- RAW Developments
Florida Real Estate Forecast Next 5 Years: Will it Crash?
Source: Florida Housing Market Predictions 2023 | Next 5 years | Will it Crash? (noradarealestate.com)
By: Marco Santarelli
The Florida housing market has continued to face challenges caused by rising mortgage rates, resulting in a decline in both single-family and townhouse/condo closed sales. Despite the challenges, the market has seen a significant increase in end-of-month inventory levels for both categories, albeit still short of pre-pandemic levels. In this article, we will take a closer look at the current trends and what they mean for the Florida housing market.
According to the recent report by Florida Realtors, single-family home sales in January 2023 were down by 32.5% compared to the same period in the previous year, a trend that has persisted for several months. The decline in townhouse/condo sales was even steeper, at nearly 41%. While this is not unexpected given the high mortgage rates, it has resulted in a significant drop in buyer demand.
The level of new listings for single-family homes for sale has been below normal, with a decline of about 5% compared to a year ago. This trend is partly due to the high mortgage rates, which are discouraging some potential sellers from listing their homes. In contrast, new listings for townhouse/condos were down by 2.4% compared to the same period in the previous year.
At the end of January, the number of single-family homes listed for sale was more than double what it was a year ago, with an increase of over 134%. The inventory levels for townhouse/condos were up 90% on a year-over-year basis. However, these levels are still short of pre-pandemic levels, and in most parts of Florida, we were considered to have an inventory shortage even before the pandemic.
Median Sale Price
The shift in the ratio of active buyers to active sellers has resulted in a deceleration of overall home price growth, but not a full reversal. The median sale price for closed existing single-family home sales in January 2023 came in at nearly $390,000, which is still 4% higher than last January's median price. The median price for townhouse/condos grew by almost 9%, up to $310,000.
The above report shows that despite the challenges posed by rising mortgage rates, the Florida housing market continues to remain resilient. While the decline in sales and new listings is not surprising, the increase in end-of-month inventory levels offers a glimmer of hope. As we move further into 2023, it will be interesting to see how the market continues to evolve and how it responds to the changing economic landscape.
Florida Real Estate Forecast Next 5 years
Florida home values have risen by about 80% over the past 5 years and a positive trend is forecasted for the next 5 years. With the recent spike in mortgage payments as a result of rising interest rates, analysts are watching the Florida housing market closely to see what effect this will have. It is likely to restrict house price increases, but to what amount is unclear because there is still a “fear of losing out” attitude among purchasers, which is fueling the market, although slowly.
It's no surprise that Zillow ranked Tampa, Florida, as the top real estate market in the United States in 2022. Overall, Florida housing prices have witnessed some of the most dramatic increases in the country, with Miami and Tampa at the forefront of the upswing. Due to a variety of variables, the housing market in Tampa has outpaced many others, including a large number of potential buyers, a scarcity of supply, strong property sales, and an active employment market in the area.
Overall, the Florida housing market is strong and is predicted to remain so in the next five years. If you're a seller, this is wonderful news since it implies property values are rising and there isn't much selling competition, giving you the luxury of selecting from the best offers on your schedule. Higher mortgage rates may cause unprepared house buyers to postpone their purchases.
If this reduces buyer demand sufficiently in some Florida areas, price appreciation may decrease. The lower price increase may provide remaining buyers who can afford higher interest rates more confidence in locating a home they can afford. And that leads to fewer home sales. If you're selling a home in Florida this year, the odds are good that you'll come out ahead financially. Real estate prices and mortgage rates are rising, and the few affordable houses that remain are being snapped up like sardines. If you want to buy in this market, now’s not the time to buy.
Whether or not the country enters a recession, the housing market appears to be in good shape for the foreseeable future. Perhaps not at the same rate that the United States has lately seen, but growth nevertheless. This is an excellent moment for real estate investors, particularly those interested in Florida, to capitalize on market possibilities.
Florida Real Estate Appreciation Rates For 10 Years
Florida's real estate market has seen unprecedented price rises during the last few years, as a result of a lack of supply and high demand. Most of the emphasis is focused on the prices and the possibility of a housing bubble. While Florida's mild temperature, cheap taxes, and natural attractions have historically enticed newcomers to the state, if affordable housing challenges continue to prevail across the state, these enticing elements may go away.
A post-pandemic world necessitates that the state of Florida deal with the fact that pricey housing can in certain respects impede economic growth and have an unequal impact on critical segments of the population. Florida has had some of the strongest housing appreciation rates in the country over the past decade.
