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February 10, 2023

Florida Real Estate Forecast Next 5 Years: Will it Crash?

Inflation and high-interest rates remained an issue for purchasers in the Florida housing market in 2022, according to the latest housing data from Florida Realtors®. However, the state’s housing market recorded higher median prices and a larger inventory (active listings) compared to a year ago. In 2022, the closed sales of single-family homes statewide were 287,352, down 18% year-over-year, while existing condo-townhouse sales reached 125,494, down 21.7% year-over-year.


The statewide median sale price in Florida for single-family homes in 2022 was $402,500, up 15.7% year-over-year.

For condo-townhouse units, it was $306,500, up 21.6% year-over-year. The supply of for-sale homes continues to slowly build, easing inventory constraints in many markets across the state. Statewide inventory was higher last year than a year ago for both existing single-family homes, up 116.8%, and for condo-townhouse units, up 65.0%. The supply of single-family existing homes increased to a 2.7-months supply while existing condo-townhouse properties were at a 2.8-months supply in 2022.


When house prices are as high as they are now, increases in mortgage rates and homeowners insurance might have a major impact on a homeowner’s monthly payment and drive affordability out of reach. U.S. News & World Report announced its rankings of the most and least affordable states for housing and total cost of living. When producing statistics on Florida’s housing affordability, experts compare median house prices to median family incomes and mortgage interest rates. Florida is ranked #31 in affordability, indicating that it has one of the least affordable housing markets among the fifty states.


Florida Real Estate Forecast Next 5 years

Florida home values have risen by about 80% over the past 5 years and a positive trend is forecasted for the next 5 years. With the recent spike in mortgage payments as a result of rising interest rates, analysts are watching the Florida housing market closely to see what effect this will have. It is likely to restrict house price increases, but to what amount is unclear because there is still a “fear of losing out” attitude among purchasers, which is fueling the market, although slowly.


It’s no surprise that Zillow has ranked Tampa, Florida, as the top real estate market in the United States in 2022. Overall, Florida housing prices have witnessed some of the most dramatic increases in the country, with Miami and Tampa at the forefront of the upswing. Due to a variety of variables, the housing market in Tampa has outpaced many others, including a large number of potential buyers, a scarcity of supply, strong property sales, and an active employment market in the area.


Overall, the Florida housing market is strong and is predicted to remain so in the next five years. If you’re a seller, this is wonderful news since it implies property values are rising and there isn’t much selling competition, giving you the luxury of selecting from the best offers on your schedule. Higher mortgage rates may cause unprepared house buyers to postpone their purchases.


If this reduces buyer demand sufficiently in some Florida areas, price appreciation may decrease. The lower price increase may provide remaining buyers who can afford higher interest rates more confidence in locating a home they can afford. And that leads to fewer home sales. If you’re selling a home in Florida this year, the odds are good that you’ll come out ahead financially.


Real estate prices and mortgage rates are rising, and the few affordable houses that remain are being snapped up like sardines. If you want to buy in this market, now’s not the time to buy. Whether or not the country enters a recession, the housing market appears to be in good shape for the foreseeable future. Perhaps not at the same rate that the United States has lately seen, but growth nevertheless. This is an excellent moment for real estate investors, particularly those interested in Florida, to capitalize on market possibilities.


Florida Real Estate Appreciation Rates For 10 Years

Florida’s real estate market has seen unprecedented price rises during the last few years, as a result of a lack of supply and high demand. Most of the emphasis is focused on the prices and the possibility of a housing bubble. While Florida’s mild temperature, cheap taxes, and natural attractions have historically enticed newcomers to the state, if affordable housing challenges continue to prevail across the state, these enticing elements may go away.


A post-pandemic world necessitates that the state of Florida deal with the fact that pricey housing can in certain respects impede economic growth and have an unequal impact on critical segments of the population. Florida has had some of the strongest housing appreciation rates in the country over the past decade.


