Wells Fargo economist disputes report on Florida population trends

A road trip is enough to convince a leading economist from Wells Fargo that the Wall Street Journal missed the mark in a recent report on population trends.

The Journal reported that Florida’s population growth – a key factor in the hot housing market – has slowed to its lowest rate since 2014.

“You don’t have to do anything other than drive on the roads around Florida to realize that more people are moving to Florida than are moving away,” said Mark Vitner, managing director and senior economist at Wells Fargo’s corporate investment bank, speaking Wednesday at a presentation on Florida’s economic outlook. “It makes sense that Florida added fewer people during the pandemic than during the prior year. Because fewer people are moving within the United States and international immigration, which has become much more important to Florida, has virtually shut down … But if nearly as many people left Florida as moved to Florida in the past year, there is no way that the population would have increased at all. That clearly just didn’t happen. More people are moving to Florida.”

About 241,000 new residents moved to Florida in 2020, Wells Fargo said. The bank is projecting a net gain of 243,000 Florida residents this year and another 254,000  in 2022. That’s 61 more people moving into the state each day than are moving away, said Charles Dougherty, vice president and economist at Wells.

Vitner and Dougherty are generally upbeat about Florida’s post-pandemic economy. There was a dramatic pullback in tourism initially and it faces a long road back, the economists said, but tech-driven markets, including the Tampa-St. Petersburg market, are seeing strong recoveries.

The local area is “on a bit of a roll,” Vitner said. It’s a mature market, so as the population grows, there’s a lot of focus on redevelopment, he said.

“Folks who live in high-cost parts of the country, where they are paying a lot of money for relatively little living space, increasingly are looking for places where they can increase their quality of life by finding more affordable housing and still have all the amenities they want,” Vitner said. “Downtown Tampa and downtown St. Pete are really nice. There’s a lot to do there. The communities have gotten younger and we’re seeing a lot of tech companies moving here. I think it’s only gotten started and has a long way to run.”

Real estate focus

The single-family housing market in Florida is the strongest it has been in a decade, Dougherty said.

“The housing market has been at the forefront of the recovery so far and there’s two factors driving that. One of them is the pandemic, which has driven the need for increased space so households can build out home offices or have increased space for exercise equipment and so forth,” Dougherty said. “The other thing is low mortgage rates. Mortgage rates last year dipped to record lows.”

Although mortgage rates now are starting to creep higher, he expects the housing market to stay strong.

“We expect that because of the demographic factors driving housing demand — namely, a ready and waiting wave of millennials who are reaching that age when home buying tends to occur,” he said. “On top of that we’re expecting north of 6 percent GDP growth this year. We’ve had such strong GDP growth and overall economic growth that you expect to see a really strong housing market alongside that.”

Wells Fargo projects 167,500 total housing permits this year and 172,000 total housing permits next year, compared to 162,592 housing permits in Florida in 2020.

On the other hand, commercial real estate was upended by the pandemic.

“Across the board you see vacancy rates going up. The office market has seen the sharpest rise. A lot of folks are still working remotely and a lot of businesses are sub-leasing their space. The office occupancy rate is probably going to move up a little bit more,” he said.

The office vacancy rate statewide was 8.1 percent at the end of the first quarter of 2021, Wells Fargo said.

Retail remains challenging, but industrial space has seen strong growth as more people use ecommerce, boosting the demand for more warehouses.