostlytodevelopersandbuilders,thiswouldincludereductionsinregulationsthatmightbeduplicativeofstateorfederalrules.ThereputationenjoyedbytheSantaRosasubdivisiondevelopmentandpermittingprocess,ofbeingabletogetthejobdonemorequicklyandwithlesshasslethansurroundingcounties,hastobeguardedzealously.Further,somesubdivisionregulationsaretoughtoimplementifthecostcanonlybespreadacrossasmallnumberofbuildablelots.Ifchangesinsubdivisionregulationscanbemadethatencouragethesmallersubdivisionsthatarenotfinanciallyattractivetothelargerbuilders,thiswillhelpkeepsmallerbuildersinthemarket.Giventhebuildoutofsomeareasthatarehighlydesirabletocustomers,smaller-scaledevelopmentswillincreasinglybecomenecessaryfortheCountytocontinuehealthygrowthinpopulationandincome.Subdivisiondevelopmentiscostly.Installationofstreets,utilities,andneededinfrastructurecaneasilyruninthe$15,000-$25,000rangeperlot,evenbeforeconsideringthecostoftheunderlyingland.Theburdenofinfrastructuredevelopmentcostwillinevitablyaffectaffordabilityandmustthereforebeevaluatedcarefully.Itisclearfromthedatathatthesupplyofeasilybuildablelotshasdiminishedwiththegrowthofthehousingstock.MeasuresthattheCountycouldtaketoencouragebringinglotstomarketwillimproveaffordability.Thisisparticularlyimportantgiventhatfederalmeasureshavebeenputinplacetolimitthebanklendingwasformerlyavailabletodevelopbuildablelots.SantaRosaanditsneighborshavebeenattheforefrontofFlorida’smovementtoimplementthecareeracademiesthatbuildworkforcecredentials.Inaneconomywheretechnologyandglobalizationlimitjoboptionsinmanytraditionaloccupations,constructiontradesremainaviablehigh-wageoptionthatcan’tbeoutsourcedtoothernations.Housingaffordabilitywillbehelpedbyanadequatesupplyofskilledtradesmenandwomen,andbyreadyavailabilityofskilledsubcontractors.SantaRosaneedstoputnewschoolswherepeoplewanttolive.Infrastructurewillbeneededandperpersoninfrastructurecostsarelessenedwithdensity.AttemptstodrivedevelopmenttooutlyingSantaRosaareaswillsendpotentialresidentstoothercounties.

16

Figure:MapofParcel-specificPotentialResidentialAvailability

Source:FLDOR,NAL67F201602VAB

17

IntroductionSantaRosaCountyhashadaComprehensivePlaninplacesince1990,butin2013begantopreparethesecondmajorrevisiontothePlan.Thependingrevisionsareintendedtotaketheplanninghorizonouttotheyear2040.TheCommissionandCountystaffhaveestablishedprotocolstoreceivepublicinputintotheplandevelopmentprocess.AsisnotedontheSantaRosaCountyGovernmentwebsite:

TheComprehensivePlanisanofficialpublicdocumentadoptedbytheSantaRosaCountyCommissionthatsetsforththecounty’spoliciesandguidesdecision-makingrelatedtothephysicaldevelopmentofthecounty.Itisformulatedinbroadtermsandcreatestheframeworkforfutureimplementation,suchasparcel-specificzoningorthedesignofinfrastructureprojects.Thepurposeofthisdocumentistoevaluateexistingconditionsandadequatelyplanforfutureexpansionrelatedtoprojectedgrowthrates.

SantaRosaCountyincludeshousinggoalsaspartofitscomprehensiveplan.Goal3.1isto“Ensuretheprovisionofsafe,affordableandadequatehousingforthecurrentandfutureresidentsofSantaRosaCounty,”whileObjective3.1.Aisto“providearegulatoryenvironmentthatencouragesacompetitivehousingmarketbetweenprivatesectorhousingprovidersandencouragestheprovisionofhousingforallpresentandfutureresidents,includingworkforce,collegegraduate,andlowincomehouseholds.PurposeandScopeofthisStudyInordertohelpdefineandmeettheCounty’shousinggoalsandobjectives,theHomeBuildersAssociationofWestFlorida(HBAWF),theSantaRosaCountyChamberofCommerce(SRCOC),andtheSantaRosaCountyBoardofRealtors(SRBOR)haveagreedtoprepareandpresentthe“StateofHousingReport”(henceforthSHR)annuallytotheSantaRosaCountyBoardofCountyCommissioners(BOCC).AssetoutintheCountyComprehensivePlanPolicyDocument,theSHRmust:

…quantifythenumberofhousingunitsprovidedinthepreviousyearbyarea,type,andprice;itwillevaluatethesupplyanddemandforhousingbystandardincomeranges;evaluatetheavailabilityofaffordablehousingforspecialincomegroupssuchascollegegraduates,serviceindustries,andpublicsectoremployees;measurethechangeinhomeownershiprates;andprojecthousingneedsforthenextyear.Thereportwillalsoidentifyfactorswiththepotentialimpactthehousingmarketsuchasdevelopmentregulations,theavailabilityofinfrastructure,andmarketforcesandmakerecommendationsasappropriate.

InassessingtheSantaRosaCountyhousingmarket,thecurrentstudypresentscounty-wideinformationaswellasdrill-downs,primarilyviamappingandpriceandquantitydata,fortheurbanizedareasofMilton,Pace,GulfBreeze,Navarre,andJay.WhileinformationontheareasofNavarreBeach,Holt,andothernamedareasisalsoavailablefromdatasources,thevolumeoftransactionsthatoccurinthoseareasarenotsufficienttodrawinferencesaboutpriceand

18

quantity,andothertrends.Inassessingtheeconomicdriversunderlyinghousingmarketneedsandperformance,thecurrentstudyidentifiesthegeographieswherepeoplework,wheretheyhavetheirleisureactivities,andwheretheyshopandplay.ForSantaRosa,theseactivitiesoccurnotonlywithinSantaRosaCounty,butalsoinEscambiatothewest,andOkaloosatotheeast.ThereisnoothercountyinNorthwestFloridathatsendsahighernumberofpeopletowork,generallyathigh-wagejobs,inothercountieseveryday.Thesefamilieswillhavelookedatmanyotherneighborhoodsinothercountieswheretheycouldhavelocated,buttheychoseSantaRosabecauseitbestmeetstheirneedsintermsofvalueandlifestyle.ThecontinuedreputationofSantaRosaasthecountyofchoiceinNorthwestFloridarequiresplanningthatidentifiesandprovidesapathforwardintermsofinfrastructure,zoning,andservicesthatwillsupportSantaRosanstodayandinthefuture.

NationalHousingMarketTrendsandTheirImpactonSantaRosaTheSantaRosaresidentialrealestatemarketisaffectedbybothnationalandlocalfactors.Nationally,housinghasmostlyrecoveredfromtherealestateboomandsubsequentbustthatdominatedthemarketforatleastthelast15years.Aglutofinexpensivefunding,muchofitprovidedbyourglobaltradingpartners,aidedbyeasymoneyfromtheFed,broughtmortgageinterestratesintheearly2000sdowntolevelsnotseensincethe1960s.Aconcurrentexpansionofsubprimemortgageorigination,andsaleofthosemortgagesintotaxpayer-guaranteedmarkets(viaFannie,Freddie),expandedthenumberofhouseholdsabletoborrow.TheseissueswerecompoundedbyfinancialderivativesandleverageamonghighlyinterconnectedWallStreetfinancialinstitutions.Together,theyensuredthatthehousingdownturnthatfollowedthe2003–2005boomledtoahousingmarketmeltdownthatculminatedintheGreatRecession.Asthefastestgrowinglargestate,andanexpectedrecipientofstrongcontinuedgrowthduetopendingBabyBoomerretirements,Florida,andSantaRosa,wererightinthemiddleofboththeboomandthesubsequentbust.Figure:MedianSingleFamilyHomeValueforSantaRosaandtheNation,1994-2016

$80,000$100,000$120,000$140,000$160,000$180,000$200,000$220,000

1996-04

1997-02

1997-12

1998-10

1999-08

2000-06

2001-04

2002-02

2002-12

2003-10

2004-08

2005-06

2006-04

2007-02

2007-12

2008-10

2009-08

2010-06

2011-04

2012-02

2012-12

2013-10

2014-08

2015-06

2016-04

MedianSingleFamilyHomeValue,Apr94- Dec16

Nation

SantaRosa

19

AscanbeseenintheFigureabove,thesinglefamilyhomevaluationrun-upinSantaRosalaggedthenationalincreaseslightlyatfirst,butduringthehousingboomcaughtupto,andexceeded,nationalprices.Themedian-pricedsinglefamilyhomeinSantaRosawasvaluedat$92,200inmid-1996,butthenroseinvaluetoapeakof$206,000inlate2005andearly2006.Themedianvaluethenfelloverthenext5yearstothe$149,000to$152,000range,whereitstayeduntiltheendof2012,untilbeginningitsrisetoitsJanuary2017valueof$180,400.Nationally,thatsinglefamilyhomeoriginallyvaluedat$99,600inmid-1996hititshighof$196,600inmid-2007,beforefallingtoalowof$151,500inlate2011.ByJanuaryof2017thenationalmediansinglefamilyhomepricehadrisenbackto$195,300.TheSantaRosamediansinglefamilyhomevaluethusremains12.7percentbelowits2005peakinJanuary2017,whilethenationalmediansinglefamilyhomevalueisonly1.2percentbelowitsmid-2007high.Theboom/bustcyclewasparticularlysevereincoastalSouthFloridacounties.OnlyTheVillages,amongFloridaurbanareas,hasrecoupedmoreoftherecession-inducedmedianpricegapthanSantaRosaCountyandneighboringEscambiaCounty.InJanuaryof2017Miamiregistered19percent,Tampa16percent,Orlando22percent,PanamaCity26percent,andCrestview-FortWalton25percent,belowtheirpre-busthighs,versus13percentforSantaRosa.SomeofthiswasbecauseSantaRosamedianpricesneverroseasmuchasinsomeFloridacounties.Ironically,itwasatleastpartlybecauseofthelackofavailablebeachfrontproperty(itistiedupinnationalseashoreandmilitarybases)thatSantaRosaavoidedtheseverepricepeaks,troughs,andassociatedillsofmanyFloridacounties.Thefactthatnationalvalueshavegrownmorerapidlythanlocalvaluesfrom2013onwardhashelpedaffordability.Whilemanyworkerswhomoveforajobhavelimitedchoicesintermsofrelocationdestination,affordabilitywillbeparticularlyimportantinattractinginboundmigrationofpotentialnewresidentswhoareabletochoosebetweenretirementvenues.Figure:MedianValueperSquareFootforSingleFamilyResidencesinSantaRosaasaPercentoftheNationalValue,1996-2016