Over the past decade, Florida’s real estate has risen 282.35 percent, which equates to an annual home appreciation rate of 6.14 percent, according to the data collected by NeighborhoodScout. If you are a house buyer or real estate investor, Florida has been one of the finest long-term real estate investments in the United States over the past decade.


Florida’s housing market mirrors larger national trends, albeit with some regional variation. An imbalance between demand and supply has fueled rapid home appreciation across the state. The real estate appreciation rate in the Sunshine State in the last two years (Between 2020 Q3 – 2022 Q3) has been 53.28 percent. Considering the most recent twelve months tracked by them (2021 Q3 – 2022 Q3), Florida’s home appreciation rates continue to be among the highest in the United States, at 26.35 percent.


The quarterly appreciation rates (Between 2022 Q2 – 2022 Q3) in FL were 4.36 percent, which amounts to an annual appreciation rate of 18.60 percent. However, high mortgage rates are pushing a lot of buyers out of the market, which can present opportunities for those who are staying in but it will also moderate the rate of appreciation over the next twelve months.


As of December 31, 2022, the typical value of homes in Florida is $404,939 (Zillow Home Value Index). Florida home values have grown by 19.9% over the last twelve months and the median days to pending is 27.


  • The median sale-to-list ratio is 0.983
  • 18.1% Percent of sales over list price
  • 61.8%Percent of sales under the list price

Within Florida, Tampa Bay has one of the most overpriced housing markets in the nation, according to new research from Florida Atlantic University. Extremely low mortgage rates drove our red-hot housing market, particularly during the epidemic, and intensified bidding wars. Lakeland ranks 12th nationally, and second in the state, with homes overvalued by more than 53.2%. North Port-Sarasota-Bradenton is No. 17 nationally, fourth in the state at 48.9%.


Florida Housing Market Trends

According to Redfin, in December 2022, home prices in Florida were up 5.8% compared to last year, selling for a median price of $384,500. On average, the number of homes sold was down 38.1% year over year and there were 27,233 homes sold in December this year, down from 43,985 homes sold in December last year. The median days on the market was 47 days, up 17 days year over year.


Top 5 Metros in Florida with the Fastest Growing Sales Price

Marco Island, Florida:  

The Marco Island housing market is not very competitive. The average sale price of a home in Marco Island was $1.01M last month, up 33.8% since last year. The average sale price per square foot in Marco Island is $610, up 2.8% since last year. The average homes in Marco Island sell for about 5% below the list price and go pending in around 73 days. Hot homes can sell for about 1% below the list price and go pending in around 16 days.


Venice, Florida: The Venice housing market is somewhat competitive. Homes in Venice receive 2 offers on average and sell in around 23.5 days. The average sale price of a home in Venice was $500K last month, up 27.3% since last year. The average sale price per square foot in Venice is $288, up 14.5% since last year. The average homes in Venice sell for about 3% below the list price and go pending in around 24 days. Hot homes can sell for around the list price and go pending in around 6 days.


Dunedin, Florida: The Dunedin housing market is somewhat competitive. Homes in Dunedin receive 1 offer on average and sell in around 29 days. The average sale price of a home in Dunedin was $487K last month, up 26.4% since last year. The average sale price per square foot in Dunedin is $333, up 23.3% since last year. The average homes in Dunedin sell for about 4% below the list price and go pending in around 29 days. Hot homes can sell for around the list price and go pending in around 8 days.


Sebastian, Florida: The Sebastian housing market is somewhat competitive. Homes in Sebastian receive 3 offers on average and sell in around 68 days. The average sale price of a home in Sebastian was $375K last month, up 25.3% since last year. The average sale price per square foot in Sebastian is $209, up 5.0% since last year. The average homes in Sebastian sell for about 3% below the list price and go pending in around 68 days. Hot homes can sell for around the list price and go pending in around 31 days.


