The COVID-19 pandemic brought about changes to daily lives and impacted every industry, with Florida real estate being no exception. As Floridians were social distancing, working remotely, home-schooling, and enjoying low interest rates, this created the ideal opportunity for buyers who were looking to relocate from Northern states. Many of these people were drawn to Florida for the state’s taxes, climate, and lifestyle it offers.
Just three months after the pandemic began, in May 2020, metropolitan areas such as Miami experienced a sharp 48% decrease in the sale of single-family homes. By the next month, the area had an eight-month supply of inventory, but the median sales price for single-family homes had increased to $372,500 or 2.1% by the end of the year. Around the same time, the total number of active listings had dropped to only 9,495 homes which was a 12-year record low.
While these housing market changes were drastic, they were somewhat short-lived as the market started rebounding in July 2020. The good news is that the market continued to recover, but the bad news is that it created some challenging side effects. Throughout the state, home prices kept rising as inventory remained low, which started the strong seller’s market the state currently has. To put this in perspective, that eight-month supply of single-family homes in Miami has decreased to a mere 2.8 month supply. The reality of limited selection mixed with the higher prices has made some homeowners reluctant to sell their homes, which has led to other issues.
Overvalued – Home Prices Up Throughout The Entire State
Homes in major Florida cities are being overvalued by an average of 20% as of June 2020. Researchers from Florida International University and Florida Atlantic University teamed up on a study. They found that five of the state’s largest cities have houses being sold for more than they are worth. The cities are Jacksonville, Miami, Orlando, Tallahassee, and Tampa – with Tampa ranking the highest at 32%.
Let’s look at some of these areas in more detail:
Central Florida
Single-family home inventory is historically low in Central Florida cities like Orlando, and prices are up 15% from last year. According to the Orlando Regional Realtor Association’s recent data, in May 2020, there were 7,260 homes on the market, whereas in May 2021, there were only 2,822 listed homes for sale. This is a decrease of 61% in the availability of homes for sale in just one year.
And every realtor knows that where there’s low inventory, there are higher costs. Currently, the average sales price in the Orlando metropolitan area is $361,600, and overall home prices are up 15% from May of last year. The market is showing that people are moving up, but there aren’t that many first-time homebuyers because many of them don’t have enough savings to pay over appraisal price.
Tampa Bay Metro
Though most of the Tampa Bay metro area has experienced increased home buying over the past year, St. Petersburg has led the pack. Between May 2020 and May 2021, the area has seen pending sales increase by about 32.1% and new listings increase by 19%. However, St. Pete’s available inventory has decreased by 59.6%, with just 554 listings in May 2021 when they had 1,370 in May 2020. This has had an undeniable impact on prices, with the area’s median sale price soaring by 26.7% from $240,000 last year to $304,000 this year.
Tampa, as a whole, is the fifth-hottest real estate market in the state. The area’s pending sales increased by over 29% since 2020, and new listings are also up. However, this demand surge has taken a toll on the city’s available inventory. In May 2020, Tampa had 2,342 houses for sale, but this number is down 61% to a meager 908 homes in May 2021. Perhaps the most telling sign is how fast the homes come on the market and then go off. It’s estimated that homes in Tampa only last on the market for about seven days, which is 25 days less than in 2020. Currently, median home sale prices are around $320,000, which is up from $273,000 last year.
Rents Across The State Are Also Up
Are you one of the thousands who think that rent is just too high? Well, across most of the country, it’s getting worse as rents across the nation are going up fast, according to an analysis from Realtor.com. The median price for all rental sizes was up 11.5% from last year to $1,607 per month.
In all, rental prices have grown by double-digit percentages in 28 out of the 50 biggest metropolitan areas across the nation. Where has it risen the most? Not in the markets you would expect, and not in the most expensive either. There are only four rental markets that didn’t reach new highs: San Jose, Boston, New York, and San Francisco.
So, where were the most significant increases in rental costs? Well, of the list of 10 cities, three of them were in Florida, including the number one city – Tampa. The Tampa metropolitan area is up 30.6% to $1,760 per month, Miami is up 27% to a monthly cost of $2,432, and the Orlando area is up 21.4% to $1,620 a month.
Are These Numbers Sustainable?
This leads us to the question on everyone’s mind: Is there another housing crash imminent? After all, most of us remember the Great Recession of the mid-2000s when the housing market crashed and forced some 10 million people into foreclosure between 2006 and 2014. But, we must also think about how that was caused – easy credit and a period of frenzied speculative homebuying. Unlike what we saw in the past, many people argue that the new growth of home prices since the beginning of COVID-19 was justifiable. U.S. demographics were already supporting growth in the housing market with the desire to own increasing as people spent more time at their homes and saved money.
The pandemic caused many to reassess their living situations, leading to some renters turning into house hunters and homeowners looking to move into larger houses. Yet, despite the rapid sales, this current boom doesn’t bear the same similarities that led to the previous crisis. This boom doesn’t have the same buildup of risky mortgages, so some experts say the answer is no; there won’t be another bust.
Yet, this doesn’t mean some relief isn’t in sight. The largest risk to housing is rising mortgage rates, and this may happen within the next year. If it does, it’ll force prices down and could potentially lead to a drop in home prices, even when solid buyers are in place. But, a flattening or decline in home prices is far from the crash we experienced during the Great Recession.
What To Expect In 2022
Now that some metrics are showing favor to buyers, what can we expect from the housing market in 2022? Here are some trends that experts feel would-be homebuyers should know:
The market will become more buyer-friendly (somewhat)
Most would hesitate to say that next year’s market will turn into a strong buyer’s market, but with inventory coming back from record lows, there should be more available options; thus, evening the playing field more for both buyers and sellers.
The buying process will return closer to normal
You’ve probably heard stories about buyers forgoing some inspections, offering well above the listing price, and tirelessly trying to outbid other offers. Some experts say that in 2022, potential buyers should be able to once again offer below the asking price and avoid bidding wars.
The suburbs will remain hot
With lots of folks still working from home and millennials now entering home-buying ages, you’ll find that the suburbs will remain hot.
What Not To Expect
The downside is that many market experts also say there are some things you should not expect to happen in 2022’s housing market.
A drop in prices
Even though the market is increasing so rapidly, you shouldn’t expect a sharp drop in prices. In fact, you’ll probably still have to pay top-dollar for a home next year. Still, home value appreciation will likely peak and begin to taper off. When this occurs, the home values will start to go back to normal levels.
A skyrocket in mortgage rates
As we mentioned, there’s a real chance that mortgage rates will rise in 2022. They won’t skyrocket by any means but should begin an upward tick.
The Bottom Line
In the end, we will have to wait and continue monitoring the situation to see if Florida real estate prices will continue to rise. But the big takeaway is that would-be homebuyers need to keep an eye on the market because tides may turn in their favor. Just don’t expect a walk in the park though, there may still be challenges.