Over the past decade, Florida's real estate has risen 282.35 percent, which equates to an annual home appreciation rate of 6.14 percent, according to the data collected by NeighborhoodScout. If you are a house buyer or real estate investor, Florida has been one of the finest long-term real estate investments in the United States over the past decade.
Florida’s housing market mirrors larger national trends, albeit with some regional variation. An imbalance between demand and supply has fueled rapid home appreciation across the state. The real estate appreciation rate in the Sunshine State in the last two years (Between 2020 Q3 – 2022 Q3) has been 53.28 percent. Considering the most recent twelve months tracked by them (2021 Q3 – 2022 Q3), Florida's home appreciation rates continue to be among the highest in the United States, at 26.35 percent.
The quarterly appreciation rates (Between 2022 Q2 – 2022 Q3) in FL were 4.36 percent, which amounts to an annual appreciation rate of 18.60 percent. However, high mortgage rates are pushing a lot of buyers out of the market, which can present opportunities for those who are staying in but it will also moderate the rate of appreciation over the next twelve months.
Within Florida, Tampa Bay has one of the most overpriced housing markets in the nation, according to new research from Florida Atlantic University. Extremely low mortgage rates drove our red-hot housing market, particularly during the epidemic, and intensified bidding wars. Lakeland ranks 12th nationally, and second in the state, with homes overvalued by more than 53.2%. North Port-Sarasota-Bradenton is No. 17 nationally, fourth in the state at 48.9%.
Florida Real Estate Forecast
As of February 2023, the typical value of homes in Florida is $377,706 (Zillow Home Value Index). Florida home values have grown by 11.1% over the last twelve months and the median days to pending is 31.
The median sale-to-list ratio is 0.997
13.5% Percent of sales over list price
67.9%Percent of sales under the list price
Based on the Zillow data provided, the Florida housing market is likely to continue its growth trend in 2023, but at a slower pace than in the previous year. The typical value of homes in Florida has grown by 11.1% over the last twelve months, which is a significant increase in value. However, this growth rate is likely to slow down as the market stabilizes.
The real estate market in Florida is expected to continue to grow in the coming years, with metro areas like Miami, Tampa, and Orlando leading the way. The latest Zillow data provides insights into the future performance of the real estate market in these metro areas and others across the state. In this blog, we'll take a closer look at the Zillow data and provide a forecast for each metro area.
According to the Zillow data, the Miami metro area is projected to see a slight increase of 0.2% in home values by March 31st, 2023. However, this growth is expected to slow down in the following months, with no growth projected by May 31st, 2023. But by February 29th, 2024, home values are expected to increase by 1.7%.
The Tampa metro area is projected to see no growth in home values by March 31st, 2023, but this is expected to change by May 31st, 2023, with a projected decrease of 0.3%. By February 29th, 2024, home values are expected to increase by 2.3%.
The Orlando metro area is projected to see a decrease of 0.2% in home values by March 31st, 2023, with a further decrease of 0.7% by May 31st, 2023. However, by February 29th, 2024, home values are projected to increase by 0.6%.
The Jacksonville metro area is projected to see a decrease of 0.2% in home values by March 31st, 2023, with a further decrease of 0.6% by May 31st, 2023. However, by February 29th, 2024, home values are expected to increase by 1.6%.
North Port, FL:
The North Port metro area is projected to see a decrease of 0.1% in home values by March 31st, 2023, with a further decrease of 0.2% by May 31st, 2023. By February 29th, 2024, home values are expected to increase by 2%.
Cape Coral, FL:
The Cape Coral metro area is projected to see a decrease of 0.6% in home values by March 31st, 2023, with a further decrease of 1.5% by May 31st, 2023. However, by February 29th, 2024, home values are expected to increase by 0.2%.
The Lakeland metro area is projected to see a decrease of 0.2% in home values by March 31st, 2023, with a further decrease of 0.6% by May 31st, 2023. By February 29th, 2024, home values are expected to increase by 1.7%.
Overall, the Florida housing market is likely to remain strong in 2023, with continued demand for homes and steady price growth. However, the market may begin to stabilize as the growth rate slows down, which may lead to more balanced conditions between buyers and sellers. It is important to note that these projections are subject to change based on a variety of factors, including economic conditions, interest rates, and local market conditions.
Florida Housing Market Trends
Florida is one of the most popular destinations for homeowners and investors alike. With its tropical climate, beautiful beaches, and booming economy, Florida continues to attract new residents from all over the world. In this section, we will analyze the Florida housing market for January 2023 based on the data provided by Redfin.
