Is Florida in a Housing Bubble?

Gayle Kurtzer-Meyers

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Is Florida in a housing bubble? /Photo by Marcelo Dias from Pexels

If the sunshine state is in a housing bubble, it is one hot bubble, but I don't think so. I'm seeing things are a little different than the last time around.

Mortgage processing now requires higher standards. However, home pricing still statistically falls into an affordable range for the more significant percentage of wage earners. In addition, the foreclosures are down substantially from 2006-08, and the current market has a limited number of homes available.

"Florida real estate looks like the hottest in the U.S. right now." -Robert Reffkin, Co-founder of Compass Real Estate -

If you relied on sensational headlines, social media posts, and neighborhood gossip, you might think that Florida is in a housing bubble. However, although the real estate market is hot, it reflects demand and does not represent a housing bubble.

What is a housing bubble?

A housing bubble occurs when speculative purchasing causes real estate prices to snowball. It starts when the supply of houses for sale becomes limited and demand increases. But it's fueled by the frenzied, emotional purchasing activities of buyers who are afraid that prices will rise even higher.

In 2006, the national housing bubble developed because lenders were funding just about every housing purchase. The demand outweighed the inventory. However, because speculators took on excessive risk, the illusion lacked a foundation. But speculators cause housing prices to skyrocket. A housing bubble will eventually crash because the inflated prices have no foundation and aren't sustainable.

Housing bubble vs. shortage

Trends in home-buying have shifted during the pandemic. Increased opportunities for remote work have inspired people to move away from major metropolitan areas. In addition, many home buyers seek social distance, unexpectedly boosting property values in smaller Florida towns.

Labor and supply problems during the pandemic have also caused construction delays. Increased costs have also impacted construction time frames. But as international markets are reopening, foreign investors are purchasing Florida homes, limiting their availability for regular buyers. So although there is a housing shortage, it doesn't represent a falsely inflated bubble that's about to burst.

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Approximately 950-1000 people move to Florida everyday./Photo by Josh Sorenson from Pexels.

What's happening with Florida real estate?

Although mortgage rates are higher than in 2020 and 2021, they are still low. Buyers are responding by making practical decisions. If they secure a low-interest rate now, their payments will be sustainable. Now, buying at a higher price may be more advantageous than purchasing later and paying higher interest rates.

Online home buying statistics are up, as shown by current stats from Zillow and repairpricer.com.

  • Miami, Florida ranks No. 9 for best cities for online homebuyers with a city score of 36.92 (out of a possible 50). The ranking factors included Zillow Home Value Index ($435,000), Number of 3D Showings (124), Median List Price ($474,633), For-Sale Inventory (33,452).
  • Jacksonville, Florida ranks No. 13 for best cities for online homebuyers, with a city score of 34.35. The ranking factors included Zillow Home Value Index ($254,000), Number of 3D Showings (208), Median List Price ($353,463), For-Sale Inventory (7,015).
  • Tampa, Florida, ranks No. 27 with a city score of 30.69. The ranking factors included Zillow Home Value Index ($339,000), Number of 3D Showings (95), Median List Price ($373,300 ), For-Sale Inventory (12,071).

Florida also has unique demographics. Many wanted to make more efficient financial decisions after people in regions such as the Northeast experienced hard financial hits during COVID-19. They could sell their homes in more expensive markets, using the cash to pay for a new home in the state—this increased demand on inventory that was already limited.

Cash buyers don't have to deal with mortgage companies. Their offers are often enticing to sellers. Houses exchange hands quickly, but the sales don't come with risks in a true housing bubble.

Florida's real estate forecast for 2022

Experts predict that the housing market is going to level out in 2022. Although home prices will keep rising, that growth will slow.

The state is still at the top of the list for expected price increases, with forecasts indicating that home prices will rise by about 10%. However, sales growth will decelerate with the anticipated rise in mortgage rates and supply increases, and those estimates are far from the crash that typically follows a housing bubble.

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Florida is a seller's market./Photo by RODNAE Productions from Pexels.

It's a seller's market.

I'm not saying that it's easy for the average person or first-time buyer to secure property right now. However, the Florida housing market is incredibly lucrative for sellers and investors.

According to a recent study, the state includes 7 of the country's 33 most overvalued real estate markets. Those numbers may deter buyers, who are hesitant to purchase as prices are hitting their peak. The resulting decline in demand may tone down the market a bit.

Miami, rated as the least inflated real estate market in Florida, expects prices to level out in that area, encouraging slowdowns throughout the state.

While many people are concerned about a potential crash, that's not likely to happen. Legislators are working on programs to increase the availability of affordable housing. Apartment development is becoming more popular to ease the financial impacts of buying a single-family home.

Analysts say that the housing boom is already cooling off. However, homeowners don't have to worry that their properties will lose value dramatically and quickly. It will take time for the real estate market to stabilize, and expected not to crash. Instead, the market aims to correct itself, spurred by more rational decision-making after the initial housing frenzy.

If you expected to sell a home at the peak of the market, you might have missed your chance. But stability is what many are seeking after a few years of intense uncertainty surrounding just about everything. So even though it may seem volatile, the real estate market is plodding forward. Experts say that it's not going to collapse.

Everything happening makes sense, considering what's going on in the world. Unfortunately, that was not the case in 2006. As a result, buyers and sellers can be optimistic about what the future holds for the housing market.

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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