North Miami, Florida: The North Miami housing market is somewhat competitive. The average sale price of a home in North Miami was $385K last month, up 24.1% since last year. The average sale price per square foot in North Miami is $295, up 25.0% since last year. The average homes in North Miami sell for about 4% below the list price and go pending in around 59 days. Hot homes can sell for around the list price and go pending in around 33 days.


Florida Housing Market Annual Report (Year-End)

Here’s Florida’s statewide housing market data for single-family homes as reported by Florida Realtors for the previous year.


Florida Single-Family Home Sales

  • The number of sales transactions closed in 2022 was 287,352, -18% year-over-year.
  • The number of Closed Sales in 2022 in which buyers exclusively paid in cash was 92,051, -12% year-over-year.
  • The percentage of Closed Sales which were Cash Sales was 32.0%, +7% year-over-year.
  • Cash Sales can be a valuable measure of the level of market participation by investors.
  • Investors are far more likely to have the cash on hand to purchase a house, whereas the average homeowner requires a mortgage or other type of financing.
  • Florida home sales dropped in most price segments in 2022.
  • The highest closed sales were reported in the market segment of $400,000 – $599,999 (81,155 sales).
  • It was followed by the $300,000 – $399,999 segment which reported 43,683 sales.
  • These two were the only market segments that reported year-over-year gains in home sales.

Florida Single-Family Home Prices

  • The median sale price reported for the year (i.e. 50% of sales were above and 50% of sales were below) was $402,500, +15.7% YoY.
  • The average sale price reported for the month (i.e. total sales in dollars divided by the number of sales) was $562,442, +11.3%.
  • The sum of the sale prices for all sales which closed during the month was $161.6 Billion, -8.7% YoY.
  • It is a powerful predictor of the strength of the real estate business in a market, and real estate professionals, investors, and analysts are especially interested in it.
  • The Median Percent of the Original List Price Received was 100.0% in 2022, the same as in 2021.

Days on Market

  • The median number of days between the listing date and contract date for all Closed Sales during the month was 14 days, 2 days more than the previous year.
  • The median number of days between the listing date and closing date for all Closed Sales during the month was 56 Days, 1 day more than the previous year.

New Pending Sales

  • The number of listed properties that went under contract in 2022 was 290,375, -21.1% YoY.
  • Pending Sales are considered to be a decent indicator of potential future Closed Sales.

Florida Housing Supply

  • The number of New Listings put onto the market during the year was 366,296, -3.0% YoY.
  • The number of property listings active at the end of the year was 65,786, +116.8% YoY.
  • Months Supply of Inventory in the Florida Housing Market was 2.7 months, +170% YoY.
  • MSI is a useful indicator of market conditions.
  • The benchmark for a balanced market (favoring neither buyer nor seller) is 5.5 months of inventory.
  • Anything higher is traditionally a buyers’ market and anything lower is a sellers’ market.

When Will the Housing Market Crash in Florida?

Population growth, and particularly growth in the number of households, lead to a growth in housing demand. Real estate is subject to the law of supply and demand: when there are more purchasers than available homes, prices rise.  Since the 1940s, Florida’s population has increased year after year, often outperforming the national average. However, like the rest of the United States, growth plummeted to historic lows during the initial years of the pandemic until rebounding last year.


Florida is now America’s fastest-growing state. According to recent census data, the Sunshine State added over 400,000 additional people between July 2021 to July 2022. It was a growth of 1.9%, bringing the total population to 22,244,823. That makes it faster-growing than Texas, which has the second-largest population in the United States, trailing only California.

According to experts, the national housing market or the market in Florida is nowhere near the crash that occurred during the Great Recession of 2008. This is partially due to tighter lending laws coming from the financial crisis. Borrowers are in considerably better shape, as seen by their improved credit scores. And as a result of rising home values, homeowners have a record amount of equity.


The current situation is a fairly complex web, but it’s nothing compared to the 2008-2009 market crisis, which took years to unravel. The Fed’s pandemic actions fueled a housing boom. As it tries to withdraw that support, it could be bad news for housing but will it lead to a crash? The Fed will continue to play a crucial role in the future of the housing market.

