Florida Real Estate outlook next 5 Years: Crash?

Inflation and rising interest rates remained an issue for purchasers in the Florida housing market in October, according to the latest housing data from Florida Realtors®. However, the state's housing market recorded higher median prices and a larger inventory (active listings) compared to a year ago. Closed sales of single-family homes statewide last month were 20,837, down 24.6% year-over-year, while existing condo-townhouse sales reached 8,356, down 26.9% from October 2021.

The statewide median sale price for single-family homes in August was $401,990, up 12% from the prior year. For condo-townhouse units, it was $310,000, up 19.2% over the year ago. The supply of for-sale homes continues to slowly build, easing inventory constraints in many markets across the state. Statewide inventory was higher last month than a year ago for both existing single-family homes, up 88.4%, and for condo-townhouse units, up 31%. The supply of single-family existing homes increased to a 2.7-months supply while existing condo-townhouse properties were at a 2.5-months supply in October.

When house prices are as high as they are now, increases in mortgage rates and homeowners insurance might have a major impact on a homeowner's monthly payment and drive affordability out of reach. U.S. News & World Report announced its rankings of the most and least affordable states for housing and total cost of living. When producing statistics on Florida's housing affordability, experts compare median house prices to median family incomes and mortgage interest rates. Florida is ranked #31 in affordability, indicating that it has one of the least affordable housing markets among the fifty states.

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 has 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 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 176.71 percent, which equates to an annual home appreciation rate of 6 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 (2020 Q2 – 2022 Q2) has been 48.96%. Considering the most recent twelve months tracked by them (2021 Q2 – 2022 Q2), Florida's home appreciation rates continue to be among the highest in the United States, at 29.67% percent.

The quarterly appreciation rates (2022 Q1 – 2022 Q2) in FL were 8.26 percent, which amounts to an annual appreciation rate of 37.35 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.

Florida Housing Market Trends

According to Redfin, Florida home prices (statewide) were up 14.2% year-over-year in October. At the same time, the number of homes sold fell 25.7% and the number of homes for sale rose 13.9%. Home prices in Florida are selling for a median price of $392,700. On average, the number of homes sold was down 25.7% year over year and there were 29,766 homes sold in October this year, down from 40,063 homes sold in the same month last year. The median days on the market was 40 days, up 12 days from last year.

Top 5 Metros in Florida with the Fastest Growing Sales Price

Iona, Florida: The Iona housing market is somewhat competitive. The average sale price of a home in Iona was $504K last month, up 70.8% since last year. The average sale price per square foot in Iona is $300, up 33.9% since last year. In October 2022, Iona home prices were up 96.0% compared to last year, selling for a median price of $633K. On average, homes in Iona sell after 46 days on the market compared to 7 days last year. There were 24 homes sold in October this year, down from 41 last year.

Aventura, Florida: The Aventura housing market is not very competitive. Homes in Aventura receive 3 offers on average and sell in around 69 days. The average sale price of a home in Aventura was $520K last month, up 35.5% since last year. The average sale price per square foot in Aventura is $384, up 30.8% since last year. In October 2022, Aventura home prices were up 35.7% compared to last year, selling for a median price of $523K. On average, homes in Aventura sell after 84 days on the market compared to 90 days last year. There were 80 homes sold in October this year, down from 151 last year.

Daytona Beach, Florida: The Daytona Beach housing market is somewhat competitive. Homes in Daytona Beach receive 3 offers on average and sell in around 44 days. The average sale price of a home in Daytona Beach was $299K last month, up 41.2% since last year. The average sale price per square foot in Daytona Beach is $217, up 14.5% since last year. In October 2022, Daytona Beach home prices were up 18.2% compared to last year, selling for a median price of $266K. On average, homes in Daytona Beach sell after 45 days on the market compared to 45 days last year. There were 144 homes sold in October this year, down from 195 last year.

Panama City, Florida: The Panama City housing market is somewhat competitive. The average sale price of a home in Panama City was $285K last month, up 13.9% since last year. The average sale price per square foot in Panama City is $195, up 32.7% since last year. In October 2022, Panama City home prices were up 11.8% compared to last year, selling for a median price of $280K. On average, homes in Panama City sell after 32 days on the market compared to 88 days last year. There were 52 homes sold in October this year, down from 53 last year.

East Lake, Florida: The East Lake housing market is very competitive. The average sale price of a home in East Lake was $583K last month, up 59.1% since last year. The average sale price per square foot in East Lake is $253, up 19.9% since last year. In October 2022, East Lake home prices were up 59.1% compared to last year, selling for a median price of $583K. On average, homes in East Lake sell after 24 days on the market compared to 9 days last year. There were 55 homes sold in October this year, down from 63 last year.

Here's Florida's statewide housing market data for single-family homes as reported by Florida Realtors for May 2022.

Florida Single-Family Home Sales

• The number of sales transactions closed during the month was 20,837, -24.6% Year-over-Year.
• The number of Closed Sales during the month in which buyers exclusively paid in cash was 5,908, -28.4% year-over-year.
• The percentage of Closed Sales during the month which were Cash Sales was 28.4%, -5% 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 every price segment in October.
• The highest closed sales were reported in the market segment of $400,000 – $599,999 (6,072 sales).
• It was followed by the $300,000 – $399,999 segment which reported 5,617 sales.

Florida Single-Family Home Prices

• The median sale price reported for the month (i.e. 50% of sales were above and 50% of sales were below) was $401,990, +12% YoY.
• The average sale price reported for the month (i.e. total sales in dollars divided by the number of sales) was $547,307, +13.2%.
• The sum of the sale prices for all sales which closed during the month was $11.4 Billion, -14.7% 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 96.9% in October 2022.

Days on Market

• The median number of days between the listing date and contract date for all Closed Sales during the month was 25 days, 13 days more than the last year.
• The median number of days between the listing date and closing date for all Closed Sales during the month was 70 Days, 17 days more than the last year.

Pending Sales

• The number of listed properties that went under contract during the month was 17,714, -41.2% 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 month was 25,546, -18.1% YoY.
• The number of property listings active at the end of the month was 68,813, +88.4% YoY.
• Months Supply of Inventory in the Florida Housing Market was 2.7 months, +107.7% 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?

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 as a result of 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 fourteen most overpriced rental markets in the country 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 2.7 percent in October 2022.
• It is up 0.2 percentage points from the September 2022 rate, and down 1.0 percentage points from a year ago.
• There were 285,000 jobless Floridians out of a labor force of 10,750,000.
• The U.S. unemployment rate was 3.7 percent in October.
• Florida lost 1,282,500 jobs from February to April 2020 and has since gained back all jobs lost (+1,749,500 jobs).
• All ten major industries experienced positive over-the-year job growth in October.
• In October 2022, Monroe County and Miami-Dade County had the state’s lowest unemployment rate (1.7 percent each).
• It was followed by St. Johns County (2.1 percent), and Okaloosa County (2.2 percent).
• Hendry County had the highest unemployment rate (4.5 percent) in Florida in October 2022.
• It was followed by Highlands County (4.3 percent), Citrus County, and Charlotte County (4.0 percent each).

Industries gaining the most jobs over the month were:

• Leisure and hospitality with (+96,200 jobs, +8.1 percent).
• Trade, transportation, and utilities (+92,000 jobs, +4.9 percent).
• Education and health services (+76,800 jobs, +5.7 percent).
• Professional and business services (+57,200 jobs, +3.8 percent).

Florida's real estate market has seen unprecedented price rises in the previous year, 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.