Florida’s housing market is booming as more homeowners seek the sunshine and plentiful leisure activities. As home prices rise, potential borrowers need to understand the market and learn how to seek affordable properties in their chosen area.
Today, we’ll explore current housing conditions in the Sunshine State and discuss the future of Florida homes so that you have all the information you need to make an informed decision.
Florida’s Housing Market Overview
The Florida housing market has remained resilient after a turbulent few years and has settled into a new normal. Housing prices are growing steadily, while increased housing supply allows home buyers a cutting-edge advantage when finding their dream home, even in highly demanded areas.
Single Family Homes
Single-family homes are properties with only one unit; they are the most popular and plentiful type of home purchase, as more buyers want their patch of paradise.
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Market Conditions
At the moment, the single-family home market in Florida is considered relatively balanced, leaning slightly toward buyers.
The housing inventory is rising, suggesting more people are selling their homes to meet buyer demand. According to Redfin, in June 2024, 39.8% more homes were available than in the same period in 2023, which leaves buyers with plenty of options when seeking a property. This significant increase in inventory reflects a broader trend in the Florida housing market, where the number of homes sold decreased by 14.5% year over year.
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Median Sale Price
Florida Realtors notes in their yearly market detail that the median sales price was up by 1.9% from 2022 to 2023 to hit its highest level in the past five years: $410,000, which is above the national median price. However, the average home only received 96.9% of the list price in the past year, showing that home prices in Florida are no longer experiencing the rapid inflation that was common in 2020 and 2021.
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Sales Activity
Closed sales were down by 10.3% last year, which indicates a slowing market that gives buyers some breathing room. As another benefit to prospective homeowners, cash sales were down by 17.2% from 2022 to 2023, reducing the likelihood of expensive bidding wars.
Townhouses and Condos
Townhomes and condominiums are units that are part of a larger building, as opposed to single-family homes, which are single units.
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Market Conditions
The condo housing market in Florida is currently considered a buyer’s market, contrary to other high-value areas.
In a report by Newsweek, Lawrence Yun, chief economist for the National Association of Realtors, attributes this to high-cost insurance premiums and higher requirements in cash reserves for condominium associations, which makes them a less attractive buy in certain areas.
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Median Sale Price
Data from Florida Realtors’ yearly market detail notes that the median sales price for a Florida condominium was $322,500, up 5.2% from 2022. The average condo received 96.2% of its list price, down from 99.9% in 2022.
Condo prices are still high, but they have dropped significantly in certain major cities, including Cape Coral in southwest Florida, as reported by the Cape Coral Breeze. However, the prices continue to rise. The North Port-Sarasota-Bradenton metropolitan region saw an increase in median sales price from $345,000 in 2022 to $547,700 in 2023, even with increased supply.
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Sales Activity
According to data from Florida Realtors, condo sales statewide dropped significantly in 2023, down 16.0% from 2022. The median days on the market rose by 113% to 32 days, while the median days to sale was 73 days, up 32.7% from 2022. A large disparity between median days on the market and days to sale reflects that cash sales have dropped.
Factors Influencing the Florida Housing Market
The Florida real estate market is influenced by several key elements: population growth, inflation, interest rates, and government policies.
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Population Growth
Florida is the nation’s third-most populous state behind California and Texas, and it only continues growing. Between 2010 and 2022, the state’s population grew by 1.4% per year, far above the national average of 0.5%. In fact, four of the top five fastest-growing metropolitan areas nationwide are in Florida. Major population surges push up property prices to meet high demand.
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Inflation
Among all economic conditions that affect the housing market, inflation is one of the most important. Rising rents can encourage people to buy real estate, which hedges against inflation, especially as home values tend to increase rather than fall. Florida’s inflation rate is 3.9%, the highest in the nation.
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Interest rates
On the other hand, mortgage rates can reduce home sales because sellers will hesitate to leave behind their good rates and re-enter the housing market. Buyers may also be unable to afford their mortgage payments due to high rates, making it more difficult to sell homes. Currently, rates are hovering between 6.82% and 6.79%, making selling less attractive for those with better rates.
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Government Policies
Government policies, including tax incentives, zoning regulations, and housing subsidies, shape Florida’s real estate market by focusing on affordable housing, property insurance reforms, and environmental protection. For instance, property tax exemptions for seniors can make Florida more attractive to retirees. Additionally, state and local government investments in infrastructure and community development can enhance property values and stimulate market growth.
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Natural Disasters
Florida’s economy is susceptible to hurricanes and other natural disasters, influencing the real estate market. The risk of property damage can lead to higher insurance premiums and impact property values. Additionally, stringent building codes and regulations to mitigate disaster damage can affect construction costs and market dynamics.
Inventory and Affordability
Housing supply varies across the state. At the end of last year, the Orlando area had the highest inventory since 2019, while Miami had a significant shortage. Similarly, house prices in Florida are location-specific. However, we can see general upward trends statewide, indicating a healthy market for buyers.