The Florida housing market for January 2023 has shown steady growth in home prices compared to the previous year. However, the number of homes sold has declined significantly, indicating a possible shift in market dynamics. With a higher number of homes available for sale and fewer buyers, the market is currently favoring buyers. However, the low percentage of homes selling below the list price and the relatively high sale-to-list price ratio suggest that the market is still strong for sellers.
Home Prices in Florida
In January 2023, the median home price in Florida was $385,700, up 6.1% from the previous year. The average number of homes sold was down 35.4% year over year, with 21,512 homes sold in January this year, compared to 33,252 homes sold in January last year. The median days on the market was 53 days, up 21 days year over year.
Number of Homes for Sale
In January 2023, there were 138,803 homes for sale in Florida, up 36.1% year over year. The number of newly listed homes was 38,722, down 7.4% year over year. The average months of supply is 5 months, up 3 months year over year. This indicates that the market is currently favoring buyers, with more options available and less competition.
Percentage of Homes Sold Below List Price
In January 2023, only 11.0% of homes in Florida sold below the list price, down 20.6 points year over year. This indicates that the demand for homes in Florida is high, with buyers willing to pay the full asking price or even above. There were only 30.5% of homes that had price drops, up from 12.0% of homes in January last year. This shows that sellers are becoming more realistic about pricing their homes and are willing to adjust prices to meet market demands.
Sale-to-List Price Ratio
In January 2023, the sale-to-list price ratio was 96.6%, down 2.4 points year over year. This means that buyers paid, on average, 96.6% of the listed price for their homes. This indicates that there may be some room for negotiation, but the market is still relatively strong for sellers.
Top 5 Metros in Florida with the Fastest Growing Sales Price
Coral Gables, FL had the fastest-growing sales price, up 87.2% year over year. Winter Park, FL followed closely behind, with a sales price growth of 56.2%. Margate, FL had a sales price growth of 43.8%, while Altamonte Springs, FL and Miramar Beach, FL both had a sales price growth of 34.6%. These cities may offer attractive investment opportunities for buyers looking to invest in the Florida housing market.
Florida Housing Market Annual Report (Year-End)
Here's Florida's statewide housing market data for single-family homes as reported by Florida Realtors for the previous year.
Florida Single-Family Home Sales
The number of sales transactions closed in 2022 was 287,352, -18% year-over-year.
The number of Closed Sales in 2022 in which buyers exclusively paid in cash was 92,051, -12% year-over-year.
The percentage of Closed Sales which were Cash Sales was 32.0%, +7% year-over-year.
Cash Sales can be a valuable measure of the level of market participation by investors.
Investors are far more likely to have the cash on hand to purchase a house, whereas the average homeowner requires a mortgage or other type of financing.
Florida home sales dropped in most price segments in 2022.
The highest closed sales were reported in the market segment of $400,000 – $599,999 (81,155 sales).
It was followed by the $300,000 – $399,999 segment which reported 43,683 sales.
These two were the only market segments that reported year-over-year gains in home sales.
Florida Single-Family Home Prices
The median sale price reported for the year (i.e. 50% of sales were above and 50% of sales were below) was $402,500, +15.7% YoY.
The average sale price reported for the month (i.e. total sales in dollars divided by the number of sales) was $562,442, +11.3%.
The sum of the sale prices for all sales which closed during the month was $161.6 Billion, -8.7% YoY.
It is a powerful predictor of the strength of the real estate business in a market, and real estate professionals, investors, and analysts are especially interested in it.
The Median Percent of the Original List Price Received was 100.0% in 2022, the same as in 2021.
Days on Market
The median number of days between the listing date and contract date for all Closed Sales during the month was 14 days, 2 days more than the previous year.
The median number of days between the listing date and closing date for all Closed Sales during the month was 56 Days, 1 day more than the previous year.
New Pending Sales
The number of listed properties that went under contract in 2022 was 290,375, -21.1% YoY.
Pending Sales are considered to be a decent indicator of potential future Closed Sales.
Florida Housing Supply
The number of New Listings put onto the market during the year was 366,296, -3.0% YoY.
The number of property listings active at the end of the year was 65,786, +116.8% YoY.
Months Supply of Inventory in the Florida Housing Market was 2.7 months, +170% YoY.
MSI is a useful indicator of market conditions.
The benchmark for a balanced market (favoring neither buyer nor seller) is 5.5 months of inventory.
