Just How Bad is the Housing Market for Florida Buyers and Sellers?

Just How Bad is the Housing Market for Florida Buyers and Sellers?

Escalating mortgage rates are a challenge for Florida's real estate landscape, contributing to a decline in finalized transactions for single-family homes and townhouses/condos. In the face of these hurdles, there has been a noteworthy rise in end-of-month inventory levels for both property types. However, they remain beneath the levels observed before the onset of the COVID-19 pandemic.

For those seeking a deeper understanding of the ongoing market dynamics in Florida and insights into the prospective trajectory of its real estate sector, let's take a closer look at the buyer and seller real estate market in Florida.

Additionally, before making any decisions in the real estate market, ensure a smooth transaction with the guidance of our experienced Real Estate lawyers in Vero Beach.

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Just How Bad is the Housing Market for Florida Buyers and Sellers

Florida's housing market remains a hotspot for investors and homebuyers, drawing people from around the globe with its appealing tropical climate, beautiful beaches, and robust economy.

The housing market trends in January 2023 revealed a consistent upward price trajectory compared to the previous year. However, there's a notable decline in the volume of properties sold, signaling a potential shift in market dynamics. This change is favorable for buyers, with increased houses available for sale and decreased buyer demand posing challenges for landlords.

Here are some key trends to watch within Florida's recent housing market:

Number of Homes for Sale

According to Redfin, Florida witnessed a significant rise in the number of homes for sale, reaching 138,803 in January 2023—a 36.1 percent increase from the previous year. Newly listed properties amounted to 38,722, indicating a 7.4 percent decrease from the previous year. The average supply has extended to 5 months, showcasing a 3-month increase over the prior year. This surge in supply implies more options for buyers and reduced competition in the market.

Florida Home Prices

According to Redfin, Florida's median home price in January 2023 rose by 6.1 percent from the previous year to $385,700. With 21,512 homes sold in January 2023 compared to 33,252 homes sold in January 2022, the average number of properties sold declined by 35.4 percent YoY. There was also an increase of 21 days on the market from the previous year, with an average of 53 days.

Sale-to-List Price Ratio

In January 2023, the sale-to-list price ratio experienced a 2.4-point dip from the previous year, settling at 96.6 percent. This metric indicates that, on average, buyers paid 96.6 percent of the listed price for properties. While this suggests room for negotiation, it also signifies that the market remains advantageous for sellers.

Percentage of Homes Sold Below the Listing Price

A mere 11.0 percent of homes in Florida were sold below the asking price in January 2023, marking a substantial 20.6-point decrease from the previous year. This low percentage underscores the robust demand for properties in the state, with buyers willing to meet or even exceed the total asking price.

The data also reveals that only 30.5 percent of homes experienced price reductions, a notable increase from the 12.0 percent recorded in January of the previous year. This shift indicates a growing willingness among sellers to adapt to changing market dynamics by adjusting their asking prices.

Top 5 Florida Metros for Fastest-Growing Sales Price

The top five metros in terms of the fastest-growing sales price include:

  • Coral Gables, FL - 87.2 percent
  • Winter Park, FL - 56.2 percent
  • Margate, FL - 43.8 percent
  • Altamonte Springs, FL - 34.6 percent
  • Miramar Beach, FL - 34.6 percent

Factors Shaping the Florida Real Estate Landscape

Robust Job Market and Population Growth

Florida, particularly in thriving cities like Orlando, Miami, and Tampa, is witnessing rapid population expansion. The influx of new residents contributes to an increased demand for housing, presenting lucrative opportunities for real estate investors. The state's diversified and growing employment opportunities further attract individuals, fostering a positive environment for the real estate market.

Diverse Economy

Florida boasts a multifaceted economy encompassing sectors like tourism, agriculture, technology, and aerospace. This economic diversity plays a crucial role in providing resilience against economic downturns. Real estate investors in Florida can benefit from the state's ability to weather various economic challenges, making it a stable and attractive investment destination.

Tourism Impact

The continuous influx of millions of tourists into popular destinations like Orlando and Miami significantly contributes to the flourishing real estate market. The high demand for vacation rental properties in these tourist hubs presents an excellent opportunity for property value appreciation and consistent rental income, making it a favorable landscape for real estate investment.

Florida Housing Market

Tax Advantages

Florida's lack of a state income tax is a notable advantage for real estate investors. This absence of state income tax can lead to higher net returns on investments, making Florida an appealing choice for those seeking favorable tax conditions in their real estate ventures. This tax benefit adds an extra layer of attractiveness to the state's real estate market.

Florida Housing Market Stability: A Closer Look

As of now, there is no imminent indication of a crash in the Florida housing market; however, it's practical to consider several factors that play a role in its dynamics:

Population Growth and Supply-Demand Dynamics

The law of supply and demand is a crucial aspect of the real estate market. Florida has experienced continuous population growth, contributing to increased housing demand. The state's population, currently at 22,244,823, has surged, making it the fastest-growing state in the U.S. Despite a brief slowdown during the initial years of the COVID-19 outbreak, the steady growth has maintained the demand for housing.

Economic Health and Lessons from the Past

Experts emphasize that the current state of the national and Florida housing markets is far from the crisis witnessed during the Great Recession of 2008. Stricter lending regulations, implemented post the financial crisis, have contributed to a healthier borrower landscape, marked by improved credit scores. Homeowners benefitting from escalating home values now hold a substantial amount of equity.

Unraveling the Complexity

The intricate web of the current market scenario is a far cry from the extensive crisis of 2008–2009, which took years to resolve. The current housing boom, triggered partly by the Federal Reserve's pandemic measures, introduces complexity. While the withdrawal of these supportive measures might pose challenges, comparing the present situation to the market crash of the late 2000s seems unlikely.

