The real estate industry has been driving the economy of Florida since Corona pandemic. However, TD Economics claimed some signs of cooling down this market in the September 2022 report. By analyzing the drop in home sales since June 2022 by 25% due to higher mortgage rates, many experts believe that Florida home prices can drop by 20% in 2023. Unlike in previous years, there is a considerable reduction in construction and purchases of new housing, primarily due to higher inflation rates and strict government policies. Therefore, a further decrease in sales of 10-15% of the houses between now and June 2023 is forecast by realtors.
Economists marked 2023 with unexpected and uncertain challenges for Florida’s economy and the Florida housing market. Florida being a vibrant market in the US in post-pandemic, is now threatened because of the high rolling up of mortgage pricing and relatively higher risk of a recession. No doubt, 2023 is going to be a bumpy ride for policymakers, residents, and realtors of Florida. Buyers may contemplate postponing their purchase, while homeowners may question whether they should keep their properties. Furthermore, experts expect to see a drastically dropping price of Florida’s real estate this year and ask a familiar question: When will the housing market crash?
The backbone of the state
Real estate is considered real property owned by someone, including residential, commercial, or industrial areas. As mentioned earlier, the Real estate market is the backbone of a state not only for economic growth but also for providing an excellent return in cash flow.
During the COVID-19 pandemic, there was a remarkable growth of 58% in Florida house sales, which makes Florida real estate stand second next to Arizona. By 2022, Florida had caught people’s attention. Investors bought capital, and business invested their money in constructing luxury houses. Meanwhile, scarcity of land increased construction expenses, and continuous supply and demand issues contributed to the rise in prices of Florida’s real estate.
Eventually, now in 2023 Florida housing market needs to be more consistent and show mixed signals for sellers and purchasers. High inflation and raised -interest rates can be blamed for people losing interest in the Florida property market. As a result, the 2023 housing market could become a ‘nobody’s-market,’ not friendly to buyers or sellers.
Defining the trends
The housing market depends on numerous factors; supply and demand, economic conditions, interest rates, government policies, and demographic trends are essential to discuss. In a conference held on 19 January 2023, Florida Realtors Economic Expert Dr. O’Connor stated that increased mortgage rates and the economic well-being of consumers would define the future of 2023’s housing market. Here are some Florida real estate market trends that are likely to happen.
Median home prices will rise.
Buyers noticed a significant shift in the median sale price of Florida properties in January 2023. Florida’s median home price in Florida averages $384,500, elevated by 5.8% YoY, though the number of homes sold decreased by 38.1%. Moreover, real estate agents predict that the median sale price will drop by 4%. The Florida occupancy rate is As of January 202396.9%, with a decline of 2.1 pt YoY as of January 2023.
According to the National Association of Realtors, Florida property activity is expected to slow down by 38.1% YoY. In contrast, the record of previously sold 43,985 houses, there were only 27,233 new homes purchased last December. For instance, First Coast house sales dropped by 26.7% in November 2022. Likewise, North Port, Sarasota, and Bradenton will see a decline in their house sale rate by 30% in the next 12 months. However, as experts attribute the raised taxes and mortgage rates as the main contributors to this decline, they are trying to find some light at the end of the 2023 tunnel.
Florida showed an increase of 28% in the cost of rent from 2021 to 2022. The rental market of Florida is also highly competitive as a tenant can pay an average of $1,218 as rent but can’t afford to buy homeownership in Florida. However, with increased inflation, the rental costs of Florida houses are predicted to incline by 6.3 YoY, which can take up the savings of future buyers into rents. Overall, in Miami-Dade, Broward, and Palm Beach counties, the rates of renting a house are assumed to be increased by 18.81% higher than last year, which was approximately $29,00 per month.
Escalating interest rates
Realtors anticipate a significant rise in mortgage interest rates by 7.4% in 2023. Interest rates and home prices have inverse relations in terms of growth. A decrease in the interest rate calls for a reduction of the cost of obtaining a mortgage which paves the way for demand for real estate and raises home prices. Some economic analysis experts believe a rise of 11% in interest rates by the end of 2023. However, one thing essential to mention is that this rise will only impact middle-class marketers. According to the Federal Reserve, as cash-rich buyers don’t need mortgages, the luxury housing market will remain unchanged regarding interest rates.
The well-being of a state’s economy is the critical factor that triggers the real estate housing market. Economists consider overall GDP, manufacturing activity, and the prices of goods as indicators of fluctuation in property values. Such as, Realtor.com forecasts a 14.1% decrease in 2023 for existing home sales. Moreover, Florida Demographic Estimating Conference Forecast 2022 predicted that the state’s population would grow by 1.34% in 2023, contributing to an average existing home median price increase of 5.4%. As per current reports, the condo market, with sales declining by 26% and median sales price up 19.7%, will follow the trend.
Government policies of 2023
State housing legislation and new local regulations have implemented tighter restrictions on buying, purchasing, and lending home. The CEO of the Florida Housing Coalition stated that real estate depends on tax credits, deductions, and subsidiaries applied by the government. However, strict government policies can discourage sellers from listing their homes - similarly, buyers from investing their money for such a high-interest rate.
As the property’s market value will decline throughout the year, buying a home at the lowest price in Florida is not wise. There is an increased chance that home values will drop before we see signs of it increasing.
The economic downturn is a bottom line but still a good time for sellers to earn a handsome income. In addition, at least Florida’s housing market will remain stable for the next five years. Hence, the experts advise that a seller should keep their eye on the local housing market in Florida for the next couple of months.
Florida market crash
Economists and Florida market experts believe the housing market will slow down but not crash. It is because visitors and immigrants continue to move to Florida and may want to buy or remodel existing homes. Also, in 2023 the real estate market will face serious challenges, and home price growth will flatten, with a forecasted decrease of 20%. Single-family home housing starts will increase by 6%, while mortgage rates will likely bump to 3.88 percent by the end of the year. However, inventory will remain constrained, especially at the entry-level price segment.
Florida’s real estate market is under observation by economists and realtors. As mortgage rates continue to increase, homebuyers are delaying their purchase. Unfortunately, the prices of real estate markets will decline significantly. As a result, there may be considered low demand for housing, and the property value of Florida will decrease in 2023.
“Housing prices are beginning to flatten but continue to resist declines as buyer interest perks up. Buyers are still waiting in the wings, interested in purchasing a home as soon as they can do so financially. We continue to see that homeownership remains a strong goal for consumers, particularly for young adults looking to start a family who feel secure in their jobs and ready for that next transition.” -Dr. John Leer, Morning Consult chief economist-
, 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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