70%75%80%85%90%95%

1996-04

1997-02

1997-12

1998-10

1999-08

2000-06

2001-04

2002-02

2002-12

2003-10

2004-08

2005-06

2006-04

2007-02

2007-12

2008-10

2009-08

2010-06

2011-04

2012-02

2012-12

2013-10

2014-08

2015-06

2016-04

Percento

fU.S.m

edian

Source:ZillowHomeValueIndex,2017

MedianValueperSquareFoot, SantaRosaasPercentofU.S.,Apr96-Dec16

AllSantaRosaHomes

20

ThemovebytheFedtoreturninterestratestoamorenormallevelwillundoubtedlyleadtohigherratesonthe30-yearconventionalfixedratemortgageloan.FinancialmarketsexpecttheFedtoraiseinterestratesgradually,whichwillkeepmonthlypaymentsaffordable.Conventionalwisdomholdsthatsomepotentialhomebuyerswill“getoffthefence”andtrytobuybeforepricesrisemoreandbeforeinterestratesrise,sothemarketshouldbestrongforthenextseveralquarters.However,asbothhomepricesandinterestratesmoveuplaterthisyearandin2018,fewerbuyerswillqualifyforthemortgageloanstheyneed,puttingaslowdownonsalesandpricegrowthatthatpoint.Itistooearlytosaywithconfidencewhenthemarketwillhitthatpoint.Figure:RateofInterest,30-YearConventionalMortgageLoan,1972-2017

Theincreaseininterestrateswilldampenaffordability.Whilerateswereinthe3.5percentrangespriortotheNovember2016election,theythenrosealmostimmediatelytothe4.1to4.3percentrange(seeFigurebelow),wheretheyhavestayedforfivemonths.Financialmarketcommentatorshavesaidthatthisriseisduetoexpectationsforanexpansionaryfiscalpolicystancethatwouldincorporatesomecombinationoftaxcutsanddefenseandinfrastructurespendingincreases.Whilethereisstillsubstantialuncertaintyabouttheformthesemeasuresmighttake,additionaldeficitspendingwilltendtodriveinterestratesup.HeightenedinflationexpectationsandanimprovedjobmarketareexpectedtoleadtheFedtoraiseshort-terminterestratesaswell.Itseemsreasonabletothinkthat,barringanotherrecession,the30-yearfixedratemortgageloanwillbeinthe4.5to5percentrangeayearfromnow,andthe5to6percentrangeforseveralyearsbeyondthat.

0

5

10

15

20

Mar-72

Mar-74

Mar-76

Mar-78

Mar-80

Mar-82

Mar-84

Mar-86

Mar-88

Mar-90

Mar-92

Mar-94

Mar-96

Mar-98

Mar-00

Mar-02

Mar-04

Mar-06

Mar-08

Mar-10

Mar-12

Mar-14

Mar-16

Percent

Source:FreddieMac,FederalReserveEconomic Data

30-YearFixedRateMortgageRate,1972- 2017

21

Figure:RateofInterest,30-YearConventionalLoan,2016-2017

Changesinthenationalfinancialregulatoryenvironmenthavealsoaffectedthewillingnessandabilityofbankstolendmoneyintherealestatedevelopmentprocess.So-called“HighVolatilityCommercialRealEstate(HVCRE)”lendingtypicallyincludesloanstodeveloperswhointendtoconvertavailablelandintosubdivisions.Becauseofthehistoricalvolatilityoflandprices,andthepossibilityofbankruptcybyborrowers,theseloansaretypicallyclassifiedasrisky.Thegeneraltrendinrecentyearstowardslessleverageforbanks,asembodiedintheBaselIIIaccords,meansthatU.S.banksmustholdmorecashorequityascollateralagainstthepossibilityofadefaultbyasubdivisiondeveloperonaloan.Thisreducedleveragereducestheattractivenesstothebankofmakingthatsubdivisiondevelopmentloanversusdeployingtheiravailablecapitalinadifferentway.Sincethepriceofabuildablelotistypicallythelargestsingleexpensebuiltintothesalepriceofanewhome,lackofsupplyinthesubdivisionpipelinewillraisenewhomeprices.Thecostofresidentialconstructioninputshasbeenhighlyvolatileovertime.TheFigurebelowsuggeststhataperiodofrelativecalminconstructioncostsmaybeendingasconstructioninputpricesheadbacktotraditionallyhigherratesofinflation.Localbuildersreferencedincreasesinlumberandsheetrockprices,alongwithbuildablelots,andashortageofskilledlabor,asfactorsthattheyareseeingintheearly2017market.

3.4%3.6%3.8%4.0%4.2%4.4%

Source:FreddieMac,FederalReserveEconomic Data

30-YearFixedRateMortgageRate,3/31/16- 3/30/17

22

Figure:AnnualizedInflationinResidentialConstructionInputs,1994-2017

Severalothermarketdriverswillbedifferentoverthecomingdecade.OneisthathomeownershiprateshavedeclinedinthewakeoftheGreatRecession,particularlyforyoungerhouseholds.TheU.S.Censuspublishesdataregardinghomeownershipratesbyagesegment.Theserateshavedeclinedsincepeakingintheearlypartofthedecadeofthe2000s,andthatrateofdeclineincreasedforyoungerhouseholdsfollowingthefinancialcrisisandGreatRecession.Whileallhouseholdswillneedaroofovertheirheads,thedecliningownershipratewillskewforecaststowardsrentalhousing,eventhoughhomeownershipcontinuestoberelativelymoreattractivefinanciallythanrenting.Anotherdifferenceisthatthepopulationcontinuestoageandhouseholdsizesbecomecorrespondingsmaller.Theaveragehouseholdsizeforthe65–74-year-oldsegmentnationallywas1.91in2012,accordingtotheU.S.Census,whileitwas3.34forhouseholdsaged35–44.Duetoaging,Millennials(birthyears1982to2004)haverecentlyovertakentheBabyBoomers(birthyears1946–1964)asthelargestgeneration.Overthecomingdecade,itisthecombinedgrowthofthosetwosegmentsthatwilldriveallofthenetnewgrowthinSantaRosa.

-40

-30

-20

-10

0

10

20

Mar-94

Mar-95

Mar-96

Mar-97

Mar-98

Mar-99

Mar-00

Mar-01

Mar-02

Mar-03

Mar-04

Mar-05

Mar-06

Mar-07

Mar-08

Mar-09

Mar-10

Mar-11

Mar-12

Mar-13

Mar-14

Mar-15

Mar-16

Source:U.S.BureauofLaborStatistics, FederalReserveEconomics Data,author's calculations

RateofInflationforInputstoResidentialConstruction, Jan94- Feb17

23

Figure:HomeownershipRatesbyAgeSegment,1982-2016

Itwasasignoftheweaknessofthehousingmarketthatpeoplebecamemorelikelytodefaultontheirmortgageloanthanontheircarloan.Highleverageinhousinglending,alongwithfallingprices,meantthatworkerswouldratherkeeptheircarthantheirhouse.Figure:DelinquencyRateonSingleFamilyResidentialMortgages,1991-2016

Overall,however,thelowinterestratesassociatedwithexceptionalratesofmoneysupplycreationbytheFedhaveallowedmortgagedebtburdenstoeasetohistoricallylowlevels.Whilethathelpsaffordability,itraisesthepossibilityofahousingslowdownwhenratesreturntomorenormalhistoricallevels.

024681012

Jan-91

Mar-92

May-93

Jul-94

Sep-95

Nov-96

Jan-98

Mar-99

May-00

Jul-01

Sep-02

Nov-03

Jan-05

Mar-06

May-07

Jul-08

Sep-09

Nov-10

Jan-12

Mar-13

May-14

Jul-15

Sep-16

Percent

Source:FederalReserveBoardofGovernors, FederalReserveEconomic Data

DelinquencyRates:CreditCardDebt,SingleFamilyResidentialMortgageDebt

MortgageDebtCreditCardDebt

24

Figure:MortgageDebtServiceExpenseasPercentofDisposablePersonalIncome,1980-2016

LocalHousingMarketDriversAffectHomesPricesandAvailabilityThehousingmarketboomandbusthaditsowncharacteristicsinSantaRosa.Oneofthemostimportantwasthebuildoutofsomeofthe“bestandeasiest”partsoftheCounty.Thesewerebuildablelotsinsubdivisionswithfewwetlandsissuesandlittleneedforexpensiveimprovements.GoodavailabilityataffordablepricesiskeytoSantaRosa’scompetitiveadvantageinhousing.Theeconomicprofileofthethreecountiesthatwillprovidethejobsthattheseworkingfamiliesholdischangingovertime.ThefamiliesthatchooseSantaRosawillbewhite-collarratherthanbluecollar,withhouseholdersfromPaceandGulfBreezecommutingintothePensacolaurbancore,andhouseholdersintheSouthendoftheCounty,eastofGulfBreeze,commutingtothehigh-wagejobsatHurlburtFieldandEglinAFB.ThejobgrowthwithinSantaRosawillofcoursebedrivenbybusinessneeds,whichwillbefocusedonprovidingagrowingresidentpopulationwithlocaloptionsforshopping,eating,healthcare,education,andotherservices.ThecommutetoEscambiawillbedrivenbygrowthinfinancialservicesandprofessionalservices,whilethecommutetoFortWaltonwillcontinuetobedrivenbymilitaryandcivilianemployeesatthemilitarybases.TheuniquerolethatSantaRosaplaysintheregionalcommunityashometohigh-earningfamilieswhovalueitsschooldistrictandotheramenitieswillpaydividendsinthehousingmarketoverthecomingyears.Duetothehighshareofresidentswhocommutetogoodjobs,SantaRosa’shousingaffordabilityislikelytostaystrong,ashouseholdincomesgrowataratemoresimilartothenationthanthatforecastedforFlorida.Ofthefactorsthataretheprimarydriversofaffordability,interestratesandbuildinginputcostsaresimilaracrossthenation(withtheexceptionoflandprices),whilejobgrowthandearningscandiffersubstantially.ThetrendoffallingoutputperworkerthathascharacterizedFloridaasitshiftedawayfromconstruction,realestatedevelopment,andfinanceintheyearsfollowingtheGreatRecession,widenedtheincomegapwiththenation.However,SantaRosaisprojectedtocontinuetoattractthemore

44.55

5.56

6.57

7.5Jan-80

Sep-81

May-83

Jan-85

Sep-86

May-88

Jan-90

Sep-91

May-93

Jan-95

Sep-96

May-98

Jan-00

Sep-01

May-03

Jan-05

Sep-06

May-08

Jan-10

Sep-11

May-13

Jan-15

Sep-16

Percent

Source:BoardofGovernors oftheFederalReserveSystem,FederalReserveEconomic Data

MortgageDebtService:PercentofDisposable PersonalIncome1980-2016

25

highly-educated,higher-earninghouseholdswhoseincomewillkeeppacewiththenationaleconomy.EmploymentTrendsTheregionismovingawayfromdominantemploymentclustersinmilitary,manufacturingandagriculturethatwerethecoreoftheSantaRosaeconomytwogenerationsago.Itisnotthatthesesectorsarenotrobust;theyare,buttheyaresubjecttoincreaseduseoftechnologytoreplaceworkersinuniformorontheshopfloor.ThecomparisonprovidedbelowillustratesthesizeofthesectorsoftheSantaRosaeconomyin1970andin2015.Ascanbeseen,thefederalmilitaryandciviliansectorshaveshrunkfromabout27percentoftheCounty’sjobsin1970tolessthan5percenttoday.Manufacturinggeneratedabout12percentofjobsinSantaRosatwogenerationsago,butonlytwopercenttoday.Farmemploymentwentfrommorethan6percenttolessthantwopercent.Theseoncedominantsectorshavebeenreplacedintheemploymenthierarchy.Healthcare,leisureandhospitality,andretailtradenowdominatethejobgrowthcategoriesforNorthwestFloridaandforSantaRosa.