Anything higher is traditionally a buyers' market and anything lower is a sellers' market.
When Will the Housing Market Crash in Florida?
Population growth, and particularly growth in the number of households, lead to a growth in housing demand. Real estate is subject to the law of supply and demand: when there are more purchasers than available homes, prices rise. Since the 1940s, Florida's population has increased year after year, often outperforming the national average. However, like the rest of the United States, growth plummeted to historic lows during the initial years of the pandemic until rebounding last year.
Florida is now America's fastest-growing state. According to recent census data, the Sunshine State added over 400,000 additional people between July 2021 to July 2022. It was a growth of 1.9%, bringing the total population to 22,244,823. That makes it faster-growing than Texas, which has the second-largest population in the United States, trailing only California.
According to experts, the national housing market or the market in Florida is nowhere near the crash that occurred during the Great Recession of 2008. This is partially due to tighter lending laws coming from the financial crisis. Borrowers are in considerably better shape, as seen by their improved credit scores. And as a result of rising home values, homeowners have a record amount of equity.
The current situation is a fairly complex web, but it's nothing compared to the 2008-2009 market crisis, which took years to unravel. The Fed's pandemic actions fueled a housing boom. As it tries to withdraw that support, it could be bad news for housing but will it lead to a crash? The Fed will continue to play a crucial role in the future of the housing market.
Back in February 2020, the Fed owned $1.4 trillion in mortgage-backed securities, and the number was falling rapidly. As the pandemic took root, however, the central bank initiated a new round of bond purchases (known as “quantitative easing”), bringing the number to $2.7 trillion.
Fed seeks to tighten monetary policy to combat inflation Although it wants to shrink that portfolio it is quite improbable that the Fed can unwind its balance sheet. It might simply accept the fact that it will continue to play a disproportionate role in the housing market and have a larger balance sheet than it would prefer. Prepare for a collapse, not a correction, in the housing market during the next 18 to 24 months if they do.
According to the financial services business Moody's Analytics, a majority of Florida's metropolitan regions are overpriced by more than 20 percent based on these parameters, which apply to two dozen metropolitan areas. Here are the states with the most inflated housing markets as of the first quarter of this year. Unsurprisingly, coastal regions top the list. At 57 percent overpriced, the Homosassa Springs Metropolitan Service Area (MSA), which encompasses Citrus County, took the top rank. It was also the fourth-best ranking in the nation.
Florida’s Top 10 “Most Overpriced” Housing Markets (By Moody’s Analytics)
Homosassa Springs MSA (57%)
Palm Bay-Melbourne-Titusville MSA (48%)
Punta Gorda MSA (45%)
Vero Beach-Sebastian MSA (42%)
Port St. Lucie MSA (40%)
Crestview-Fort Walton Beach-Destin MSA (40%)
Cape Coral-Fort Myers MSA (39%)
Miami-Miami Beach-Kendall Metropolitan Division (39%)
Naples-Immokalee-Marco Island MSA (38%)
North Port-Sarasota-Bradenton MSA (38%)
These price increases are problematic for Floridians for a variety of reasons. Although industry experts expect that the market will eventually recover, as it always does, these increased property prices may persist for some time. But when it decelerates, homeowners will not profit as much.
“Florida homeowners are much wealthier due to the rise in property values across much of the state, but not as affluent as they may believe,” Zandi said. It will be more difficult for homeowners to move up to a more costly property or use their home's equity to fund their expenditures. In addition, many middle-to-low-income people and first-time homebuyers are priced out of the market, according to Zandi, since they cannot afford not only the high sale prices but also the increasing mortgage rates and homeowners insurance.
10 Florida Markets Are Overvalued, According To A Rental Trends Study
According to new research on rental market trends, the Florida rental housing market is among the most overpriced in the country and has among the fastest-rising prices. The moratorium's expiry, along with the high demand for rentals, particularly in Florida, pushed rental costs skyrocketing. Landlords will continue to hike rents until additional rental units are developed, pricing off many middle-class customers who previously rented because they couldn't afford to purchase.
The research of 107 U.S. rental areas, published on June 6 and based on April data, discovered that ten of the country's most overpriced rental markets are in Florida. All ten Florida markets covered in the analysis are overpriced by more than 13 percent. The Miami market, which encompasses Miami-Dade, Broward, and Palm Beach counties, was identified as having the highest “premium” paid by renters.
