March 6, 2023
What’s Happening in Florida’s Housing Market [2023]
Florida's Housing Market

What the [Latest Economic News] Means for Florida Homeowners

Are you a South Florida homeowner or buyer wondering how the economy will impact the housing market? Then you are in the right place! Today we will discuss the latest economic news for South Florida homeowners and buyers.


More Houses On The Market

If you want to buy, the odds may be in your favor. The power is returning to you! More listings are on the market compared to the crazy period during 2020-21, when mortgage rates dropped to a historic 3%. During 2020-21 sellers had no trouble finding a buyer causing demand to increase and supply to dwindle. Buyers who needed to obtain a mortgage kept losing out to cash buyers. Bidding wars ensued, and many buyers even opted to skip housing inspections.

In 2022-23 supply is starting to catch up with demand as mortgage rates continue to rise. The supply of homes for sale keeps growing, boosting inventory across the state. Statewide inventory was higher last year than the year before for single-family homes. As a result, buyers now have more time to get a mortgage, compare properties, and complete home inspections.


More Houses Doesn't Necessarily Mean More Opportunities

More Houses Doesn’t Necessarily Mean More Opportunities

Inflation and high-interest rates continue to pose a problem for buyers in the Florida housing market. While supply is growing, house prices remain high. With the increased homeowners’ insurance and mortgage rates, homeowner’s monthly payments are high. This means the dream of owning a home is out of reach for many buyers. The U.S. News & World Report shared its rankings of the least and most affordable states for housing compared to the total cost of living. Experts compared the average house price to the average family income and mortgage interest rate. Florida ranked #31 in affordability, indicating that the sunshine state has one of the least affordable housing markets in the nation.


Average Sales Prices to List Price Ratio Are Down

During December 2022, the average closing price to listing price was 95.7% in Miami-Dade County. Basically, buyers were often receiving a 4.3% discount on their closing. However, between February and May 2022, “discounts” vanished, and the closing price matched or exceeded the list price. Then in June 2022, the Federal Reserve raised mortgage rates to 5% to control the inflation rate and bring it back to 2%.

As interest rates continue to rise, buyers once again gain negotiation power. In Miami-Dade County, the average price-to-listing ratio fell for homes that sold at $1 million or more. The average discount is 7%. For homes that sold in the $300,000 – $399,000 range in December 2022, the average buyer received 4.1% off the list price.

Real estate experts and economists predict buyers will find an average 5% discount for homes priced less than $1 million. However, homes over $1 million could receive a further discount of 10% due to the buildup in inventory.


Will Prices Continue To Rise?

Florida home values rose 80% over the last five years, and experts predict the momentum to continue for the next five years. However, analysts wonder what impact higher mortgage payments will have due to rising interest rates. While it’s initially thought that this rise would restrict housing prices, there is still a “fear of losing out” mentality among buyers, which continues to fuel the market.

Zillow ranked Tampa, Florida, as the top real estate market in the U.S. in 2022. Overall, Florida housing prices experienced some of the largest increases in the country. The housing market in Tampa continues to outperform many others due to numerous variables – a scarcity of supply, a large number of potential buyers, strong property sales, and an active employment market.

Despite interest hikes, the Florida housing market remains strong, and we predict it will remain strong for the next five years. This is excellent news if you’re a seller, as your property value may rise and selling competition may lower. This may reduce buyer demand in some Florida areas, causing price appreciation to decrease. The lower price increase may give buyers who can afford higher interest rates more confidence to find a home they can afford. This leads to fewer home sales, resulting in affordable homes going like hotcakes!


Is The Housing Market Crash in Florida Crashing?

Is The Housing Market Crash in Florida Crashing?

This is not easy to answer, like all answers involving the economy. Population growth and growth in the number of households all lead to an increase in housing demand. Like all items for sale, real estate is subject to supply and demand. If there are more buyers than available homes, prices will rise. Starting in the 1940s, Florida’s population began to grow and continues to grow year after year. However, Florida suffered during the pandemic and experienced their growth plummeting to historic lows during the first years of the pandemic before bouncing back in 2022.

Florida is now the United State’s fastest-growing state. A recent census noted that Florida added over 400,000 new residents between July 2021 and July 2022, creating a population growth of 1.9%. This means Florida’s growing faster than Texas, the second-largest growing population in the United States, trailing behind California.

Experts note that the national housing market (including Florida) is far from the crash of the Great Recession of 2008. There are several reasons for this prediction, but it is partially due to tighter lending laws that emerged from the financial crisis in 2008. As a result, borrowers are in better shape, and due to rising home values, homeowners have a record amount of equity.


The Role The Fed Plays

The Fed will continue to play a vital role in the housing market’s future. In February 2020, the Federal government owned $1.4 trillion in mortgage-backed securities, and the number began to fall rapidly. Then, as the pandemic began, the central bank initiated a new round of bond purchases, nearly doubling the number to $2.7 trillion.

The Fed now seeks to tighten monetary policy to fight inflation better. In addition, they hope to lower their balance sheet. However, if they tighten their policy, we may face a collapse in the housing market during the next 18 to 24 months.


The Role Employment Plays

Despite rising interest rates and layoffs nationwide, Florida’s economy continues to do well. Florida gained 440,000 jobs in 2022, an increase of 4.8%. In addition, the state’s nine major private sector industries have surpassed pre-pandemic employment levels. Finally, Florida’s unemployment rate was down 0.1% from the November 2022 rate and down 1.0% from a year ago. With a strong and continually growing need for employment, Florida continues to attract new residents creating more demand for housing.


Overvalued Housing

According to Moody’s Analytics, home values in 97% of U.S. cities (including cities across South Florida) are very overpriced. Furthermore, experts predict that real estate in some of the most overpriced regions will fall by 10% over the next few years.

These price increases pose a problem for Florida house owners and buyers. Even if the market crashes, industry experts expect it to recover eventually, as it always does. However, these increased property prices may persist for some time, and when it ultimately decelerates, homeowners will profit less. Florida homeowners are wealthier due to the rise in property value. However, they are not as affluent as they may think. It is difficult for homeowners to move to a more costly property or leverage their home’s equity to find their expenditures.

Finally, many low-to-middle-income range families and first-time homebuyers can’t compete in the market. Sadly, they can’t afford the high sales price, increasing mortgage rates, and homeowners insurance.


What Does It All Mean?

What Does It All Mean?

Despite all the unknowns the future holds, Florida’s housing market remains strong due to the increasing population growth, continual supply and demand, and a robust and growing job market. Call the Westerfield Group if you need personal advice or guidance concerning selling or buying a home in the Southwest Florida area! I have over 40 years of marketing experience and over 20 years of knowledge working in SW Florida real estate. I believe in treating each valued client with the same honesty, respect, and care the we offer our families. So, let’s face the real-estate economy in SW Florida together!

Published: March 6, 2023
Author: The Westerfield Group
Categories : Uncategorized