Back in February 2020, the Fed owned $1.4 trillion in mortgage-backed securities, and the number was falling rapidly. As the pandemic took root, however, the central bank initiated a new round of bond purchases (known as “quantitative easing”), bringing the number to $2.7 trillion.


Fed seeks to tighten monetary policy to combat inflation Although it wants to shrink that portfolio it is quite improbable that the Fed can unwind its balance sheet. It might simply accept the fact that it will continue to play a disproportionate role in the housing market and have a larger balance sheet than it would prefer. Prepare for a collapse, not a correction, in the housing market during the next 18 to 24 months if they do.


According to the financial services business Moody’s Analytics, a majority of Florida’s metropolitan regions are overpriced by more than 20 percent based on these parameters, which apply to two dozen metropolitan areas. Here are the states with the most inflated housing markets as of the first quarter of this year. Unsurprisingly, coastal regions top the list. At 57 percent overpriced, the Homosassa Springs Metropolitan Service Area (MSA), which encompasses Citrus County, took the top rank. It was also the fourth-best ranking in the nation.


Florida’s Top 10 “Most Overpriced” Housing Markets (By Moody’s Analytics)

  • Homosassa Springs MSA (57%)
  • Palm Bay-Melbourne-Titusville MSA (48%)
  • Punta Gorda MSA (45%)
  • Vero Beach-Sebastian MSA (42%)
  • Port St. Lucie MSA (40%)
  • Crestview-Fort Walton Beach-Destin MSA (40%)
  • Cape Coral-Fort Myers MSA (39%)
  • Miami-Miami Beach-Kendall Metropolitan Division (39%)
  • Naples-Immokalee-Marco Island MSA (38%)
  • North Port-Sarasota-Bradenton MSA (38%)

These price increases are problematic for Floridians for a variety of reasons. Although industry experts expect that the market will eventually recover, as it always does, these increased property prices may persist for some time. But when it decelerates, homeowners will not profit as much.


“Florida homeowners are much wealthier due to the rise in property values across much of the state, but not as affluent as they may believe,” Zandi said. It will be more difficult for homeowners to move up to a more costly property or use their home’s equity to fund their expenditures. In addition, many middle-to-low-income people and first-time homebuyers are priced out of the market, according to Zandi, since they cannot afford not only the high sale prices but also the increasing mortgage rates and homeowners insurance.


10 Florida Markets Are Overvalued, According To A Rental Trends Study

According to new research on rental market trends, the Florida rental housing market is among the most overpriced in the country and has among the fastest-rising prices. The moratorium’s expiry, along with the high demand for rentals, particularly in Florida, pushed rental costs skyrocketing. Landlords will continue to hike rents until additional rental units are developed, pricing off many middle-class customers who previously rented because they couldn’t afford to purchase.


The research of 107 U.S. rental areas, published on June 6 and based on April data, discovered that ten of the country’s most overpriced rental markets are in Florida. All ten Florida markets covered in the analysis are overpriced by more than 13 percent. The Miami market, which encompasses Miami-Dade, Broward, and Palm Beach counties, was identified as having the highest “premium” paid by renters.


The investigation revealed that it was 22.07 percent overpriced. The average monthly rent in South Florida increased to $2,846, despite historical data indicating that the average should be just $2,331. In the Fort Myers region, rental expenses increased the most year-over-year. The average rent is now $2,073, an increase of 32.38 percent from one year ago. The rental prices in the nine other Florida markets included in the research increased by more than 20 percent annually, and they all ranked in the top 15 out of 107 areas for this criteria.


“A lot of our Florida markets are way overpriced compared to the rest of the country,” said Ken H. Johnson, a real estate economist at the Florida Atlantic University College of Business, who is a co-author of the study.