26

Figure:EmploymentSharebySector,1970and2015

TheUWFHaasCenter,aspartofaU.S.EconomicDevelopmentAdministrationprojecttoexaminetheregionaleconomyinthewakeoftheoilspill,producedforecastsofjobslocatedwithinSantaRosaCountybyeconomicsector,andforecastsofgrowthinspecificoccupationslocatedinSantaRosaCounty.TheseTablesarereproducedimmediatelybelow.Thetablesaresortedbythenumberof2016jobslocatedinSantaRosaCounty.Thefirstofthetwochartsshowstheeconomicsectorinwhichthejobsarelocated.Publicschools,limited-servicerestaurants,andfull-servicerestaurantsarethelargestjobgeneratingsectors.Theprojected5year(2016–2021)jobgrowthshowshowmanynet(afternettingoutretireesandotherjobleavers)jobsareexpectedtobecreatedby2021,withthelastthreecolumnsshowingcurrentearningsperjobinthatsectorlocallyandforthenation.Thecolumnmarked“LQ”referstothelocationquotient,whichisameasureoftheshareofthelaborforceinthatsector,comparedtothenationalshareinthatsector.AnLQofonemeansthatourlocaleconomyhasthesameshareofworkersinthatsectorasdoesthenationaleconomy.AnLQof1.15wouldmeanthatourlocaleconomyhas15percentmoreworkersinthatsectorthanwouldbeexpectedrelative

0% 5% 10% 15% 20% 25%

FarmEmploymentForestry,Fishing,Other

MiningUtilities

ConstructionManufacturing

WholesaleTradeRetailTrade

Transportation,WarehousingInformation

FinanceandInsuranceRealEstate,RentalandLeasingProfessional/TechnicalServices

ManagementofCompaniesAdministrativeandWasteServices

EducationalServicesHealthCareandSocialAssistanceArts,Entertainment,Recreation

Accomodation,FoodServiceOtherServices,exceptPublicAdmin

FederalCivilianFederalMilitary

StateandLocalGovernment

Source:Woods&PooleEconomics, CEDDS2016

EmploymentSharebySector,2025,2015,1970

2025

2015

1970

27

tothenation,whileanLQof.85wouldmeanwehave15percentlessthanthenationalaverage.Thegreenhighlightsareforvaluesthatareabovethelocalaverage.Table:ProjectedGrowthinJobsLocatedinSantaRosa,bySector,2016-2021

Source:HaasCenter,2017Thefederalstatisticalagenciesalsoprovideinformationaboutthenumberofpeopleemployedinparticularoccupationsinalocaleconomy.Hereweseethatthetopfiveoccupationsin2016forjobslocatedinSantaRosawerefoodpreparationandserving,retailsalesperson,cashier,military,andcustomerservicerepresentative.Whatcanbeseenisthatourlocalmilitarymissionsarewell-paidrelativetothenationalaverage,butthatalmostnogrowthisexpectedinmilitaryemploymentoverthenextseveralyears.Table:ProjectedGrowthinOccupationsLocatedinSantaRosa,2016-2021

Source:HaasCenter,2017Thelessontobetakenfromthewithin-SantaRosaemploymentforecastsistwo-fold.Onepointisthat“retailfollowsrooftops,”sothatthehigh-growthoccupationsarethosethatprovideservicesneededbytheresidentcommunity.Withtheexceptionofthemilitaryjobs,customerservicerepresentatives,andpossiblyofficeclerks,thetoptenoccupationsarefocusedonleisureandhospitalityandhealthcare.However,high-wagejobgrowthwillinevitablyevolveasentrepreneursfindthatSantaRosahasbuiltthelivable,well-educated,affordable,well-runcommunitywheretheywouldliketobuildtheirbusiness.TheotherlessonhereisthatSantaRosa,untillocalhigh-wagegrowdevelopsitsownsustainablemomentum,willneedtocontinuetoattractthebestandthebrightestofthewell-educatedhouseholdsthatcommutetoworkinneighboringcounties.TheStateofFloridaalsopublishesoccupationalforecastsviaCareerSourceFlorida.PleaseseetheForecastAppendixforthisstudy,availableontheHBAwebstie,toviewmoredetailfor

28

WorkforceDevelopmentRegionsI(EscambiaandSantaRosa),andII(OkaloosaandWalton).Aslongasschoolsaregoodandtransportationandothercriticalinfrastructureneedsevolvetomeetcommunityneeds,thosehigh-wagehouseholdswillseriouslyconsiderSantaRosaCounty.CommutePatternsItisnotanexaggerationtosaythattheSantaRosahousingmarketlivesanddieswithdecisionsbyworkerscommutingfromthehighamenityneighborhoodsofSantaRosatotheemploymentcentersofEscambiaandOkaloosa.U.S.Censusdatatellusthatin2014,themostrecentyearofdata,therewere21,795moreworkersexitingSantaRosaboundforotherplacesofworkthantherewereworkerslivinginothercountiescommutingintoSantaRosa.Farfrombeinganegative,thisisasignthatpeopleandfamilieswhocouldchoosetoliveanywherewithincommutingdistanceoftheirworkplacechoosetoliveinSantaRosa.ThesepeoplevotewiththeirfeetandtheirpocketbookstoenjoythelifestyleamenitiesthatSantaRosahastooffer,andthenmakethecommutetowork.AsameasureofhowstrongtheSantaRosaresidentialattractionis,onecanlookacrossthe13countiesprofiledbytheUWFHaasCenterintheCountySnapshotsectionofthe2017NorthwestFloridaForwardplanproducedbyHaas,Florida’sGreatNorthwest,andTIPStrategies.Ofthe13countiesstretchingfromEscambiatoWakulla,9hadnetcommuteroutflowsand4hadnetcommuterinflowsduringthemostrecentdatayear.SantaRosa’snetoutflow,at21,795,waslargerthanthe19,529netoutflowoftheother8outflowcountiescombined.Infact,oftheSantaRosanswhoreportedtotheCensus’AmericanCommunitySurveythattheycommutedtowork,moreofthemcommutedtoworkinEscambiathancommutedtoworkinSantaRosa.Escambia,SantaRosa,andOkaloosaarejoinedatthehipeconomically.Escambiacannothaveahealthyurbancore,andOkaloosacannotemploythemilitaryandcivilianstaffneededtherewithoutahealthySantaRosa.Conversely,SantaRosacannotthrivewithoutsuccessfuleconomicdevelopmentinneighboringcounties.

29

Figure:NetCommutingFlows,2002-2014

Source:HaasCenter,2017WheredoResidentsWork?Muchofthismigrationoccursasheadsofhouseholdstakenewjobsandsearchfordesirablehousingandamenities.TheSantaRosahousingmarketdependscriticallyontheavailabilityofemploymentwithinareasonablecommutingdistanceforhouseholdsheadedbymenandwomenwhoareinthelaborforce.TheoverwhelmingmajorityofthejobsthattheseSantaRosansholdarelocatedinEscambia,SantaRosa,andOkaloosaCounties.ThedatashowthattheintegrationofSantaRosansintoalargerregionaleconomyhasgrownovertime.TheLongitudinalEmployer-HouseholdDynamics(LEHD)programispartoftheU.S.CensusBureauandproducesanddisseminatesdataaboutoriginsanddestinationsofcommutesforworkersacrossthenation.2002istheearliestdatayearthatisavailableand2014isthemostrecent.WhatthedatashowforSantaRosaCountyisthatemploymentofSantaRosanshasrisenfromanestimated50,646in2002to59,194in2014.Ascanbeseenbelow,thisincreaseof8,548,or16.9percent,inthenumberofworkingSantaRosansoverthe12-yearperiodislargeenoughsothattheincreaseof1,075SantaRosanswhoworkinSantaRosaactuallyrepresentsadecrease,from34.2to31.1percent,intheshareofworkingSantaRosanswhoworkinSantaRosa.ThenumberofSantaRosansworkinginSantaRosaincreasedby1,075,or6.2percent,butthenumberofSantaRosansworkingoutsideSantaRosaincreasedby7,473,or22.4percent,from2002to2014.

30

Table:WhereSantaRosansWorkedin2002and2014

EscambiaandOkaloosaclearlydominatethecommutingoutflow-takentogether,theyemploy3.4timesthenumberofSantaRosansasothercountiescombined.However,thisdoesnotindicateaone-wayexodusfromSantaRosa.ThesameLEHDdatashowthatsome3,195OkaloosansworkedinSantaRosain2014,upfrom1,601in2002.Therewere8,445EscambianswhoworkedinSantaRosain2014,upfrom7,386in2002(thesefiguresareforEscambiaCounty,Florida;therewerealsosome894fromEscambia,ALworkinginSantaRosain2014).Thus,theincreasingintegrationgoesbothways;moreregionalresidentsworkinSantaRosathanbefore,andmoreSantaRosansworkoutsideofSantaRosathanbefore.ThisincreasingintegrationofSantaRosansintotheregionaleconomyhelpsdiversifyfinancialriskforSantaRosafamiliesbyspreadingjobsacrosssectorsandgeographies,butitalsomeansthatanincreasingshareofSantaRosapersonalincomeisearnedoutsidetheCounty.Outofeverydollarofpersonalincome,about53centswouldhavebeenearnedinSantaRosatwogenerationsago,andthesharehasfallento28centstoday.IncomeearnedoutsideSantaRosahasrisenfrom23centsto33centsonthedollaroverthatsameperiod.ThismeansthathousingdemandgrowthinSantaRosahasbeendrivenbyemploymentgrowthinkeysectorsinEscambiaandOkaloosaaswellasbyjobgrowthwithinSantaRosa.AsecondmajortrenddrivingchangesinthehousingmarketinSantaRosaistheagingofthepopulation.ThemedianageoftheU.S.populationhasincreasedovertimeastheBabyBoomergenerationmovestowardretirementandashealthcareoutcomeshaveimproved,particularlyforolderAmericans.ThemedianageofAmericansincreasedby9.9yearsduringthelasttwogenerations,andby9.6yearsforFloridians.However,themedianageofSantaRosansincreasedby15.9yearsoverthesame1970–2015period,astheBabyBoomersaged,as

Count Share Count Share Change

EscambiaCounty,FL 23,616 39.9% 22,700 44.8% 916

SantaRosaCounty,FL 18,415 31.1% 17,340 34.2% 1,075

OkaloosaCounty,FL 8,009 13.5% 5,754 11.4% 2,255

BayCounty,FL 919 1.6% 727 1.4% 192

LeonCounty,FL 744 1.3% 998 2.0% -254

WaltonCounty,FL 644 1.1% 372 0.7% 272

DuvalCounty,FL 592 1.0% 292 0.6% 300

OrangeCounty,FL 505 0.9% 100 0.2% 405

HillsboroughCounty,FL 401 0.7% 150 0.3% 251

MobileCounty,AL 386 0.7% 305 0.6% 81

AllOtherLocations 4,963 8.4% 1,908 3.8% 3,055

TotalAllJobs 59,194 100.0% 50,646 100.0% 8,548

Source: LEHD On the Map, 2017

20022014

JobsCountsbyCountiesWhereWorkersareEmployed-AllJobs

31

retireesfoundSantaRosamoreinvitingthananincreasinglycrowdedSouthFlorida,andastheeconomyshiftedmoretowardshealthcareandeducation,andmilitaryoccupationsgrewslowlyifatall.Figure:MedianAgeofPopulation,1970-2105

Theagingofthepopulation,alongwithchangesinchild-bearingpatterns,hasdrivenhouseholdsizedown.This,alongwithincreasednumbersofpeoplelivingaloneduetodivorceorwidowhood,andincreasedwealth,hascausedadecreaseovertimeinthesizeofhouseholdnationallyandinSantaRosa.

