Florida’s real estate market is facing difficulties, Potential Home Owners Disturbed

Condo sales in Florida have significantly decreased recently, despite price reductions in major metropolitan areas. The state presently has the biggest number of “motivated” sellers, who are willing to accept lesser offers to sell quickly.

Statewide house prices have been consistently increasing over the previous few months. In January, the median sale price for all homes in Florida was $404,100, showing a 4.5 percent year-on-year growth, as reported by Redfin statistics.

The data indicates that the price correction in the U.S. from late summer 2022 to spring 2023 has ended in Florida. However, it does not clarify why Florida is performing worse than the national market, with certain major metropolitan areas experiencing a decline in home sales and prices.

In January, sales in Jacksonville decreased by almost 27% compared to the previous year, and in Miami, they fell by about 9% according to Redfin data. Home prices in Jacksonville have decreased by 6.5 percent compared to last year, and in Miami, they have dropped by 2.5 percent.

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Nationally, condo prices are rising rapidly and sales are increasing, however this situation is contrary to the current trend. What is happening in Florida?

Lawrence Yun, the chief economist and senior vice president of research at the National Association of Realtors, attributed the decrease in condo sales to the insurance problem in the state and increased costs for units.

Yun informed Newsweek that long-term reasons might be attributed to significant increases in property insurance costs. Another possible reason is that many condominiums are required to have more monies set aside for repairs and maintenance following the tower collapse that occurred a few years ago.

High condo association expenses are a burden for condo owners and discourage buyers, unless the price decreases to offset the increased monthly payments.

Home insurance costs in Florida have increased by 102% over the last three years, making them three times more than the national average, as reported by Fox 13 and data from the Insurance Information Institute (Triple-I).

In 2023, home insurance had an average premium of around $6,000, making it the highest in the country, as reported by Triple-I.

Florida’s housing prices are increasing despite low demand and a preference for more affordable properties due to a limited supply.

“The decrease in demand for homes due to the lowest housing affordability in four decades has led to a drop in existing single-family home sales to their lowest level since the Great Financial Crisis. However, a simultaneous decrease in supply is preventing prices from falling further,” stated Moody’s Analytics housing economist Matt Walsh in an interview with Newsweek.

Walsh explained that the condo market is exhibiting a comparable dynamic to the single-family houses market. “Although transaction volumes are low, prices, as indicated by the Moody’s Analytics Home Price Index, are still rising.” However, the rate of increase is gradual, especially noticeable in the priciest condominium units.

Walsh stated that the increase in mortgage rates and monthly payments has had the most significant impact on the most costly residences in the state. Prospective purchasers still in the market are now looking for lower-priced properties.

Walsh stated that the primary factors influencing Florida’s home market in 2024 will be poor affordability and limited supply.

“Moody’s Analytics anticipates that prices will remain stable in the upcoming years, gradually readjusting the equilibrium between median house prices and median incomes,” he stated. “Overall, this change will take a long time to happen before affordability is regained, unless there is a recession.”

Increasing population leads to a higher demand for homes in the long run, however the immediate timing of purchases may be affected by mortgage rates.

However, some believe that Florida’s home market may still face challenges in the future. Reporter Lance Lambert from ResiClub reported that several major metropolitan areas in Southwest Florida experienced the largest inventory growth from January 2023 to January 2024, indicating a potential upcoming decrease in pricing.

Based on Lambert’s data, inventory increased by 149% in Punta Gorda, 103% in Cape Coral-Fort Myers, 81% in North Port-Sarasota-Bradenton, and 62% in Naples-Marco Islands compared to the previous year.