Insights on the 2022 Florida Housing Market

Gayle Kurtzer-Meyers

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House on beach property/Photo by Jess Loiterton from Pexels

"I believe it may be the hottest real estate market in the world at this time." -Jay Phillips Parker, CEO of Douglas Elliman's Florida Brokerage-

The Florida housing market has been one of the hottest in the country for years. Florida is the third-most populous state, and its population growth is higher than the national average. Typically, the growth rate is hovering near 1.5 percent per year and should continue through 2024, while the national average remains roughly at 0.66 percent. With its enviable climate and strong economy, the state continues to offer plenty of reasons for growth to continue.

The real estate housing market has boomed in this state for years. The year-over-year change in single-family home sales value showed an increase of more than 22 percent. The monthly supply of inventory fell by 40 percent to 1.2 days, and the number of closings increased by 4.3 percent. What does the local real estate housing market hold in store for 2022?

Mortgage interest rates

Since the housing market correction in 2008, the Federal Reserve has maintained meager interest rates. In fact, for most of the last 14 years, interest rates have hovered below one percent. Nevertheless, inflation has shot up since the start of the COVID-19 pandemic. While the inflation rate in 2019 was only 1.76 percent, the year-over-year inflation rate between 2021 and 2022 is leaning nearer to 6.81 percent. Because of issues related to inflation, the unemployment rate, and other factors, the Federal Reserve has declared three interest rate hikes for 2022 and 2023. The interest rate may be temporarily close to 2.25 percent at the end of these hikes.

It is important to note that many moving parts impact the Fed. The most notable is the economy's response to the pandemic. As expectations related to interest rates stand today, however, rising interest rates will slow down the state's housing market.

New housing starts

The pandemic has resulted in significant supply chain issues. Related to the housing market, the availability of construction materials and their rapidly rising costs have dampened the production of new condos and single-family homes throughout Florida. Labor shortages have also complicated matters. Notably, Florida's production of new homes has lagged behind population growth for more than 15 years. The pandemic-related challenges have added fuel to the fire, and population growth continues.

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New housing starts are on the rise. /Photo by Anete Lusina from Pexels

Institutional and international investors

The state has been a hot market for both institutional and international investors in recent years. With the strong demand in the area and the hot rental market, institutional investment activity in Florida will continue to be fervent. However, movement may slow slightly because of rising interest rates and tight supply.

International investors have the pandemic. While there continues to be uncertainty related to the pandemic, global investment activity will pick up slightly in the next year based on trends. The movement of international buyers interested in immigrating has been slow for years because of the dollar's strength, immigration policy, and other factors. With these factors continuing, their activity will have a slight meaningful impact on the state's housing market conditions in 2022.

The rental market

Many first-time homebuyers in Florida rent for at least a few years before dipping their toes in the buyers' marketplace. Because of this, rental rates can be a driving force in their interest to get active in the buyers' market or to sit on the sidelines. Between October 2020 and October 2021, rental rates in South Florida increased approximately 36 percent. Nationwide, the average for that same period held close to 14 percent. While the average cost of homes for sale in the state has been high, sales price changes have not kept pace step-for-step with rental prices. As a result, renters are increasingly interested in locking in fixed mortgage rates rather than dealing with skyrocketing rental rates, adding to the demand for housing in this state.

Market projections for 2022

Various factors govern supply and demand in the real estate housing market. These factors include interest rates, investor activity, the rental market, new home construction, prices, and more. As a result, predicting what the real estate market will do in the coming year is generally a challenge because there are many moving parts. The primary components are in conjunction with employment figures, inflation, government policy, and other factors that are also moving targets. In addition, the 2022 market will continue to be governed by the impact that the COVID-19 pandemic has on the availability of labor, construction materials, inflation, employment, and more.

While there are many factors at play, it is possible to project what the real estate housing market in Florida may do, given what is currently known:

  • First, rising interest rates will moderate the growth of housing prices.
  • Second, at the same time, demand will increase as the population grows and many of the state's renters become buyers.
  • Third, investor activity will remain steady.
  • Finally, supply will remain tight because of rising demand and new construction constraints.

Expect to see a subtle slowing in the hot real estate market with all of these factors in play.

"There is no place like home."-Judy Garland-

This article is for informational purposes only. It should not be considered Financial, Real Estate, or Legal Advice. The market fluctuates; therefore, not all information will remain the same. Consult a financial or real estate attorney before making significant real estate decisions.

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I am a Licensed Community Association Manager for the State of Florida and a published author. My top articles are about Florida RE, property management, and the many beautiful venues and activities available in the Sunshine State. Thank you for reading my work and joining me on the journey.

Kissimmee, FL
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