Florida Real Estate Trends 2023
Despite the pandemic, 2020 and 2021 were strong years for the Florida real estate market. But in 2022 the residential housing market was negatively affected by escalating inflation and rapidly rising mortgage rates.
Florida Realtors Chief Economist, Dr. Brad O’Connor painted an optimistic outlook at the organizations Mid-Winter Business Meeting for 2023: ““Now, we expect the state’s residential real estate market to return to a more typical pace,” he said. I believe 2023 will look more like the ‘traditional’ housing market years of 2018-2019 in Florida as supply and demand become more balanced.”
In terms of a price correction, O’Connor added, “Prices are determined by both demand and supply,” O’Connor said. “In the last housing cycle, this came from overbuilding and foreclosures. And it’s unlikely that we’re going to see a flood of newly built homes on the market for several reasons.”
The reason for this is that fewer homebuilders currently exist than in years past. Further, builders have become more conservative and cautious when they are considering new developments. Supply is being profoundly affected by homeowners who don’t want to list their house for sale because when they buy their next home, the mortgage rates will much higher than what they are currently paying.
Nevertheless, things are improving as we are seeing gains in listings compared to the recent past when rates were well above 7%. There is also some easing of prices. But a serious drop in home prices is not likely to occur until more inventory becomes available.
Inflation will continue to be a factor in 2023, though recent economic news shows the Federal Reserve’s action to fight inflation seems to be having a positive effect. However, buyer demand in Florida in the near term will be challenged by insurance costs, mortgage rates, and continuing economic uncertainty, especially if rates rise again above 7%.
O’Connor added, “All of the current forecasts on existing home sales in 2023 rely on where the 30-year mortgage rate is going to be, and that’s in flux. In the first half of this year, I feel confident that we’re going to see home prices flatten out on average, and I think sales will kind of hug below the line of 2018 … I expect closed sales to hover a bit below the more usual pace of Florida home sales, such as what we saw in 2018. However, because home prices are much higher now than in 2018, we are still going to see a higher dollar volume of closed existing home sales, just not at the level of last year or in 2021 with dollar volume.”
John Leer, chief economist at Morning Consult who also attended the conference opined that, “How consumers are affected by the economy, inflation and other factors – or how they feel about what’s going on in the world around them – influences consumer confidence and factors into their buying decisions or saving habits. In 2023, consumer confidence is starting to rise across most of the U.S. but remains far off from where it was a year ago. It’s going to take a prolonged period of real wage growth and fairly stable policy outcomes for consumers to feel more comfortable and confident about the economy and their future. In December, consumers reported rising credit balances at the highest rates since tracking began. Research shows more consumers are finding it difficult to make ends meet at the end of the month, and the share of adults able to save each month continues to shrink.
He added that in 2023, “Consumer confidence is starting to rise across most of the U.S. but remains far off from where it was a year ago. It’s going to take a prolonged period of real wage growth and fairly stable policy outcomes for consumers to feel more comfortable and confident about the economy and their future. In December, consumers reported rising credit balances at the highest rates since tracking began. Research shows more consumers are finding it difficult to make ends meet at the end of the month, and the share of adults able to save each month continues to shrink.
Leer pointed out this is a sign that consumers have been pushed to the brink and are having to pull back on spending as higher expenses erode their savings and sense of financial stability.
Leer further stated that while we’re seeing in the news that inflation is starting to cool, inflation is still impacting consumers. “They still feel and see that inflation is costing them more. Consumers are under financial stress and they’re trying to downsize their spending. Over the last two months, what we’re seeing is the outlook for the U.S. economy has really deteriorated, particularly among consumer fronts. Consumers have exhausted their sources of spending. We expect to see consumers continue to draw back from spending as small business and other sectors reduce hiring, expenditures and otherwise also contract.”
Interestingly. Leer also noted that housing and homeownership remain a top priority for many consumers.
“Housing prices are beginning to flatten but continue to resist declines as buyer interest perks up. Buyers are still waiting in the wings, interested in purchasing a home as soon as they’re able to do so financially. We continue to see that homeownership remains a strong goal for consumers, particularly for young adults looking to start a family and who feel secure in their jobs and ready for that next transition.”