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Friday, June 02, 2023

Florida Housing Market Update: April 2023

Florida Housing Market News 2023

Florida Housing Market Update: April 2023

Sales are down in Florida in 2023 compared to 2022, according to the latest update about the Florida housing market. Florida Realtors Market data suggests that home sales activity in the Sunshine State is easing, even as the state remains a top migration destination.

The activity slowdown may be the market’s reaction to higher interest rates, which have been creeping up since 2022. Let’s dive into the report and what it says about the Florida housing market compared to the market at large.

Digging Into the Florida Housing Market

House models over a paper with a chart going upward

The latest housing data in Florida provides insights into closed sales, how many homes were paid for in cash, median sales price, and more. Looking at three key variables: closed sales, total all-cash sales, and median sales prices, we see [add conclusion].

Closed sales

Defining the term: The total number of homes that closed in a time period compared to the numbers from the same month the year prior

The numbers: 23,334 in April 2023, down from 28,171 in April 2022.

What it means: The total closed sales in Florida dropped 17% compared to year-over-year. It’s even worse if you look at Q1 2023 to Q1 2022, which had a 22% drop. Since sales fluctuate seasonally, a year-over-year comparison is generally considered a better market indicator than month-to-month.

But 17% is a significant YOY decline. Looking at the state’s metropolitan statistical areas (MSAs), every single one had a drop in closed single-family home sales in Q1 2023.

The markets that showed the most significant drops in closed single-family home sales in the first quarter of the year were:

  • Fort Walton Beach-Destin MSA 31.2%
  • Punta Gorda MSA 28.8%
  • Tallahassee 27.4%

And the markets with the least drop in sales were:

  • The Villages MSA 11.7%
  • Melbourne-Titusville MSA 13.6%
  • Sarasota-Bradenton 16.2%

This is Florida, it’s not likely this is due to waning demand but rather suggests the housing supply remains tight. Simply put, there aren’t enough homes on the market to meet buyer demand.

This may be because people with existing homes are more likely to stay in their homes if they have a favorable mortgage rate. After all, why move out and get a new mortgage if current rates may be more than double what they’re paying now? It adds hundreds of dollars a month to their payment.

Given how pervasive the supply crunch is, some people are staying in place because they fear they won’t be able to find a new home in a timely manner. With news stories about the low supply and buyers taking months, if not over a year, to finally land a new home, it’s discouraging to be a buyer right now.

And in southwest Florida, the housing crunch is compounded by the damage left behind by Hurricane Ian. It displaced thousands, some of whom have come back into the area to live in temporary housing. However, others are in less affected cities still trying to sort out a more permanent living situation. At eight months since landfall, the area is still cleaning up, and construction has barely begun on rebuilding.

Paid in cash

A bundle of cash dollars

Defining the term: Of the homes sold in the same month, how many were paid in cash? This typically means the buyer has the financial resources to swing a transaction. In other words, a higher number indicates generally higher financial health in the local economy. It could also signal a market with many real estate investors with the liquidity to make all-cash deals.

The numbers: 9,751 homes were paid in all cash in Florida in April 2022, declining to 6,814 in April 2023, a 30% decrease.

What it means: If you can pay for a house in cash, you’re probably doing well. So a higher number here means good things for the economy, as we noted in our definition of the term.

Unfortunately, this number declined even more than the total sales. This means that budgets are stretched tighter in 2023 than in 2022, which may reflect the high inflation that started in late 2022. This is only one economic indicator, of course.

Median sale price

Defining the term: The median refers to a split where half of the totals are higher, and half are lower. A median price can typically show tendencies better than averages, which can be impacted by an extremely low or high sale price.

The numbers: Surprisingly stable, with year-over-year data showing a median sales price of $410,000.

What it means: Prices didn’t budge, despite total sales decreasing in a landslide. It’s the first time in 135 months Florida’s single-family home prices didn’t go up year-over-year. So what happened?

It all comes back to that issue of supply. There are simply too few homes available for the number of buyers who want to get their hands on them. To compete, buyers have to pay more for the homes. That’s why the sales numbers can decrease while the prices stay high.

The markets with the most median price gains on single-family homes in Q1 2023 were:

  • Gainesville 8.2%
  • Panama City 7.8%
  • Sebring 7.8%

With single-family homes in short supply and priced higher, some buyers are turning to condominiums. Here, the price gains show even more dramatic growth, reflecting market demand. The top markets for year-over-year change were:

  • Sebastian-Vero Beach MSA 29.8%
  • Sebring 29.4%
  • Fort Walton Beach-Destin 27.8%

We should also mention that higher mortgage rates in 2023 could actually be tempering price gains. Median home prices might even be higher if mortgages weren’t so difficult to afford for more people.

It’s tough to buy and tough to sell. But in Florida, it’s not so tough to sell that buyers are willing to let their houses go for less money.

Supply of Inventory

Defining the term: How long it would take to sell all the current homes available on the market. Six months is a balanced market between buyer demand and available homes for sale.

The numbers: Up 170% from Q1 2022 to Q1 2023.

What it means: Available inventory is where there is a glimmer of hope for the Florida real estate market. That 170% figure is dramatic, but that’s because the supply of homes in 2022 was near record-level lows. In Q1 2023, the supply reached 2.7 months, with homes taking a median of 41 days to get under contract. That figure, 272% above the prior quarter, reflects the slowing market pace.

In a press release, Florida Realtors® President G. Mike McGraw felt that “having more available inventory could ease the pressure of rising prices; however, Florida’s current for-sale supply is still constrained as cautious buyers and sellers remain wary of higher mortgage interest rates.”

Where Florida is Heading

Future of Florida housing

The numbers suggest that Florida isn’t exempt from what’s going on in the national economy. National numbers also show declining home sales without a commensurate drop in prices.

So the dwindling housing supply but persistent demand for Florida living keeps prices up. The state is facing a supply crunch for people who want to buy a home, which will continue putting pressure on pricing. And with hurricane season looming, the supply crunch could worsen if the state is impacted by another major storm.

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Preston Guyton

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