The investigation revealed that it was 22.07 percent overpriced. The average monthly rent in South Florida increased to $2,846, despite historical data indicating that the average should be just $2,331. In the Fort Myers region, rental expenses increased the most year-over-year. The average rent is now $2,073, an increase of 32.38 percent from one year ago. The rental prices in the nine other Florida markets included in the research increased by more than 20 percent annually, and they all ranked in the top 15 out of 107 areas for this criteria.
“A lot of our Florida markets are way overpriced compared to the rest of the country,” said Ken H. Johnson, a real estate economist at the Florida Atlantic University College of Business, who is a co-author of the study.
Florida Housing Market Predictions 2023
Florida has one of the nation's hottest housing markets. Home sales usually are directly tied to an economy's health and rise and fall with economic activity. As economies slow, the supply of money tends to become more restrictive. As money becomes harder to borrow, fewer home buyers enter the housing market.
With year-round sunlight (giving it the nickname “The Sunshine State”) and world-class amusement parks, Florida is a popular worldwide tourist destination. The economy is active and varied, with dozens of international corporate headquarters. Eighteen companies with headquarters located in Florida earned a place on Fortune magazine’s 2020 list ranking enterprises with the 500 highest fiscal-year revenues in the nation.
Florida’s Economy Continues to Thrive
Florida’s seasonally adjusted unemployment rate was 2.5 percent in December 2022.
It was down 0.1 percentage points from the November 2022 rate, and down 1.0 percentage points from a year ago.
There were 271,000 jobless Floridians out of a labor force of 10,761,000.
The U.S. unemployment rate was 3.5 percent in December.
Florida gained 440,000 jobs over the year, an increase of 4.8 percent.
Nationally, the number of jobs rose 3.0 percent over the year.
All nine major private sector industries in the state have surpassed pre-pandemic employment levels.
In December 2022, Miami-Dade County and Monroe County had the state’s lowest unemployment rate (1.4 percent each).
It was followed by St. Johns County (1.8 percent), and Wakulla County & Okaloosa County (1.9 percent each).
Highlands County had the highest unemployment rate (3.6 percent) in Florida in December 2022,
It was followed by Citrus County (3.5 percent), and Sumter County (3.4 percent).
Industries gaining the most jobs over the month were:
Leisure and hospitality with (+88,600 jobs, +7.4 percent).
Education and health services (+83,800 jobs, +6.2 percent).
Trade, transportation, and utilities (+82,700 jobs, +4.4 percent).
Professional and business services (+53,400 jobs, +3.6 percent).
Florida is a Hot Spot for Real Estate Investment for a Few Reasons
Florida's strong population growth, diverse job market, tourist attractions, affordable property prices, tax benefits, and diversified economy all contribute to making it a hot spot for real estate investment.
1. Strong population growth and job market: Florida has strong population growth, particularly in cities like Miami, Orlando, and Tampa. This leads to an increased demand for housing, making it a prime location for real estate investment. Additionally, Florida's job market is diverse and growing, which attracts new residents and supports the demand for housing.
2. Tourist Attraction: Florida is a booming real estate market due to tourism. Florida attracts millions of tourists annually. In tourist-heavy areas like Miami, Orlando, and others, vacation rental properties are in high demand. Vacation rentals offer greater space, privacy, and facilities than hotels for Florida tourists. Investors can earn rental income and gain property value via vacation rentals.
Vacation rental properties are more reliable and profitable than typical rental properties due to high demand. Tourists pay extra for comfortable vacation rentals. Tourist demand can remain consistent throughout economic downturns, making vacation rental properties more market-resilient. Florida's great tourist draw can offer real estate investors looking for vacation rental properties a reliable and successful revenue stream and property value appreciation.
3. Affordable property prices: Compared to other states like California, property prices in Florida are relatively affordable, which can make it an attractive option for real estate investors. This can lead to strong returns on investment and can make it easier for investors to purchase multiple properties. It's important to note that property prices can vary widely depending on location and property type. While some areas of Florida may have lower property prices, other areas, such as beachfront or tourist-friendly areas, may have higher property prices.
4. Tax Benefits: Florida has no state income tax, which can be a significant advantage for real estate investors. This can lead to higher net returns on investment and can make it a more attractive option for real estate investors.
5. Diversified economy: Florida's economy is diverse, with a mix of industries such as agriculture, tourism, aerospace, and technology. This diversified economy can help insulate the state from economic downturns, which can be beneficial for real estate investors.
However, it's always important to do proper research, understand the market and the property before investing, and have a solid plan in place for managing risks.