DemographicsoftheHousingMarketplaceInthissection,weassesstheexistingmarketandthenidentifythenewhouseholdsthatwilllikelywishtolocateinSantaRosaCounty.Welookatfactorsarecloselycorrelatedwithhomerentalandpurchasingpatterns.Thesefactorsincludetheirlikelyhouseholdincome,theirage,theireducationalattainment,andatthesizeoftheirhouseholds.These,alongwithcommutepatterns,willtellusalotaboutwhattypesofhomestheywillneed,whethertheywillpurchaseorrent,andwhatsomeoftheirmunicipalserviceneedswillbe.EmploymenttrendsforlocalandneighboringworkplaceswillinfluencetherateofpopulationgrowthaswellasthehomepricethresholdsassociatedwithaffordabilityPopulationandHouseholdsPopulationgrowthistheprimarydriverofdemandfornewhousingunitsinanylocalhousingmarket.PopulationgrowthhasbeenstronginSantaRosarelativetoFloridaandthenation,ascanbeseenintheFigurebelow.

20

25

30

35

40

45

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

Source:Woods&PooleEconomics, CEDDS,2016

MedianAgeofResidentPopulation, 1970- 2015

SantaRosa Florida Nation

32

Figure:HistoricPopulationGrowthRatesforSantaRosa,Florida,andtheNation,1990-2015

Populationincreasecanbebrokendownintoconstituentcomponentsofnaturalincrease(numberofbirthsminusnumberofdeaths)andnetmigration(theamountbywhichthenumberofin-moversexceedsthenumberofout-movers).Likemostrapidlygrowingareas,SantaRosadependsoninboundmigrationofpeoplecomingfromothercountiesandstates.2010wasarelativelyweakgrowthyearforFloridagenerallyasweworkedthroughthedebrisoftheGreatRecession.In2010,theUniversityofFlorida’sBureauforEconomicandBusinessResearch(BEBR)estimatedthatSantaRosagainedabout2.3residentsvianetmigrationforeverynewresidentgottenthroughnaturalincrease.By2015,thatratioroseto4.5asthejobmarketimprovedandinterstatemigrationpickedupandmorefamiliesshoppedforhomesinSantaRosaCounty.Incontrast,aweak2010forslowergrowingneighboringcountiesofEscambiaandOkaloosameantnetmigrationwasnegativein2010beforerecoveringstronglyseveralyearslater.ThedesireofregionalhouseholdstoenjoythebenefitsofSantaRosaresidencyisalsoreflectedinthetypeofpopulationgrowthexperiencedbytheCounty.IntheFigurebelow,U.S.Censusestimatesofthesourcesofpopulationgrowthareshown.Thegreysegmentofeachverticalbarrepresentspopulationgrowthcausedbybirthsanddeathsofresidents,whilethebluesegmentshowsnetdomesticmigration.Ascanreadilybeseen,inboundmigrationofnewresidentsvastlyexceedslocalincreaseinmostyears(2010isnotprovidedasitisaDecennialCensusyear).

100%

150%

200%

250%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015Percento

f1990populatio

n

Source:HaasCenter,Woods&PooleEconomics,2016

Population 1990- 2015:SantaRosa,Florida,Nation,1990=100%

SantaRosa Florida Nation

33

Figure:ComponentsofPopulationChanges,2001–2015

Source:HaasCenter,2017TheagingofthenationandofSantaRosahascausedachangeintheshareoftotalpersonalincomethatisattributabletofederaltransferpaymentsnationallyandlocally.BecausetransferpaymentsfromthefederalgovernmentintheU.S.aredirectedprimarilytowardsolderAmericans(MedicareandSocialSecurityarethetwolargestfederaltransferpaymentprograms),theshareoftransferpaymentsinadollar’sworthofpersonalincomehasgrown.BecausethemedianageoftheSantaRosapopulationhasincreasedmorerapidlythanforFloridaandthenation,theshareoftransferpaymentsinSantaRosapersonalincomehasalsogrownmorerapidly,goingfrom6centsin1970to20centstoday.Whiletheshareoftransferpaymentsinpersonalincomeforthenationhasalsogrownastheseprogramshavegrownandasthepopulationmedianagehasincreased,theincreasehasbeenmorepronouncedforSantaRosaduetoitschangingagestructure.TheAmericanCommunitySurvey(ACS)isarichsourceofinformationaboutpeoplewholiveinourCounty.WhentheACSreplacedtheCensuslongformin2000,itwastoenableamorefrequentupdatetolookatwholiveswhere,andwhattheydo.TheCensuslongformgaveusthatinformationeverytenyears,butgiventhelengthoftimeittookgovernmentstatisticianstodothenecessaryqualitycontrolprocesses,theinformationwasoutdatedalmostwhenwegotit.ThatsameoneinsixsamplingframehasbeencarriedintotheACS.

34

Figure:SourceofPersonalIncomeforSantaRosaResidents,1970-2015

FuturePopulationGrowthFuturepopulationgrowthwillbetheprimarydriveroffuturehousingdemand.HereweusepopulationgrowthestimatesprovidedbytheUniversityofFlorida’sBureauforEconomicandBusinessResearch(BEBR)alongwithothersourcestoprojectnumbersofresidentsandnumbersofhouseholdsintheshorttermandinthemediumtolongterm.BecauseBEBRistheofficialproviderofpopulationestimatestoFloridaLegislature,andthoseestimatesareusedtocalculatetaxrevenuesharingbetweenstateandlocalgovernment,theyareausefulsource.TheprimarysourcesofdataBEBRusestoestimategrowtharethenumberofresidentialelectricitycustomers,thenumberofresidentialbuildingpermits,andthenumberofhomesteadexemptionsasreportedbytheFloridaDepartmentofRevenue.SantaRosahasconsistentlyrankedinthetop10percentofthe67Floridacountiesintermsofpercentagegrowthinpopulation,wellexceedingnational,state,andregionalgrowthrates.Thefollowingchartshowspopulationchangefrom2000to2015.SantaRosapopulationhasdoubledsince1990,risingbyacumulative102percent.Aswasshownearlier,thisfaroutstrippedgrowthinthenationoverall,whichroseby29percentoverthesameperiod,andinFlorida,whichroseby55percent.NeighboringEscambiaandOkaloosaCountygrowthratesmorecloselytrackedthatofthenation,at19and37percent,respectively.WhileSantaRosa’sgrowthrateisprojectedtoslowsomewhatincomingyears,asistrueforothergeographies,itwillstillmaintainabovethestateandthenation.

0%

10%

20%

30%

40%

50%

60%1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

Percento

fpersonalincom

ebysource

Source:Woods&PooleEconomics, CEDDS2016

SourcesofPersonalIncomeforSRResidents,1970- 2015

IncomeEarnedinSR Dividends, Interest,RentGovernmentTransferPayments IncomeEarnedOutside SR

35

Figure:PopulationGrowthforSelectedNorthwestFloridaCounties,1990-2015

Populationgrowthof29,981isforecastedforSantaRosabyBEBRforthe2015–2025period,makingSantaRosa17thfastestinthestateintermsofgrowthrate,at18.4percent,and25thintermsofabsolutenumberofresidentsadded,amongthe67Floridacounties.StartingwiththeU.S.Censusestimatesfor2015of167,040residentsofSantaRosa,theprojectedincreasewilltaketheCountytoapopulationof196,934by2025.Atthatpoint,itwillhaveedgedoutBayCountytobecomethefourthmostpopulouscountyfromTallahasseewestward,trailingonlyEscambia,Leon,andOkaloosaCounties.TheBEBRforecastprojectsthatSantaRosawillovertakeOkaloosainpopulationby2035.TherecentlyreleasedMarch2017U.S.CensusestimatesofJuly1,2016populationshowSantaRosagaining3,457residentsduringtheyear,foragrowthrateof2.07percent,ratherthanthe1.67percentannualgrowthprojectedbyBEBR.IfthehigherCensusrateweretoholduntil2025,thepopulationandhousinggrowthforecastsinthisdocumentwouldneedtobeadjustedupwardbyabout31percent.TheWoods&PooleEconomicsforecastisabout15percenthigherthanBEBR.However,itisworthnotingthatothercredibleforecastsarelowerthanBEBR’s.ForinstancetheEMSIconsultancyisalmost42percentlower

100%

150%

200%

250%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015Percento

f1990populatio

n

Source:HaasCenter,Woods&PooleEconomics,2016

Population 1990- 2015:SantaRosa,Escambia,Okaloosa, 1990=100%

SantaRosa Escambia Okaloosa

36

Figure:PopulationChangeperYear,1971-2016

Forecastsofthenumberofunitsneededtohousethisnewpopulationdependonboththenumberofnewresidentsandontheaveragesizeofhouseholdsthatneedtooccupynewresidences.Becausesomehomesmayberemovedfromthehousingstock,whetherstorm-damagedortear-downs,weneedtoexaminethehistoricalrateofsalesofnewhomeswithrespecttothehistoricalchangeinpopulation.Thisrelationshipisshownbelow.Atightercalculationcanbemadebylookingattheannualchangeinpopulationandcomparingittotheannualchangeinthenumberofnewhomessold.Thisrelationshipcanthenbeusedtoprovideaforecastofhowmanynewhomeswilllikelybebuiltandsoldtomeettheneedsoftheprojectedincreasedpopulation.Figure:NewResidentPopulationperNewSingleFamilyHomeSold,1991-2015

Thismethodimplicitlyassumesthatratesofchangeofutilizationofmultifamily,rental,owner-occupiedalsostayonthetrendof1991–2015.Ifnewresidentsweretoskewawayfromsinglefamilyhomesandintomulti-family,thisratiocouldchange.Whilethisbehaviorhascertainly

0

2

4

6

8

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

Source:U.S.Census

SantaRosaResidentPopulationChange,1971- 2016thousandsofresidentsperyear

0.01.02.03.04.05.06.0

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014Source:U.S.Census,FLDeptofRevenue,author's calculations

NewCountyResidentsperNewHomeBuilt,1994- 2015

37

occurredinresponsetotheGreatRecession,particularlyinhighlyurbanizedareas,ithasnothappenedinmeaningfulwaysinSantaRosaandappearsunlikelytooccur.AgeCharacteristicsThenationisaging,Floridaisold,andNWFLwasyoungerthaneither50yearsago,butisnowolderthanthenationandgainingonFlorida.SantaRosa’spopulationsegmentgrowthoverthemostrecenttwodecadeshasreflectedthis.Thelargeincreasesinmedianhouseholdincomeobservedduring2002-2006wereassociatedwiththeinfluxofyoungerfamilies,mostwithbothparentsworking.Figure:PopulationGrowthbyAgeSegment,1970-2015

Forecastsofpopulationgrowthbyagesegmentshowthatthe“graying”trendwillcontinueandinfactraisethemedianageofthepopulation.ButitcanalsobeseeninthechartbelowthattheattractivenessofSantaRosatoyoungfamilies,bothlocalandotherwise,isexpectedtocontinueunabated.

