Recent headlines are sounding a warning that Florida’s housing market could be in trouble.
Affordability issues driven by record-high home prices and elevated mortgage rates have caused the housing market to slow across the country. In some areas like Florida, less demand is simultaneously being met with a spike in inventory, which some feel could set the stage for a market crash.
Media and research company ResiClub analyzed all active listings on Realtor.com in March 2024. Florida had the largest inventory increase in the country, with 57% more homes for sale year over year.
High inventory and slowing demand is a worrisome scenario, but does it mean Florida’s housing market is doomed?
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What’s Happening in Florida’s Housing Market Right Now
Florida’s median sales price in June was $419,000, according to the latest Redfin data, a 2.3% increase compared with the year prior. Prices have flattened slightly since their 2024 peak in April, but today’s median home price is near its highest level in Florida’s history.
“Official numbers say prices are at an all-time high. However, I’m regularly seeing price drops in Central Florida, particularly for mid-range properties in the $500K-$650K range and in the suburbs, about 45 minutes or so outside the city,” says Robert Arnold, managing broker of Sand Dollar Realty Group in Altamonte Springs, Florida.
Britt Brooks, a real estate agent with Coldwell Banker Realty in Brandon, Florida, has also seen a recent slowdown in sales and increase in price drops. However, she says the price drops aren’t huge, “maybe a 1 or 2% reduction. Things priced well are still selling quickly,” says Brooks.
Redfin data shows 30.7% of Florida sellers made a price drop in June 2024, up 4.5 points from last year. Home sales fell by 14.1% in June, with just under 33,000 homes closed compared to 38,387 last year. And it took 16 days longer than last year to sell a house at an average of 57 days from listing to closing.
Brooks explains that, historically, it takes around four to six months to list and sell a home, based on data from the National Association of Realtors. “Right now, the average time for sale is around two months,” she says.
As of June 2024, Florida had around a five-month supply of housing. Last June, there was just over two months of housing supply. Generally, five to six months of supply is considered a balanced market. “It’s a huge jump compared to what we had, but we still have low inventory,” says Arnold.
Why Demand Is Slowing in Florida
Florida was one of the most coveted states for relocation after the pandemic. Its favorable tax laws, mild winters, beautiful beaches and lower cost of living — compared with expensive markets in New York, California and the Northeast — brought people in record numbers. The state’s less restrictive reputation was a draw for some people.
As a result, the Florida housing market soared. The median home price in Florida was $261,400 in June 2019. Five years later, it is 60% higher equating to an annual appreciation rate of 12%.
That rate of growth isn’t sustainable. “Mortgages have gotten much more expensive. On top of that, prices have gone way up, property taxes have gone up, and the Florida insurance market has gone crazy,” says Arnold.
Due to the state’s high hurricane and flood risks, Florida’s homeowner’s insurance is the most expensive in the country and rates climbed abruptly after Hurricane Ian in 2022.
There could also be potential concern about changes resulting from the National Association of Realtors lawsuit settlement, which could leave buyers on the hook for their agent fee, explains Brooks.
“As of August 17, 2024, sellers are not obligated to pay both sides for the transaction commissions. This has created some uncertainty in the buyer’s mind about who will be responsible for the agent’s fees,” Brooks says. With homebuying budgets being thin to begin with, not knowing if you will have to pay the agent fee on top of traditional closing costs and down payments is unnerving buyers.
Rising homeowner’s association fees are also creating concerns for the estimated 1.5 million condo associations in the state. “Condos are in a big mess right now. Every condo I deal with either has a special assessment or will have a special assessment,” says Arnold.
After a condo in Surfside, South Florida, collapsed due to structural issues, killing 98 people, Florida passed a law that requires mandatory condo inspections and increased HOA reserves. Now condo communities are makingmajor improvements and increasing their savings, leading to huge special assessments for residents.
Arnold shared recent data from the Orlando Association of Realty to illustrate how flooded the condo market in Florida is right now. “In June 2024, there were 890 condos for sale in Seminole and Orange County. As of July 31, 2024, there were 2,088 condos for sale.”
The current markets with the highest year-over-year price growth are mostly midsized cities with populations under 100,000. Retirement boomtowns including Sarasota, Winter Garden and cities in South Florida like Lauderhill and Deerfield Beach are still doing well, thanks to a larger portion of cash buyers.
The largest Florida metro markets including Tampa, Jacksonville, Orlando and Miami are doing well. While days on the market and sales activity have slumped in each area, price growth remains healthy.
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Is the Florida Housing Market in Trouble?
There is no doubt that certain markets in Florida are slowing, and as a result, prices are dropping. However, it doesn’t mean a crash is imminent. “None of us have a crystal ball, but in my opinion, it’s becoming a healthy market again where buyers are having a bit more say,” says Brooks.
High prices, insurance and mortgage rates have pushed everyone’s monthly payments up. “Buyers have just reached their maximum. They’re sitting to the side or, if they are buying, they are buying new construction or buying in areas where prices aren’t quite as exorbitant,” says Arnold.
Mortgage rates came down to their 15-month low over the last week, but it will take more than a percent or two to heat the Florida market back to recent levels.
Arnold doesn’t believe a crash is coming either. However, he does feel prices may flatten for a while. “If prices go down, it will be single-digit percentages and only for the short term,” he says.
The current shift may be a rebalancing, where overheated markets are returning to more realistic levels.
“Florida is by nature, transitory. There is still demand for housing and people are still moving here,” says Arnold.
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Is Florida’s Housing Market in Trouble? originally appeared on usnews.com
