Florida’s Real Estate Realities
Bottom Line: A significant drop in home sales coupled with a continued increase in home prices. Those two don’t exactly seem to go hand in hand, however for the second consecutive month to start the year that’s the big picture takeaway of Florida’s real estate market via the Florida Association of Realtors. The headline sales for February looked and sounded somewhat grim without additional context. Existing home sales fell by 21.3% in February year-over-year. Condo and town home sales were much slower still with a greater than 30% decline. If you heard those numbers and nothing else, you might be left feeling that the bottom is falling out of the housing market. But then there’s the rest of Florida’s real estate story.
A year ago, home sales were happening so fast there was only about a month’s worth of inventory on the market. A neutral market, one that’s essentially at parity between buyers and sellers, is six months' worth of inventory being listed for sale. The rapid sales activity of a year ago wasn’t sustainable, hence the sales decline. However, sales were so high a year ago that even a 20%+ decrease in sales has still left our state in a strong seller’s market with approximately 3 months' worth of inventory on market. And that’s why we continued to see price increases in February.
Statewide the average price increase for single-family homes was 3.5% to an average of $395,000. The price increase was stronger still for condos and town houses which saw price increases of 8.6% leading to average prices of $315,000. In South Florida the news was similar though more exaggerated. Single-family home sales were off 26% from February of last year while prices rose by 4.2%, while condo and town home sales dropped by nearly 40% - with prices rising by close to 7%. One of the key trends being discussed going forward is where future inventory is going to come from. Florida Realtor’s Chief Economist Brad O’Connor noted that fewer homes are being brought to market due to interest rates. Floridians are now far less likely to relocate due to an unwillingness to trade low interest rate mortgages for rates which would often double their current rates with a new purchase. That lack of inventory is likely to help put a floor under our current market as those who’re interested in relocating here will be competing over the available listings.