-0.5

0

0.5

1

1.5

2

2.5

2000 2002 2004 2006 2008 2010 2012 2014

Thousandsofnew

residents

Source:Woods&PooleEconomics, CEDDS2016

AnnualPopulationGrowthbyAgeSegment,1970- 2015

Ages0- 24Years Ages25- 54Years Ages55andOver

38

Figure:PopulationbyAgeSegment,2016and2025

Thepronouncedfocusonretired/soon-to-be-retiredandonyoungfamiliesisevenmoreapparentwhenonereducestheabovecharttoshowgrowthbyfivemajoragecategories.ThesearechosentomatchtheU.S.Censusprofileoflikelyhomebuyers.BelowitcanbeseenthattherealgrowthdemographicsforSantaRosaoverthenext10yearswillbeinolderhouseholds,whetheraginginplaceBabyBoomers,ornew-to-SantaRosaretirees,andinyoungerhouseholdswithheadsofhouseholdat35–45yearsofage,andtheirnot-yet-off-to-collegechildren.Eachsegmenthasparticularneedsinthehousingmarket.Figure:HistoricalandProjectedPopulationGrowthbyAgeSegment

Thetotalgrowthinpopulationfrom2005to2015iscalculatedbytheU.S.Censustobe25,601.Inthis10-yearperiodatotalofabout6,908newhomesweredeliveredbybuilderstopurchasers.Thisrangedfromanaverageofabout1,200peryearastheboomendedin2005and2006,toalowofabout523peryearduringthe2008to2012trough.Thepopulation

0

5

10

15

20

Source:Woods&PooleEconomics, CEDDS,2016

Population byAgeSegment,inthousands, 2016and2025

2016 2025

-5 0 5 10 15 20

65yrs+

55- 64yrs

45- 54yrs

35- 44yrs

0- 35yrs

Source:Woods&PooleEconomics, CEDDS,2016

PopulationGrowth,inthousands, byAgeSegment

2005- 2015

2015- 2025

39

growthprojectedforthe2015to2025periodis37,764,whichis12,163,or68percentgreater,thanthegrowththatactuallyoccurredduringtheprior10-yearperiod.Whilesalespernewresidentcanbeexpectedtotickupwardslightlyduetothesmalleraveragenumberofpersonsinolderhouseholds,thiseffectwillbelesspronouncedinSantaRosarelativetothenationduetothepredominanceofsinglefamilyhomesintheCounty.IncomeTrendsBecauseearningsaresohighlycorrelatedwitheducationalattainment,welookatACSdataforsmallareaswithintheCountytoassesshouseholdincomeandalsoeducationalattainment.TrendgrowthinpersonalincomeinSantaRosahasaveraged3.6percentperyearfrom1993until2015.Thisisonlyslightlylessthanthe3.7percentaverageforthenationasawholeoverthesameperiod.However,thatsimilarityintheaverageannualgrowthratemasksimportantdifferences.Percapitapersonalincomegrewatarobust6.4percentperyearduringthe2000–2006period,whichincludesthebeginningsoftherealestateboomandthestronginboundmigrationofyoungerfamilies.Duringthatsameperiod,thenationaveraged4.2percentpersonalincomegrowth.However,the2007–2015periodsawadecreasetoanaverageof1.3percentinSantaRosa,versus2.7percentforthenation.TheGreatRecession-drivenslowdownininboundmigrationofhigher-earningfamilies,andtheshiftoftheregionaleconomyintoleisureandhospitalityoccupations,hascontributedtoadecreaseinpercapitapersonalincomegrowthrateinrecentyears,asisshownbelow.Figure:PersonalIncomeperCapita,1991-2015

TheAffordableHousing/WorkforceHousingSituationPriceappreciationhasbeendifferentfordifferenttypesofhomesduetotheeconomicprospectsofhouseholdersacrossincomeclasses.Belowwecanseetherun-upinpricesfor

$15,000$20,000$25,000$30,000$35,000$40,000$45,000

Source:AmericanCommunity Survey,U.S.Census,author's calculations

PersonalIncomeperCapita,1991- 2015

40

highvaluehomeswhenmortgageloanswerebothplentifulandcheap.Whilebottom-tierhomesparticipatedintheboom,theirpricegrowthlaggedbehind.Butinthewakeoftherecession,withlendingcurtailed,andcreditscoresdamaged,demandforentrylevelorbottom-tierhomesgrewmorestrongly.Figure:GrowthinValueforTopTier,BottomTier,andAllHomes,1996-2016

SantaRosacomparesfavorablytoFloridaandthenationintermsoftheshareofhouseholdsearningamoneyincomeoflessthan$30,000peryear,evenafterthatsharespikedupwardduringthehousingbust.Thatsharethenfellmorerapidlythanforthestateornationandisprojectedtofallatroughlythesamerateasthestateandthenationincomingyears.Figure:LowerIncomeHouseholdsasaShareofTotalHouseholds,County,State,Nation

100%120%140%160%180%200%220%

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Source:ZillowHomeValueIndex,2017

ValueasPercentof1996/97Value, byPriceTier,AllHomes,Apr96-Dec16

BottomTierSantaRosaTopTierSantaRosaAllHomesSantaRosa

19%21%23%25%27%29%31%33%35%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

Source:Woods&PooleEconomics,CEDDS,2016

PercentofHouseholds EarningLessThan$30,000perYear,2000- 2025

SantaRosa Florida Nation

41

Figure:MiddleClassHouseholdsasaShareofTotalHouseholds,County,State,Nation

ThestatusofSantaRosaasanupper-middleclassworkingcountycanbeseenintheFigurebelow,witharelativelylargeshareofhouseholds,about27percent,inanincomerangethatfacilitateshomeownership.ThisishigherthanforFloridaorforthenation.Figure:UpperMiddleClassHouseholdsasaShareofTotalHouseholds,County,State,Nation

PartlybecauseSantaRosaattractsfamilieswithchildren,personalincomeperpersonhaslaggedthenationaleconomy.ThegoodnewsisthatthenumberofSantaRosahouseholdswithhigherthan$100,000peryearincomesisprojectedtogrowatthenationalrate.Thiswillbereflectedinhomeownershiprates,asdiscussedbelow.

24%

26%

28%

30%

32%2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

Source:Woods&PooleEconomics,CEDDS,2016

PercentofHouseholds Earning$30,000to$75,000perYear,2000- 2025

SantaRosa Florida Nation

19%21%23%25%27%29%31%33%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

Source:Woods&PooleEconomics,CEDDS,2016

PercentofHouseholds Earning$75,000to$100,000perYear,2000- 2025

SantaRosa Florida Nation

42

Figure:HighIncomeHouseholdsasaShareofTotalHouseholds

Atonelevel,thereismeasurementbiaswhenlookingatpersonalandhouseholdincomefigures,astheydonotcountaccumulatedwealthofretirees.Thus,adropinincomeswouldbeexpectedastheshareofretireesinthepopulationincreases.However,thisisonlyapartialexplanation,asincomefiguresdoincludeearningsfromdividends,interest,andrents,whichrepresenttheflowofincomeattributabletoaccumulatedwealth.InalowyieldenvironmentsuchashasbeenfacilitatedbytheFedinterestratepolicysince2008,anabundanceofsavingsglobally,andalackofstrongdemandforloanablefunds,incometosavershasbeendepressed.However,muchofthedropinpersonalandhouseholdincomeisattributabletothegrowingconcentrationofthelocaleconomyinservices,particularlyleisureandhospitality,healthcare,andeducation,attheexpenseofthemilitaryandmanufacturingjobsofagenerationago.SantaRosaHomeownershipRatesAswasseeninthediscussionofthenationalhousingmarket,homeownershiprateshavedeclinedforallagecohortsinthewakeoftheGreatRecession.69.3percentofallparcelsclassifiedasimprovedresidentialcarrysomelevelofhomesteadexemption.Homesteadedratesarehigherforsinglefamilyresidenceparcels,with73.1percentofthoseparcelshomesteaded.52.1percentofmobilehomeparcelsarehomesteaded,whileonly15.3percentofcondominiumsarehomesteaded.ThetaxationimplicationsofchangesinhomeownershipratesareparticularlyimportantforlocalgovernmentsinFlorida,giventheirrelianceonpropertytaxasthemajorrevenuesourceforfundingneededinfrastructuredevelopmentandmaintenance.ThisisespeciallytrueforSantaRosa,wheretheratiooftheallowed$25,000homesteadexemptionasapercentoftotalassessedvalueis1.7timestheaverageforFlorida.SantaRosahasrelativelymanyresidents,andthusacorrespondinglyhighresidentialvaluationasashareoftotalvaluation,comparedtothedensityofcommercialactivityinotherpartsoftheregionandstate.GiventhatSantaRosaismoreresidentiallyoriented,onewouldexpectotherratiosrelatedtoresidentialdensitytoalsocomeinatabout1.7timesthestateaverage.However,thedemographicsoftheCounty

15%

17%

19%

21%

23%

25%2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

Source:Woods&PooleEconomics,CEDDS,2016

PercentofHouseholds EarningMoreThan$100,000perYear,2000- 2025

SantaRosa Florida Nation

43

andstructureofourfamilieshaveledtoaratio5.8timesthatofthestateforthehomesteadassessmentreductionforparentsorgrandparentslivinginthehome,andaratio2.2timesthatofthestateforadditionalhomesteadexemptionforage65andover.SantaRosaisalreadyasenior-intensivecounty.Notunexpectedly,giventheoutsizeroleofthemilitaryemploymentintheregion,theratiofordisabledveteranshomesteaddiscountis3timesthatofthestate.Aswasmentionedpreviously,useofthedeployedservicemember’shomesteadexemptionisfarandawaythehighestofanycountyinthestate,at25.6timesthestate’sratio.Itisalsotruethat,giventhelowerhomeprices,taxburden,andgreateraffordabilitytraditionallyassociatedwithSantaRosa,thehomesteadpropertytaxexemptionsprovideagreatproportionatereductionintaxherethaninmoreexpensivepartsofthestate.ThismeansthatSantaRosafacesabuilt-inconstraintonCountyincomegrowththatismoreseverethaninotherpartsofthestate.Homesteaded,non-homesteaded,andvacantresidentialparcelsareshownbelowforGulfBreeze.Thismapcanbeexpandedtobetterseedetail,andfurthergeographicdetail,andlargermaps,fortheCountyanditscitiescanbefoundintheMapAppendix(onHBAwebsite).Figure:MapofHomesteadStatusforGulfBreeze

44

Source:FLDOR,NAL67F201602VAB

PerformanceoftheSantaRosaHousingMarketAfterthecripplingblowoftheGreatRecession,salesofnewandexistinghomeshaverecoveredstrongly,althoughmedianpricesandquantitiesarestillnotbacktotheboomlevelsof2005.Today,theSantaRosamarketismoremature,andisfacedwithsomeofthesamecapacitychallengesofitsneighbors.Morebuildershaveturnedtoinfilldevelopment,buildinghomesindifferentlocationsacrossthecommunity,ratherthanclustersofhomesinsubdivisions.Thisispartlyduetothefactthatmanyoftheeasiestneighborhoods,intermsoflargenumbersofbuildablelots,witheasyaccesstogoodschoolsandtowork,andthatarewithoutwetlandsorotherissues,arelargelybuiltout.Inparticular,thestronginboundmigrationof1996–2005,andespecially2002–2005,isassociatedwithhighgrowthinpopulation,householdincome,andmedianvaluepersquarefootofhomesinSantaRosaCounty.TheGreatRecessionthendroppedinboundmigrationtohalfitsnormallevel,andmedianhouseholdincomeandhomevaluesstagnated.Whileyears2010and2015sawpopulationgrowthatmorenormallevels,ongoingmodestpopulationandhouseholdincomegrowthhasthreatenedtoholdbackhomevalueappreciationinSantaRosamorethaninotherlocations.Thisinturnhasaffectedtheperformanceforecastsforthehousingmarket.TherealestatefirmZillowprovidescredibledataforlocalmarkets.ThebaselineZillowforecastcallsforgrowthintheaveragehomevaluesinSantaRosaofabout3percentover2017.RelativetootherlocationsinFlorida,ZillowexpectsSantaRosa2017homevaluegrowthtobeslightlylowerthantheforecastedrateof3.4percentstatewideand3.2percentnationally.However,themostrecentdataregardingeconomicdriversintheregionsuggestthatSantaRosamaywelloutperformthathousingforecast.Table:ActualYearBuilt,SingleFamilyResidentialParcels,byCity

