Florida’s Housing Market ‘On the Brink’ – ryan

The Florida housing market is “on the brink” as home prices, homeowners’ insurance, and property taxes have surged beyond what many can afford, according to a new report by Cotality, formerly known as CoreLogic.

Why It Matters

After years of booming during the COVID-19 pandemic, when people from all across the country were moving to the state chasing sunny weather, relatively affordable housing, and lower taxes, the Florida housing market is now experiencing a correction.

In-migration—the process of relocating to another part of one’s country—to the state has slowed down significantly since companies started calling their employees back to the office. On top of that, historically elevated home prices and stubbornly high mortgage rates have cooled down demand for housing, pushing potential homebuyers off the market right when a new flood of inventory was landing on the market as a result of Florida’s recent efforts to build more supply.

What To Know

According to Cotality’s report, Florida’s pandemic boom is now turning into a burst, as years of enormous population growth have left the state grappling with rising home prices, shrinking affordability, and growing pressure on its infrastructure.

Between 2021 and 2023, nearly 2.76 million people moved to Florida, making it the third most populous state in the nation. While these newcomers represent a boost to economic growth in Florida, they have also negatively affected the state’s housing market.

In 2019, just before the pandemic, the median price for all property types in Florida was $240,000, according to Florida Realtors. That was the kind of affordability that attracted out-of-state newcomers and those who have been priced out of other markets, sparking the state’s housing market boom.

But that massive surge in demand had a disastrous impact on prices, especially as the state was facing a chronic lack of inventory. The median sale price of a home in the Sunshine State in February, according to the latest data available on the Redfin website, was $412,200—nearly 60 percent higher than in 2019.

In those same years, homeowners’ premiums skyrocketed. The Florida property insurance market is only now stabilizing after the past five years saw a series of carriers either going bust or cutting coverage across the state, while premiums shot up and the state’s insurer of last resort, Citizens, ballooned in size.

While Citizens is successfully transferring thousands of its policies to new insurers who have recently entered the state’s market and premiums have stopped rising so fast, Florida homeowners still pay the highest rates in the country for coverage.

According to NerdWallet, the average cost of homeowners insurance in the Sunshine State is $2,625 per year—24 percent more than the national average of $2,110. Insurify expects premiums to rise by a further 9 percent by the end of the year.

Growing inventory across the country should be able to meet demand from newcomers, but unsold inventory is piling up on the Florida market as many locals are unable to cope with the higher prices and mortgage rates still hovering between 6 percent and 7 percent.

In February, a total of 25,209 homes were sold in the Sunshine State, according to Redfin, down 10.2 percent from a year earlier.

According to Cotality, there are signs that many residents are now “looking to escape” Florida, as the state becomes “a victim of its own success.”

An analysis conducted by the company found that Georgia, North Carolina, South Carolina, Tennessee, and Texas are receiving 48 percent of mortgage applications for those moving out of the Sunshine State, as Floridians try to move to their cheaper neighbors.

“Florida’s rapid price appreciation combined with soaring home insurance prices and the threat of hurricanes has led people to start looking at other nearby states,” said Hepp. “When people leave, they are staying in the South where there is relative affordability as well as access to large employment centers—they are seeking the ingredients that made Florida so prosperous in the first place.”

What People Are Saying

Cotality Chief Economist Selma Hepp said in the report: “The last 25 years have seen home prices, homeowners’ insurance, and property taxes surge in Florida. When you add in the unflagging migration that is straining the state’s public services and inflated costs across the board, the pressure on the quality of life has become so great that it is beginning to tip the balance. Many households are finding it increasingly difficult to stay in the state.”

Marco Santarelli of Norada Real Estate Investments wrote in a recent report: “Florida’s story isn’t over yet. But the state is at a critical juncture. State lawmakers and businesses need to take these warning signs seriously. They need to find solutions to the affordability crisis, address the insurance market meltdown, and invest in infrastructure to support sustainable growth. Time is running out. People seeking a better quality of life, affordable homes, and reliable insurance can’t wait years for solutions.”

What’s Next

Florida has not completely lost its shine. Despite the challenges facing the state—which include aging school buildings and overburdened drinking water infrastructure in cities like Tampa, Orlando, and Jacksonville—people across the country are still moving to Florida, and the state is seeing more arrivals than departures.

These, however, are often wealthy individuals attracted by the state’s promise of low taxes, who are distorting the Florida housing market with their deeper pockets, Santarelli said in a recent report.

“Baby boomers with retirement savings and high-income earners from other states are competing for the same homes as younger, middle-income Floridians. The result? Affordability is becoming a distant memory for many,” he wrote.