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Home Availability
In March of 2024, there were 131,880 homes for sale throughout the state; this is a dramatic increase from March 2023, where there were only 83,981 homes available, showing a 34% increase. Most available homes are concentrated in Southwest Florida, particularly near Cape Coral and Fort Myers, which were struck particularly hard by Hurricane Ian in 2022.
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Mortgage Rates
In early April 2024, mortgage rates sat at 6.82%, representing an 8.6% increase from last year’s rate of 6.28%. These high rates can slow home sales, particularly amongst older home sellers who may be willing to stay put until rates drop.
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Affordability for Buyers
High prices and mortgage rates can make it difficult for buyers to afford their dream property.
Using data from Zillow, Florida Realtors reports that buyers would need to make at least $106,000 annually, which is 80% more than what was necessary in January 2020. This means that new buyers would need to make approximately $8,833 in average months to put 10% down and spend only 30% of their income on housing.
Given that the average household income in Florida is just $55,980, many Floridians may find it difficult to break into the housing market.
Florida Real Estate Market Predictions
The Florida real estate market varies across regions; Miami differs from Tallahassee because of its demographics and economic factors. However, we can make some statewide Florida housing market predictions based on the current conditions and the research of Florida realtors familiar with its cycles.
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Short-Term Predictions
While many speculators were worried about a Florida housing market crash, Florida Realtors chief economist Dr. Brad O’Connor believes there’s plenty of reason to be optimistic about the housing market’s short-term prospects.
As the Federal Reserve works to ease inflation, interest rates will drop lower than in the past year, motivating buyers and sellers to re-enter the market. Predictions suggest a return to traditional market conditions like those in 2018-2019, with a balance between supply and demand.
One primary concern is that demand is higher than supply due to an influx of migration. Fortunately, new construction is boosting inventory, and there has been an abundance of new listings within the past few months.
Recently, most homes sold within 37 days, which shows a fast-paced yet balanced market. Over 11% of homes sold above the list price, suggesting that home prices are set low enough to entice bidders right now. While prices may flatten, high mortgages and economic uncertainty will continue to challenge buyer demand.
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Long-Term Predictions
There’s a lot to be optimistic about for the Florida real estate market, as home prices have risen by 80% in the last five years. While it’s unlikely that any market can sustain that kind of momentum as the economy recovers from the pandemic, analysts predict that it will remain strong in the long term.
Low supply and high interest rates stabilize property prices, but they may reduce the number of homes sold if it becomes difficult for anyone to buy a house. Economists predict that the market will shift to a seller’s market due to the inventory squeeze, especially if the population boom remains stable.
This prediction makes it an ideal time to buy in Florida. Property values are expected to rise, albeit slower, as supply improves to meet demand.
Advantages of Buying Real Estate in Florida
Florida is a desirable real estate market for those who can afford the high home prices, as all economic and demographic indicators suggest a healthy economy and job market.
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Population Growth
Florida is among the top ten US states for population; the latest indicators from April 2024 show a year-over-year increase of 1.61%. Surprisingly, people are moving to Florida from other large economic areas, including California, New York, New Jersey, Illinois, and Texas.
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Strong Economy
Florida’s economy has outpaced the nation’s; its economic growth was 4.4% in 2023, twice the national growth of 2.5%. While inflation is relatively high, the economy has bounced back admirably from the pandemic and is now equalizing admirably.
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Great Weather
No discussion of Florida would be complete without a mention of the beautiful weather. While hurricanes are a concern pushing up insurance prices, those who do not live in the more storm-prone areas of the state can enjoy balmy temperatures that stay relatively consistent throughout the year.
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Powerful Job Market
Florida’s job market is huge and only growing. The state’s workforce grew by 2.2% year-over-year, much larger than the overall US workforce growth of 0.8%. Education and health services, along with leisure and hospitality, are the largest growing sectors.
Real Estate Investment Market in Florida
The construction market in Florida shows great promise, particularly for affordable housing. Despite ample new construction, it has yet to keep pace with the state’s high migration rates. This market presents a lucrative opportunity for investors to build new homes, potentially yielding significant returns.
Approximately 125,000 new single-family properties were built in 2022, far below the number of people who moved in. The housing crunch led to the Live Local Act in 2023, which provided $711 million for developers seeking to invest in affordable housing.
New construction is nearly double the rate of the US, yet it’s still not oversaturated. However, investors need to be aware that rising insurance costs remain an issue that may diminish their profit. Areas that remain hotspots for new construction include Polk, Lee, and Pasco Counties.
Should You Buy Real Estate in Florida?
The real estate market in the Sunshine State is still hot and shows no sign of abating. Purchasing property here is the perfect opportunity for those who want to enjoy sunny weather, a strong economy, and plentiful job opportunities.
If you’re ready to get started with home ownership, F5 Mortgage is here to help. We offer a variety of loan products, including VA, Florida FHA loans, conventional, and jumbo mortgages, as well as investor-specific mortgages like DSCR loans. Get a free quote in just a few minutes so that you’re prepared to take the first step toward getting your brand-new home.
Contact us today to learn more, or check out today’s rates to get a better idea of what home ownership in Florida will look like for you.