Source:FLDept.ofRevenueNALfile,author’scalculations

NoCity Bagdad GulfBrz Holt Jay Milton Navarre NavBch Pace Totalperiod pre-1955 1 208 156 3 314 901 56 1 185 1,825

1956-1970 3 204 1,239 1 361 2,136 179 6 721 4,850 1971-1985 6 505 3,225 4 381 3,525 1,057 514 2,636 11,8531986-2000 9 677 3,889 5 382 5,241 6,083 776 4,266 21,3282001-2015 416 833 3,372 4 379 4,539 6,287 529 3,941 20,300

Total Total 435 2,427 11,881 17 1,817 16,342 13,662 1,826 11,749 60,156

NoCity Bagdad GulfBrz Holt Jay Milton Navarre NavBch Pace Totalpre-1955 0% 9% 1% 18% 17% 6% 0% 0% 2% 3%

1956-1970 1% 8% 10% 6% 20% 13% 1% 0% 6% 8%1971-1985 1% 21% 27% 24% 21% 22% 8% 28% 22% 20%1986-2000 2% 28% 33% 29% 21% 32% 45% 42% 36% 35%2001-2015 96% 34% 28% 24% 21% 28% 46% 29% 34% 34%

Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

45

Overall,SantaRosaistodayenjoyingaGoldilocksresidentialhousingmarket–nottoohot,andnottoocold.Whilethenumberofnewandexistingsinglefamilyresidencessoldhasincreasedmarkedly,particularlysincemid-2013,pricegrowthhasbeenmoderateinthenewhomemarket.Pricegrowthhasbeenstrongerintheexistinghomemarketsinceits2013pricebottom,withthemediansalepricein2016only14.6percentbelowthemedianpriceatthe2005peakofthemarket.Thegoodnewsforhomebuyersisthatevenwithstrongincreasesinhomesbuiltandsold,priceincreasesfornewhomeshavebeenmodestinthelastseveralyears.Datacoveringallindividualtransactionsshowthatmediannewsinglefamilyhomesaleprices(excludingcondominiumsandmobilehomes),in2016inSantaRosarosebyonly1.8percentrelativeto2015.NewhomepricesarerisingabitmorethanthatinNavarre,andlessinPaceandMilton,eventhoughPaceandMiltonareseeinggreaterincreasesinquantitiessold.Thesamedatasourcesshowthatthenumberofexistingsinglefamilyhomessoldrose15percentin2016from2015,to4,037homes,whilemedianpricerose8.4percent,to$162,000.However,thatpricevariedwidelyacrosstheCounty,withthemedian2016salepricebeing$200,000inGulfBreeze,$69,050inJay,$106,200inMilton,$190,000inNavarre,$373,500inNavarreBeach,and$158,400inPace.Table:NumberofResidencesbyType,RatioofSingleFamilyResidencestoVacantResidential,allSantaRosaParcels,byCity

Source:FLDept.ofRevenueNALfile,author’scalculationsBuildableLotsOneofthemajorthreatstoSantaRosagrowthistheloomingshortageoflotsavailabletobuildersataffordableprices.Areabankersanddevelopersindicatethatthelotshortfallcanbeattributedtoseveralfactors,allrevolvingaroundavailabilityofinvestmentcapitalforsubdivisiondevelopment.Oneisthenationalfactormentionedearlier,thatHVCREassetshavedeclinedinattractivenessforbankersduetoincreasedreserverequirements.Anotheristhe

NoCity Bagdad GulfBrz Holt Jay Milton Navarre NavBch Pace TotalVacantResidential 12081 913 1487 4 365 3051 2443 119 1993 22456

SingleFamily 422 2023 10948 11 1482 13733 12276 685 10752 52332MobileHomes 22 408 466 6 342 2604 1299 0 969 6116

Multifamily10+units 0 1 7 0 1 23 5 0 7 44Condominiums 0 0 470 0 0 15 102 1143 33 1763

Multifamily<10units 1 9 216 0 1 244 138 0 62 671ResCommonAreas 131 1 8 0 0 1 16 0 5 162Othernonresuses 15521 149 1013 8 1163 2708 752 27 808 22149

Totalparcels 28178 3504 14615 29 3354 22379 17031 1974 14629 105693

RatioofSingleFamilyResidencestoVacantResidencesforAbove-listedCitiesSingleFamily/Vacant 0.0 2.2 7.4 2.8 4.1 4.5 5.0 5.8 5.4 2.3

46

growingpresenceofnationalbuildersabletopurchase,orsecuretheoptiontopurchase,largequantitiesofbuildablelots,uptoandincludingentiresubdivisions,duetoahealthybalancesheetandaccesstonationalcapitalmarkets.Thus,strongsalesoveraperiodofyearshavedepletedlocalinventories,andotherfactorshavemeantitisincreasinglydifficultforsmallerbuilderstoacquirelots.LargerbanksmaybereluctanttolendondirtbecauseFederalregulatorsrequire15percentcashupfrontonassetsclassifiedas“high-volatilitycommercialrealestate.”Lendingatahigherloan-to-valueratiorequiresadditionalcapitalupfront.Whilethecommunitybanksthatsurvivedthefinancialcrisisarenowwell-capitalized,theymaynotbeaggressivelypursuingrawlandlendingduetohighrisksandtheamountofcapitaltiedup.Someprojectsarecomingoutofmothballs,butwithlotpricesat$50,000.WhiletherearesomeparcelsalongHighway98,thereisnotmuchinthedesirablePaceandNavarreschooldistricts.Anticipatedhigherinterestratesmayhaveanegativeimpactonlotdevelopment,assomebankstellpotentialdeveloperstoplanontheirprojectbeingprofitableat6percentinterestrates.Figure:RatioofVacantLotSalestoNewHomeSales,1992-2016

Itisworthnotingthatobtaininganoptiontopurchasewouldtieupthelotsinquestionwithoutgeneratingavacantlotsaletransaction.Sosomeofthedownwardslopeofthetrendshownabovemaybeduetochangingmethodsoffinanceaswellasdecreasedlotsinthepipeline.However,withnewhomesalespickingup,therewillneedtobeanincreaseinavailablelots,ataffordableprices,tomeettheincreaseddemand.Geospatialcalculationsoflotsize(providedbyMetroMarketTrends)forexistinghomessoldinSantaRosaallowscalculationofchangesovertimeinaveragelotsize.Medianlotsizehititslowestlevelinearly2017,at.33acres.Itwasatitshighestinthe1990’s,at.37acres.Thus,thechangesmentionedbybuildersseetohavesomevalidity.

0.60.81

1.21.41.61.82

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016Va

cantlotssoldpern

ewhom

ebuilt

Source:MetroMarketTrends,FLDept.ofRevenueNALfile,author's calculations

RatioofVacantLotsSoldtoNewHomesBuilt,1991- 2016

47

Builtandvacantresidentialparcels,alongwithnon-residentialparcels,areshownbelowforNavarre.Thismapcanbeexpandedtobetterseedetail,andfurthergeographicdetail,andlargermaps,fortheCountyanditscitiescanbefoundintheMapAppendix(onHBAwebsite).Figure:MapofPotentialResidentialAvailabilityforNavarre

Source:FLDOR,NAL67F201602VABIntheFigurebelow,lotsalescanbeseentohoverthroughoutthe1990sinthe2,000–2,500lotssoldperyear,withpricesinthe$15,000to$20,000range,untiltheadventofthebuildingboomin2003.Atwo-yearjumpinquantity,followedbyatwo-yearjumpinprice,ensued,followedbytheburstingofthehousingbubble.Thedropinquantityoflotssoldwasappropriateatthattime,giventhelackofbuyingactivityinthenewandexistinghomemarket.However,priceshavenotfallen,andcontinuetobeinthe$25,000to$30,000range,evenwithlowlevelsoflotsales.Thefactthatcompetitionamongsellershasnotdrivenpriceslowerisindicativeofarelativescarcityoflotsavailabletothemarket.Withbuildablelotpricestypicallyabout18to20percentofthecostofadeliverednewhomeinmostmarkets,thishasgraveimplicationsforaffordabilityintheCounty.WhileithasperhapsnotyetbeenanoticeableproblemasthemarketworkedthroughexcessinventoryfromtheGreatRecession,itwillsooncauseaffordabilityissues,particularlyforworkforcehousing.

48

Figure:VacantResidentialLotSalesandMedianPrice,1991-2016

Overthelast60months,theaverageannualincreaseinlotpricewas2.6percent,whichisfarbelowtheaverageannualpricegrowthof20.5percentregisteredoverthe60monthspriortothepricecrashthatbeganin2005.Whilethemedianlotpriceistoday14percentbelowitsprevioushigh,whentakentogether,thetrendsinbuildablelotsalesandinnewhomesalesareindicativeofanoveralldecreaseinavailability.Muchofthisisduetobuildoutinneighborhoodsnearthebestschools,andsomeofitisduetofactorsbeyondlocalcontrol.However,theCountymustworktoensurethatsubdivisiondevelopersarenotdrivenoutofthemarketbyrequirementsforimprovementsthatrenderSantaRosalessviablefordevelopmentprojectsthanneighboringcounties.Itislikelythattheincreasingtrendtowardslotacquisitionbeingbiasedtowardsthosewithsufficientfinancialcapabilitytoenterthebuildablelotmarketandpurchasequantitieswellinadvancewillskewthemarkettowardslargebuilders.SomeofthiscanbeseenalreadyinchangesinthenumberandsizeofbuildersactiveintheSantaRosamarket.TheFigurebelowshowsthatthenumberofbuildersisdownfromits2004peak,andthatbuildersarebuildingandsellingalmostthreetimesmorehomesperbuilderthantheydidin1991.Withanaveragenumberbuiltperyearofroughly11homes,andonlyadozenbuilderssellingmorethan20peryearin2016,SantaRosaisnolongerjustasmallbuildermarket.Itislikelythatlargerbuilderscanbenefitfromtheeconomiesofscaleinmaterialspurchases,lotpurchases,andaccesstofinanceinordertobuildalessexpensivehome.However,somebuildersanddevelopershaveexpressedconcernthatexcessiveconcentrationmayresultinmarketpowerforlargebuilders,andtheabilitytoraisepricesduetoalackofcompetitivebidsifsmallerbuildersaredrivenoutofthemarket.