The Ongoing Influence of the Federal Reserve on the Housing Market

The Federal Reserve's role in shaping the future of the housing market remains paramount, and several vital factors underscore its significance.

Initially holding $1.4 trillion in mortgage-backed securities as of February 2020, the Federal Reserve witnessed a rapid decline in this amount. However, as the pandemic unfolded, the central bank responded with a new phase of bond purchases, colloquially known as "quantitative easing," effectively elevating the total to $2.7 trillion.

The Federal Reserve's strategy to counteract inflation involves tightening monetary policy. While there is an intention to reduce the portfolio, entirely unwinding the balance sheet appears unlikely. The challenge arises when the Fed accepts a larger-than-preferred balance sheet, assuming a disproportionate role in the real estate market.

Property owners, investors, or landlords are concerned about the potential consequences if the Federal Reserve maintains a substantial presence in the housing market. The uncertainty surrounding the Fed's ability to unwind its balance sheet within the proposed timeframe raises apprehensions about the housing market's stability, possibly triggering concerns of a market downturn within the next 18 to 24 months. Vigilance and monitoring of the Federal Reserve's actions will be crucial for stakeholders navigating the intricate landscape of the real estate market.

While uncertainties persist, the consensus among experts leans towards a more resilient and better-prepared housing market, less susceptible to the severe downturns of the past. The ongoing monitoring of population trends, economic indicators, and policy shifts will be crucial in gauging the trajectory of Florida's real estate landscape.

Florida Housing Market: Key Statistical Insights

Statistical Insights of Housing Market
  • Average Home Prices: Florida's median home price is $402,500, reflecting a 2.8 percent YoY increase. Experts anticipate further growth in the median sale price in 2024 due to the prevailing tight inventory. The sale-to-list price ratio currently registers at 97.4 percent, experiencing a marginal decline of 0.27 points YoY since September 2022.
  • Home Sales: September 2023 witnessed a notable 5 percent YoY increase in home sales. The data reveals that 30,887 homes were sold in September 2023, up from 29,562 in the same month in 2022.
  • Average Rent Prices: Rental costs exhibit regional variations across Florida. In Miami, the average tenant pays $1,635, while those residing in Tampa pay an average of $1,300.
  • Median Days on Market: The median days on the market for homes available for sale increased by eight days YoY, reaching 43 days. This metric indicates the average duration a property remains listed before being sold.
  • Pending Sales: Compared to 2022, the number of homes for sale has grown by 3.4 percent YoY. Presently, there are 143,000 homes available for sale in Florida.
  • Months of Supply: Florida's housing market maintains an average of 4 months of supply. This signifies that the state's inventory situation is relatively less constrained compared to the national housing market, providing a healthier balance between housing demand and availability.

Florida Housing Market Predictions for 2024

Floridians have weathered the turbulence of surging mortgage rates and escalating home prices in 2023. The following is a forecast for Florida's housing market in the upcoming year:

  • Home Sellers Resurgence in 2024: Many observers expect sellers who remained on the sidelines in 2023 to re-enter the market. This is particularly true for those compelled by new job opportunities or seeking more affordable locations. Analysts who accurately predicted the 2008 financial crisis anticipate that downsizing baby boomers can contribute up to 30 million housing units.
  • Stabilization of Mortgage Interest Rates by the 2nd Half of 2024: Mortgage rates peaked at 7.79 percent in October 2023, marking the highest level in 23 years. However, a subsequent drop to 7.35 percent in November, driven by a softening labor market and a slowing economy, suggests a potential stabilization. Although rates are expected to remain above 6 percent, a more stable scenario is anticipated in the second half of the year.
  • Rise in the Number of Home Buyers: Historically high interest rates deterred buyers in 2023. Yet, with mortgage demand rebounding after the rates softened to 7.35 percent in November, a resurgence in house hunters is expected. Easing inflation and stabilized rates are likely to contribute to this trend.
  • Continued Rise in Home Prices: Home prices demonstrated a consistent YoY increase in top Florida metros, reaching $402K in September 2023. Experts project that home prices will persist in their upward trajectory until the equilibrium between low supply and high demand shifts.
  • Increased Sales of New Home Constructions: September 2023 saw 12.3 percent of homes purchased being new constructions, the highest since 2022. Many observers expect incentives such as $30,000 concessions offered by home builders in 2023 to intensify the competition between builders and sellers for buyers in 2024.
  • iBuyers Making Lowball Offers: iBuyers, who offered 104.1 percent of market value in 2021, reduced their offers to 86 percent in 2022 and approximately 70 percent in 2023. The financial challenges faced by iBuyer giants like Opendoor and Offerpad, resulting in substantial losses in 2023, are anticipated to lead to continued lowball offers as they strive to navigate economic pressures.

Look Ahead at the Florida Housing Market

Jordan Lulich
Jordan Lulich, Real Estate Attorney

Florida homeowners should carefully weigh all of these factors when making decisions that affect their properties. A recent report from Florida Realtors highlights a decline in single-family home sales and condo-townhouse sales, coupled with a simultaneous increase in prices. This shift can be attributed to the ripple effect of elevated mortgage rates, leading to decreased buyer demand. Despite these challenges, many experts maintain an optimistic outlook, with no imminent expectations of a market crash in the near future. Homeowners should stay informed about these market dynamics to navigate their property decisions effectively.

If you plan to buy or sell a home this year, be sure to enlist the services of an experienced real estate lawyer who can navigate the ins and outs of the market.