Many people are moving to Florida. Indeed, three Florida metropolitan areas top the Census Bureau’s list of areas with the largest net migration increases.
People are moving into The Sunshine State for various reasons, including the weather, favorable tax rules, job growth, and a friendly business climate. All that migration makes Florida’s real estate market interesting for a real estate economist.
Here are a few trends and predictions in Florida’s housing market that sellers should know.
Rising Interest Rates May Cool the Market Slightly
The Florida market has been quite hot recently. High demand was causing homes to sell quickly, with less than a one-month supply available.
The Federal Reserve began raising benchmark interest rates in March, June, July, and September. Federal Reserve officials indicate that they will continue to raise rates until inflation cools. Mortgage interest rates tend to mirror increases in the benchmark interest rate. Forbes quotes experts saying rising mortgage rates may end up between 5.5 percent and 7 percent.
Higher mortgage rates may cool the market, making the supply of houses for sale more equal to buyers’ demand. The trend is already beginning. September 2022 saw a three months supply of homes for sale, which is up two months year on year.
Florida Home Prices May Stop Soaring
For the past 15 years, the demand for new Florida homes has far outpaced the supply, leading to soaring home prices. Florida home listing prices have risen by 81 percent over the past five years, and house prices in the state have been up 58 percent since the start of the pandemic. Miami is now among the top 15 most expensive cities to live in, with high prices in the home ownership and rental market.
The rising prices and higher increase rates have caused Florida’s housing affordability index to decline sharply. Over the past few years, the median price increase has been particularly sharp in the luxury market.
However, home price growth is beginning to cool, and Florida housing market predictions are that these prices will stabilize. The median sales price pulled back in June and July. The increase in prices in the luxury market also is slowing.
In mid-2022, one in five homes sold in Miami-Dade had a market value of $1 million or more, compared with 1 in 13 in the past. The emphasis toward the end of the year is likely to be on affordable housing markets.
Sellers also are seeing four to five offers on their homes rather than 15, the norm earlier in the year. Home prices in Florida are stabilizing. In September, 18.7 percent of homes sold at more than their listing price, down almost 14 percent year over year. On the other hand, 31.9 percent of homes sold below the listing price.
On average, homes sold at 97.6 percent of the list price, down 1.5 points year over year. The median time on the market is also increasing to 16 days vs. nine days a year ago.
Florida Areas May See Fewer Buyers
Florida has experienced a housing boom for many years because of a massive influx of buyers. However, Florida realtors expect the influx to slow for several reasons. Rising mortgage rates are one reason. The Sunshine State being one of the least affordable housing markets is another. A third reason is projected slower economic growth.
Job growth is expected to slow to 2 to 3 percent from its previous rate of 6 percent. Finally, population growth in the state is slowing. Areas of south Florida are already showing signs of fewer people moving into the state. However, the influx of new buyers into the state is still expected to be positive.
Florida’s Housing Market May See a Supply Increase
Florida is beginning to see an increase in housing inventory. Builders are working diligently to create new single-family homes and condominiums. However, labor shortages make building challenging.
However, with buyers’ demand moderating, the inventory of single-family homes is surging to near-record high levels, and sales are down 40 percent. The number of active listings has increased recently.
Some of the increase is because real estate investors are becoming strapped because of variable interest rates on their debt. In September, more than 130,000 homes were on the market, up 11 percent year over year. The increase in homes for sale comes despite 21 percent fewer new listings than one year ago.
Despite Challenges, the State Will Avoid a Massive Housing Crash
Although rising rates, expensive housing prices, and higher inventory are causing the state’s housing market to settle, the state will avoid a significant housing market crash for several reasons.
Even though builders are increasing the inventory of new homes, they are doing so much more slowly than they did during the last housing crash. Housing inventories are unlikely to reach excessive levels, meaning home values will not decrease. However, Miami’s cost of living is still 20 percent lower than in San Francisco, and the Sunshine State’s overall cost of living is only 1 percent above the national average.
Median family incomes are still increasing, in contrast to national trends. And, because lenders have held to stricter standards than before the last housing crisis, Florida homeowners are more likely to hang onto their homes.
Sellers can still feel comfortable listing their homes for sale. Home sales are still brisk, and serious buyers are making offers on homes. Florida home values are still rising. The market continues to favor sellers, although they may expect lower prices than in previous months.
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