$0

$10,000

$20,000

$30,000

$40,000

0

1,000

2,000

3,000

4,000

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015Source:MetroMarketTrends,author's calculations

VacantResidentialLotSalesandMedianPrice,byYear,1991- 2016

NumberoflotssoldMedianpriceperlot

49

Figure:NumberofBuildersandAverageNumberofHomesSoldperBuilder,1991-2016

NewHomeSalesandPricesThispendingbuildablelotshortfallisnotyetshowingupinnewhomeprices,withtheaverageannualrateofmedianpriceincreasefrom2012to2016being2.6percent.Lookingatthecountofnewhomesdeededtothehomeowner,thenumberofhomesdeliveredhasrisenby88percentfrom2012to2016,butthemedianpricehasonlyrisenby8percentoverthattime,to$220,900in2016.Homebuilderssaythatseveralfactorsaredrivingthistrend.Oneisthatitisaverycompetitivemarketplacefornewhomes,withrelativelymanybuildersactiveinthemarket.Anotheristhatthepresenceofnationalbuilders,haskeptpriceslowbecauseofverycompetitivelypricedandsomewhatsmallerstarterhomes,andbecausenationalcompanies,byvirtueofsize,haveaccesstoalargevolumeoflowercostfinancialcapitalthatallowsthemtobuybuildablelotsinvolume,andothercomponents,whetherbricks,flooring,paint,orsubcontractorservices,oftenatalowerprice.Table:MostRecentYear(2015):NewResidencesbyArea(City),Type,andPrice(JustValue)

Source:FLDept.ofRevenueNALfile,author’scalculationsTounderstandjustwhataspecializedroleSantaRosaplaysintheregion,considerthatonly4.2%oftotalresidentialbuildingpermitsfromJanuary2001throughDecember2016(741of17,692,asreportedbytheU.S.Census)werefordwellingunitsotherthansinglefamilyresidences,versus6,300of23,482(26.8%)inEscambia,versus5,134of17,860(28.7%)in

0%50%100%150%200%250%300%350%

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Source:MetroMarketTrends,author's calculations

NumberofBuilders,AverageHomesSold perActiveBuilder,1991=100%

NumberofBuildersAverageNumberofHomesSoldperActiveBuilderperYear

NoCity Bagdad GulfBrz Jay Milton Navarre NavBch Pace TotalSingleFamily 97 28 128 6 182 334 2 265 1042JustValue$ 157326 136597 192395 146375 151114 175257 489514 160776 162829

MobileHomes 1 1 0 2 14 4 0 2 24JustValue$ 89899 53337 na 122967 62183 103944 na 75234 70183Multifamily 0 0 0 0 0 3 0 0 3JustValue$ na na na na na 165190 na a 165190

Total 98 29 128 8 196 341 2 267 1069

50

Okaloosa.This,whencombinedwiththedemographicsofpopulationgrowthshownearlier,pointstoastrongneedformulti-familystructuresandneighborhoodsforolderadultswhomightprefertospendretirementyearsinSantaRosa.Thefollowingfigureshowsthenumberofnewsinglefamilyhomes,excludingmobilehomesandcondominiums,builtinSantaRosaandappearingonthepropertyroll.Hereitshouldbenotedthatparcelswithsinglefamilyresidencesreportedbuiltbefore1950aresummedandreportedhereas“pre-1950.”Allotheryearsrepresentannualadditionstothesinglefamilyresidentialhousingstock.Figure:NewHomes,Pre-1950to2025

Lookingonanannualbasisatthechangeinthepricesshowsthatpriceincreaseshavebeenmoderate.However,thefirstseveralmonthsof2017haveshowedstrongerpricegrowth.Figure:NewHomes(SpecandPresold),PriceandNumberofUnits,1991–2016

0

500

1000

1500

2000

2500

pre-1950

1952

1955

1958

1961

1964

1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

2012

2015

2018

2021

2024

Source:NAL67F201602VAB,FloridaDeptofRevenue,author's calculations

NewHomesBuiltAnnually, Pre-1950- 2015,andProjected,2016- 2025

$50,000

$100,000

$150,000

$200,000

500

1000

1500

2000

2500

1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

Source:MetroMarketTrends,author's calculations

NewHomes:NumberofUnitsSold andMedianPrice,1991- 2016

NumberofNewHomesMedianNewHomePrice

51

Growthinnewhomeconstructionandsalesiscontinuinginto2017,ascanbeseenbelow.Buildingpermits,whichexhibitatightcorrelationwithhomesalessixmonthslater,havebeenonanupwardtrajectorysince2011,althoughFebruary2017registeredaslowdownrelativetopreviousmonths.Figure:SingleFamilyBuildingPermitsbyMonth,January2000–February2017

Themedianpricefornewhomessoldhasbeenrisingatabout$478permonthsinceJanuary2009.However,thispriceincreaseisnotevenlydistributed.Post-recessionpricespeakedinmid-2014ataseasonally-adjustedpriceof$242,000(3-monthmovingaveragebasis)beforesettlinginatthecurrentmedianpriceof$229,000Figure:RateofAnnualIncreaseinMedianSalePriceforNewHomes,1992-2016

0

50

100

150

200

Mar-01

Nov-01

Jul-02

Mar-03

Nov-03

Jul-04

Mar-05

Nov-05

Jul-06

Mar-07

Nov-07

Jul-08

Mar-09

Nov-09

Jul-10

Mar-11

Nov-11

Jul-12

Mar-13

Nov-13

Jul-14

Mar-15

Nov-15

Jul-16

Source:U.S.Census,author's calculations

SingleFamilyResidenceBuildingPermits,Jan00- Feb17unitspermonth,seasonallyadjusted,3-monthmovingaverage

-10%

0%

10%

20%

30%

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Percent

Source:MetroMarketTrends,author's calculations

AnnualPriceGrowthforNewHomes, 1993- 2016

52

TheMarketforResalesofExistingSingleFamilyHomesSantaRosasawstrongpricegrowthin2015and2016.Canitcontinue?Afterbottomingoutin2012,existinghomesaleshavegrownmorestronglythanatanytimeexceptthepeakyearsofthehousingboom.Totalsalesofexistinghomesin2016werenotfarbelowtheir2005peak.Figure:SalesperMonth,ExistingSingleFamilyHomes,September1990–February2017

Priceshavealsorecoveredsothattheyarebackonthepre-boom,pre-busttrend.Givenadecreaseintheinventoryofexistinghomesonthemarket,itappearsthatstronggrowthinthepriceofexistinghomeswillcontinueatleastintheshortterm.

01002003004005006007008009001000

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Source:MetroMarketTrends

NewHomes(SpecandPresold)Annually byParcelCity,1991- 2016

GULFBREEZEMILTONNAVARREPACE

60110160210260310

1990/11

1991/10

1992/09

1993/08

1994/07

1995/06

1996/05

1997/04

1998/03

1999/02

2000/01

2000/12

2001/11

2002/10

2003/09

2004/08

2005/07

2006/06

2007/05

2008/04

2009/03

2010/02

2011/01

2011/12

2012/11

2013/10

2014/09

2015/08

2016/07

Source:MetroMarketTrends,author's calculations

MonthlySalesofExistingSingleFamilyHomes, Sep90- Feb17warrantydeedsalesonly,seasonallyadjusted,3-monthmovingaverage

53

Figure:MedianSalePrice,ExistingHomeSales,1990-2017

Medianpricepersquarefootforexistinghomesroseat4.5percentperyearfromlate2012untilFebruary2017,afterrisingat5.2percentperyearfrom1992untilthebeginningofthehousingboomin2003Figure:MedianPriceperSquareFoot,ExistingHomeSales,1990-2017

Thesesalesreflectthelowmortgageinterestrates,theimprovingemploymentpicture,andthedesireofregionalresidentstoenjoyaffordabilityandgoodschools.Thewithin-countymarketisnothomogeneous,andamenitiesmaydiffersubstantiallybyneighborhood.Asanexample,thequalityofimprovementsforexistingresidentialparcelsisshownbelowforMilton.Thismapcanbeexpandedtobetterseedetail,andfurthergeographicdetail,andlargermaps,fortheCountyanditscitiescanbefoundintheMapAppendix(availableontheHBAwebsite).

$50,000

$100,000

$150,000

$200,0001990/11

1991/11

1992/11

1993/11

1994/11

1995/11

1996/11

1997/11

1998/11

1999/11

2000/11

2001/11

2002/11

2003/11

2004/11

2005/11

2006/11

2007/11

2008/11

2009/11

2010/11

2011/11

2012/11

2013/11

2014/11

2015/11

2016/11

Source:MetroMarketTrends,author's calculations

MedianSalePriceforExistingSingleFamilyHomes, Sep90- Feb17warrantydeedsalesonly,seasonallyadjusted,3-monthmovingaverage

$30

$50

$70

$90

$110

1990/11

1991/11

1992/11

1993/11

1994/11

1995/11

1996/11

1997/11

1998/11

1999/11

2000/11

2001/11

2002/11

2003/11

2004/11

2005/11

2006/11

2007/11

2008/11

2009/11

2010/11

2011/11

2012/11

2013/11

2014/11

2015/11

2016/11

Source:HaasCenter, MetroMarketTrends,author's calculations

ExistingSingleFamilyHomeSales,MedianPriceperSqFt,Sep90-Feb17warrantydeedsalesonly,3-monthmovingaverage,s.a.,currentdollars

54

Figure:MapofQualityofImprovementsforMilton

Source:FLDOR,NAL67F201602VABGivenlowratesandanimprovedjobmarket,inventoriesofhomesforsalehavebeenfalling.Thispointstocontinuedpriceincreasesandhighlightstheneedtobringnewbuildablelots,andthusnewcapacityforbuildingandsellingaffordablehomes,tothemarket.

55

Figure:For-SaleResidentialInventory,January2010–February2017,s.a.

TrendsinLoantoValueRatioEventhoughoneofthefactorsthatledtothefinancialcrisiswastheuptickinmortgageindebtednessfacilitatedbygovernmentmortgageguarantees,loantovalueratioshavenotdiminishedappreciablyinthewakeofthemortgagecrisis.Instead,ifanything,leveragehasincreased.About91percentofnewhomepurchasesfrom1990to2017inSantaRosawerefundedusingproceedsfrommortgageloans.Interestingly,thatnumberroseto94percentduringthetroughofthenewhomesalemarket,whensalesofnewhomesfellbymorethan50percentfromtheaverageduringtheboomandstayedbelow600peryearforfiveyears.Lendinglargelyshiftedawayfromconventionalloanswiththeonsetofthefinancialcrisisin2007.OnereasonthatSantaRosa,andNorthwestFloridamoregenerally,weresomewhatshieldedfromthemagnitudeofeffectsseenelsewhereisFloridaisthehighshareofthebuyerpopulationeligibletoreceiveaVAloan.VAoriginationsdidfallduringtheGreatRecession,butnottothesamedegreethatconventionalloansdid.By2012,VAoriginationshadregainedtheaveragelevelseenduringtheboomyears,andfarexceededthatlevelinthelastseveralyears.Conventionalloanoriginationsrosesharplyin2016,butareonlynowreachingthelevelof20yearsago.Bankerssuggestthatwhileloantovalueratiosforconventionalmortgagescanstillbeashighaftertherecessionasbefore,toughappraisalsandstricterregulationofwhatcanandcan’tbecountedasincomeanddebt,arethemajorfactorsholdingbackresidentialmortgagelending.