Florida Housing Market Predictions 2023

Florida has one of the nation’s hottest housing markets. Home sales usually are directly tied to an economy’s health and rise and fall with economic activity. As economies slow, the supply of money tends to become more restrictive. As money becomes harder to borrow, fewer home buyers enter the housing market.


With year-round sunlight (giving it the nickname “The Sunshine State”) and world-class amusement parks, Florida is a popular worldwide tourist destination. The economy is active and varied, with dozens of international corporate headquarters. Eighteen companies with headquarters located in Florida earned a place on Fortune magazine’s 2020 list ranking enterprises with the 500 highest fiscal-year revenues in the nation.


Florida’s Economy Continues to Thrive

  • Florida’s seasonally adjusted unemployment rate was 2.5 percent in December 2022. It was down 0.1 percentage points from the November 2022 rate, and down 1.0 percentage points from a year ago.
  • There were 271,000 jobless Floridians out of a labor force of 10,761,000.
  • The U.S. unemployment rate was 3.5 percent in December. Florida gained 440,000 jobs over the year, an increase of 4.8 percent. Nationally, the number of jobs rose 3.0 percent over the year. All nine major private sector industries in the state have surpassed pre-pandemic employment levels.
  • In December 2022, Miami-Dade County and Monroe County had the state’s lowest unemployment rate (1.4 percent each).
  • It was followed by St. Johns County (1.8 percent), and Wakulla County & Okaloosa County (1.9 percent each).
  • Highlands County had the highest unemployment rate (3.6 percent) in Florida in December 2022,
  • It was followed by Citrus County (3.5 percent), and Sumter County (3.4 percent).

Industries gaining the most jobs over the month were:

  • Leisure and hospitality with (+88,600 jobs, +7.4 percent).
  • Education and health services (+83,800 jobs, +6.2 percent).
  • Trade, transportation, and utilities (+82,700 jobs, +4.4 percent).
  • Professional and business services (+53,400 jobs, +3.6 percent).

Florida is a Hot Spot for Real Estate Investment for a Few Reasons

Florida’s strong population growth, diverse job market, tourist attractions, affordable property prices, tax benefits, and diversified economy all contribute to making it a hot spot for real estate investment.


1. Strong population growth and job market: Florida has strong population growth, particularly in cities like Miami, Orlando, and Tampa. This leads to an increased demand for housing, making it a prime location for real estate investment. Additionally, Florida’s job market is diverse and growing, which attracts new residents and supports the demand for housing.


2. Tourist Attraction:  Florida is a booming real estate market due to tourism. Florida attracts millions of tourists annually. In tourist-heavy areas like Miami, Orlando, and others, vacation rental properties are in high demand. Vacation rentals offer greater space, privacy, and facilities than hotels for Florida tourists. Investors can earn rental income and gain property value via vacation rentals.


Vacation rental properties are more reliable and profitable than typical rental properties due to high demand. Tourists pay extra for comfortable vacation rentals. Tourist demand can remain consistent throughout economic downturns, making vacation rental properties more market-resilient. Florida’s great tourist draw can offer real estate investors looking for vacation rental properties a reliable and successful revenue stream and property value appreciation.


3. Affordable property prices: Compared to other states like California, property prices in Florida are relatively affordable, which can make it an attractive option for real estate investors. This can lead to strong returns on investment and can make it easier for investors to purchase multiple properties. It’s important to note that property prices can vary widely depending on location and property type. While some areas of Florida may have lower property prices, other areas, such as beachfront or tourist-friendly areas, may have higher property prices.


4. Tax Benefits: Florida has no state income tax, which can be a significant advantage for real estate investors. This can lead to higher net returns on investment and can make it a more attractive option for real estate investors.


5. Diversified economy: Florida’s economy is diverse, with a mix of industries such as agriculture, tourism, aerospace, and technology. This diversified economy can help insulate the state from economic downturns, which can be beneficial for real estate investors.

However, it’s always important to do proper research, understand the market and the property before investing, and have a solid plan in place for managing risks.


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Source: Marco Santarelli

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