It's no secret that the Florida housing market has had sharp price increases. Although as a whole Florida saw growth of about 24% year-over-year as of May 2022, some areas such much sharper increases. In fact, some areas saw so much growth that some experts called them "overvalued." According to data from Florida Atlantic University, Ft. Myers, Tampa, North Port, and Sarasota are some examples of these markets.
Determining Which Cities are Most Vulnerable to a Possible Housing Downturn: The real estate website Redfin wanted to know which metros were most vulnerable to a housing bubble. So it recently analyzed 98 U.S. housing markets to determine vulnerability by examining home-price volatility, average debt-to-income ratio, and home-price growth. Using this data, each metro was assigned an overall risk score.
How Did Florida Fare?: Florida did not do well. The sunshine state made up 6 of the top 15 most vulnerable metros.
They were, in order:
West Palm Beach
Why are these Cities So Vulnerable?: Redfin identified some reasons that the highest-ranked cities might be susceptible to a housing bubble, as follows:
- Most of the metros listed had price increases which far outpaced the national average.
- The metros that ranked as most vulnerable had a high number of new residents migrating from somewhere else.
- Metros with high debt compared to income and home equity may be more likely to foreclose or panic sell at a loss.
Many Experts Believe the Florida Housing Market is Unsustainable at Current Levels, But May Eventually Correct Itself: Dr. Ken Johnson, associate dean of graduate programs at Florida Atlantic University, told WPTV that he believes that the south Florida housing market is overvalued by about 30% and that the area needs more inventory to level out, which will take time. He explained:
"The reckoning is we have separated so far from the fundamental values in terms of both rents and home prices."
Tampa Bay historian Rodney Kite-Powell told the Tampa Bay Times that Florida real estate markets have often been self-correcting in the past:
“We’ve seen that artificially inflated values of real estate always corrected themselves. The market always corrects itself at some point..." Kite-Powell explained.
Some Cities in the United States were Identified as Less Vulnerable: While the news was arguably discouraging for some Floridians, some cities were identified in Redfin's data as being less susceptible to a downturn. Metros in the rust belt with relatively affordable homes were considered more stable. The following were the metros considered the least vulnerable:
Montgomery County, Pennsylvania
El Paso, Texas
Buffalo, New York
Kansas City, Missouri
Rochester, New York