50%60%70%80%90%100%110%

2010-01

2010-04

2010-07

2010-10

2011-01

2011-04

2011-07

2011-10

2012-01

2012-04

2012-07

2012-10

2013-01

2013-04

2013-07

2013-10

2014-01

2014-04

2014-07

2014-10

2015-01

2015-04

2015-07

2015-10

2016-01

2016-04

2016-07

2016-10

2017-01

Source:Zillow, author's calculations

ForSaleResidentialInventoryasPercentof2010Average,Jan10- Feb17

SantaRosa Florida

56

Figure:AnnualMortgageOriginationbyTypeofMortgageLoan,1991-2016

BecauseoftheimportanceofVAlending,themedianamountofmortgagedebtincurredinthosenewhomesforwhichamortgageloanwastakenouthasactuallystayedat100percentfrom2007onward,whichishigherleveragethanexistedbeforethecrash.ThisisduetotheshiftawayfromconventionalloansastheprevalentloaninthemarketplacetoVAloans,wherethemedianloantovalueratio,countingbothfirstandsecondmortgages,hasstayedconsistentlyat102percent.Whiletheloansareoriginatedbyprivatelenders,theycarryaVAguarantee,andloanqualificationcriteria,includingcreditscore,arenotasstringentasforconventionalloans.TheVAloanscanbeseentobeconcentratedintheHwy98commutecorridorandareafunctionofthedensityofmilitaryresidencyinSouthSantaRosaCounty.However,inNavarre,VAloansaccountfor73percentofallmortgagesmade,whichistwicetheutilizationrateofanyotherareaoftheCounty.Asconventionalloanshavebeguntogrowagaininvolume,thishascausedthemedianloan-to-priceratiototickdownwardslightly,ascanbeseenbelow.TheadventofAppendixQ(StandardsforDeterminingMonthlyDebtandIncome)regulationshasmeantthatbanksfaceuniformlimitingcriteriawhenqualifyingborrowersforconventionalmortgageloansintendedforsaleintothesecondarymarket.VAloanshavethebuilt-inadvantageofbeingeasiertoqualifyfor,aslongasthemilitaryservicememberhasmetservicerequirementsandnotyetuseduptheirVAeligibility.Duringtherealestatepriceboomof2003–2006,somepurchaserswhowereVAeligiblemighthavechosentopreservethateligibilityforalaterdatebypurchasinginsteadwithaconventionalloan.

0

200

400

600

800

1,000

1,200

1,4001990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

AnnualMortgageOriginationsbyTypeofLoan,1991- 2016Newhomesonly

ConventionalFHAVA

Source:MetroMarket Trends,author's calculations

57

Figure:MedianLoantoSalePriceRatioforNewHomeswithMortgages,1990-2017

InterestRateIncreasesHaveImpactsonAffordabilityThesetrendshaveimpactsonhousingaffordability.Affordabilityimproveswhenfamilyincomesrisefasterthanhouseprices,andwheninterestratesfall.Overthenextseveralyears,goodjobcreationinthetwo-countymetroareawillkeepinboundmigrationfromothercountiesandstatesathealthyrates.AhealthynationaleconomymeansthatthetraditionalretireedynamicthatletsnewhouseholdsmovesouthtoadopttheFloridalifestyleandNorthwestFloridaaffordability,isinplace.However,thestrongincreaseinthesalespriceforexistinghomeserodesaffordability,whilethemoremodestincreaseinnewhomepriceskeepsthemaffordable.Thereareseveralstandardcalculationsthataredonetoassessaffordability.TheNAHBandWellsFargoproduceanOpportunityIndexforlocalareastoenablecomparisonofthealmost450areasforwhichtheOpportunityIndexiscalculated,totherestofthenation.Onthismeasure,thetwo-countyPensacolametrohasimprovedinaffordabilitysince2012,movingfromarankingofbetween100thto150thinaffordabilitybetween2008and2012,toarankingbetween50thto100thfrom2013onward.Thisisbecausehomepriceincreasesinourareahavelaggedperformancenationally.Inthemostrecent6monthsforwhichdataareavailable,andrestrictingtheanalysistowarrantydeedsalesonly,themediansaleprice(seasonallyadjusted)foranexistingsinglefamilyresidenceinSantaRosawas$192,150.Iftheloan-to-valueratioforthattransactionwereat100percent,ashasbeentrueonaverageforSantaRosaforthelastdecade,thenanincreasefrom3.5to4.5percentwouldraisethemonthlyinterestexpenseforthatmortgagepaymentby$160andlowerthecontributiontopayingoffprincipalinyear1by$49permonth.Ifwemaketheusualassumptionthathouseholdsareconstrainedbytheirmortgagelendersfromhavingamortgagepaymentburdenofmorethan28percentofmonthlygrossincome,thenahouseholdwouldneedanincomethatishigherby$4,749peryeartoaffordthatsamehouse.

90%

95%

100%

105%1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Source:MetroMarketTrends,author's calculations

MedianLoantoPurchasePriceRatio,Jan90- Feb17fornewhomeswithmortgages,includesboth1stand2ndmortgages

TotalMortgageDebtIncurredasPercentofPrice

58

Takingitastepfarther,wecanassumenormalratesforpropertytax(forahomesteadedproperty),windstormandhomeowners’insurance,privatemortgageinsurance,andpayoffofprincipalbalance.ThiswouldyieldamonthlyPITIofabout$1,320ata3.5percentmortgageinterestrate,requiringanannualincomeof$56,612toqualify.Theincreasefrom3.5to4.5percentinthemortgageinterestratewouldtakethatmonthlypaymenttoabout$1,432,requiringannualincomeof$61,361toqualify.Anincreaseto5.5percentwouldrequireanincomeof$66,393toqualify.Attheseincomelevels,takingthemortgageinterestrateupto4.5percentwouldeliminateabout4.1percent,ormorethan2,600,householdsfromqualifyingforthatloan.Anincreaseto5.5percentwouldkeepanadditional3,000householdsfromqualifyingtopurchasethelate-2016medianpricedhome.Additionally,asinterestratesrise,thepoolofavailablebuyersshrinksforanotherreasonaboveandbeyondfailuretoqualify.“Mortgagelock-in”referstothephenomenonofhouseholdswhoalreadyhaveamortgageonanexistingpropertyatalowrate.Theymayfindthatanymovetoadifferenthomewouldraisetheirmonthlypayments,unlessthatdifferenthomeweretobemuchcheaperthantheirexistinghome,duetohighermortgageinterestrates.Thealternativeofstayingintheirexistinghome,presumablypurchasedorrefinancedwheninterestrateswereatrockbottom,mightbepreferredtomoving.Takentogether,thedecreasednumberofhouseholdswhoqualify,alongwithhouseholdswhodonotwantahigherpaymenteveniftheydoqualify,pointtowardsaslowdownasinterestratesrise.

TheJobCreationimpactofHomebuildinginSantaRosaCountyInboundmigrationisparticularlyimportantindeterminingpopulationgrowthratesinSantaRosa,asitisforotherfast-growthcountiesthroughoutFlorida.Ifthesenewresidentshadnotarrived,theneedfornewschoolswouldnotbeasgreat,andtheneedtoexpandroads,water,sewerandotherinfrastructurewouldbeless.However,therewouldalsobefewerresidentsoverwhichtospreadthefundingburden.Thequestionofwhethernewhousingdevelopmentpaysforitselfishotlydebated.Thereareclearlybothcostsandbenefitstothelargercommunityofconstructingnewhomesandneighborhoods.WhileacompletetreatmentoftheeconomicandfiscalimpactofgrowthtotheCounty,itsestablishedresidents,anditsnewcomersisbeyondthescopeofthisreport,weoutlineheretheeconomicimpactofnewhomeconstruction.Homebuildinghasasomewhatuniquecapabilitytodrivelocaleconomicimpact.Itcallsforskilledworkerswhocommandalivingwagethatwillmostlybespentlocally.Muchofthespendingdonetobuilda$230,000houseisdoneonlocallyproducedgoodsandservices.Thismeansthatunlikeothertypesofgoodsproduction(i.e.,manufacturing),thesupplychainfordevelopersandbuildersoftenhasanextensivelocalcomponent.Thischaracteristicgiveshomebuildingarelativelylargemultiplier,orspin-offspending,effectinthelocaleconomyperdollarspent.Thisreportforecaststhattherewillbesufficientregionalpopulationgrowthtoenableabsorptionofabout1,500newhomesperyearintheCountyuntilatleast2025.Itisimportanttobreaktheeconomiceffectoutintoone-timeandcontinuingeffect.TheNationalAssociation

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ofHomeBuildershasproducedstudiesthatestimatethejobcreationandspendingimpactofhomebuildinginSantaRosaCounty,andhavealsoestimatedthenetcostsandrevenuesassociatedwiththepresenceofnewresidents.TheNationalAssociationofHomeBuildersrecentlyusedstandardeconomicimpactmeasurementtoolstoassessthevalueofnewresidentialconstructioninourlocalarea.Thatstudyappliedtothetwo-countymetroareaandusednewhomesalesfiguresandpricesfromseveralyearsago.Here,weupdatethatanalysistoincorporateadjustmentstothequantitiesofhomesbuiltandsold,aswellastoprices,toshowtheeconomicimpactofthehousinggrowthprojectedbythisstudy.Theestimatedannualeconomicimpactofproductionof1,500newhomesperyearprojectedbythisstudy,usingthecurrentmedianpricepernewhome,is$288millioninnetnewlocalincome,alongwith$25.8millionintaxesandotherrevenuestolocalgovernments,and5,327netnewjobsinthelocaleconomy.Thisisseparateandapartfromthecontinuingimpactofhavinghomeownersinnewer,highervalue,andthushigherpropertytax-paying,propertiestosupportCountyrevenuerequirements.Toputthisinperspective,totalearningsfromjobslocatedinSantaRosain2016wereabout$2.16billion.

ConcludingRemarksSantaRosa’suniquepositionasthecommunityofchoiceforhigh-earningfamilieshasledittoapositionoffourthhighestmedianhouseholdincomeamongthe67countiesofFlorida.Becauseincomeissohighlycorrelatedwitheducation,health,longevity,andothersocio-demographicmetrics,SantaRosaconsistentlyperformswellrelativetoitspeers.GiventhelowcostoflivinginNorthwestFloridagenerally,andinSantaRosaspecifically,thishighrankinginmedianhouseholdincomeisallthemoreimpressive.Adollargoesfartherhere,andcombinedwithhighincomes,yieldsoneoftheverybestprice-level-adjustedaveragestandardsoflivinginthestateandtheregion.Preservingandgrowingthisstatuswillrequirerenewedattentiontotheavailabilityofthehigh-qualityandlow-costcombinationthathasledsomanypeopletocallSantaRosatheirhome.Littlecanbedonelocallyaboutsoutheasternandnationalfactorsthatwillinfluenceaffordability,suchasmortgagerates,banklendingstandards,andthecostofbuildingmaterials.However,localgovernmenthasalargeroletoplayinstrikingtherightbalancebetweeninfrastructureandaffordability,andinthedistributionoffinancialburdenbetweennewandexistingresidents.Asonepoliticalpunditputitaswebegantherecoveryfromthehousingbust:“Floridausedtobebigongrowthmanagement,butnowwejustwishwehadsomegrowthtomanage!”TheregionalpopulationgrowththatwouldsupporthealthygrowthforSantaRosaisavailable,aslongastherearegoodschoolsandgoodandsafestreetsforall.Ifnot,thosepotentialnewresidents,andtheirspending,haveotheroptions.Thisisnottosaythatgrowthcomeswithno

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cost.However,itistheviewofmanythattheproblemsthatcomewithgrowtharepreferabletotheproblemsthatcomewithstagnation.SantaRosahaschoicestomake.