2023 September Florida Real Estate Economic Update

Market Status: Stalemate

The residential real estate market in 2023 was expected to look more like 2018–2019, with supply and demand finding more of a balance. Balance, however, seems more like a stalemate so far, with buyers and sellers both having reasons to hold back from transacting this year. 

The vast majority of homeowners with mortgages that originated or refinanced in 2020–2022 have interest rates that are likely 5% or lower, making the decision to sell difficult, particularly if sellers then need to finance their next home at today’s rates. Buyers are facing a double whammy—rates are nearly double what they were 18 months ago, and prices on the whole have yet to stay down from the peak set a year ago. 

When interest rates were lower, higher sticker prices for homes mattered less as the monthly payment stayed low. Now, that is gone. The result: supply and demand have both slowed. Closed sales of existing homes are off from pandemic highs and are settling in slightly lower than trends set in 2019. 

However, life happens, and it affects residential real estate. People need to move for a variety of reasons, and the headline issues facing the industry don’t affect everyone. Dollar volume so far in 2023 is above 2019–2020 levels, thanks to higher median sales prices. 

The lack of inventory on the supply side will keep prices high, as buyers still have less housing options to choose from. Affordability remains an issue for all buyers, but particularly first-timers who don’t have the advantage of using a current home’s higher equity buoyed by above historic norm sale prices.

Inflation and Interest Rates Impact on Economy

The Federal Reserve aggressively pushed the fed fund rate 10 consecutive times, but finally declined to continue in June 2023, citing cooling inflation. This move has provided some stability to capital markets, including lenders, with
mortgage rates stabilizing, albeit in the 6–7% range. While inflation is half
of what it was last summer, it still sits around double the Fed’s goal. As such, market experts anticipate at least one more hike this year. However, some believe cuts may actually be on the horizon as the impact of previous rate hikes have had sufficient time for goals to be met, resulting in that “soft landing” everyone is hoping for. A persistently strong labor market is helping to keep the United States out of recession territory, but high interest rates carry higher borrowing and operating costs for consumers and businesses. That leaves the economy in a somewhat holding pattern, with everyone waiting for some shift to move out of this uncomfortable equilibrium.

The Sun is Shining on Florida’s Future

Florida has always been an attractive place for people to live, but long-term efforts to diversify the economy and attract working-age residents are paying off. Florida topped the list for younger people looking to take their remote job to a place with amazing amenities and affordability. A deeper bench of tech, healthcare and information, and business services jobs has also attracted people who work on-site as well. No longer just for retirees, Florida continues to be a major player in attracting companies to relocate or expand here, citing a more diversified workforce to fill available jobs than before. 

Florida’s future remains bright despite some obvious growing pains. Affordability is becoming more of an issue as people relocating from other states are tipping sales prices in a direction that gives long-term residents headaches. Dwindling the availability of land to create new housing will challenge Florida’s ability to build its way out of pricing pain. 

Managing growth and success will continue to be Florida’s charge over the coming decades as the economy matures, similar to Silicon Valley’s experience over the last few decades.

*Information provided by Florida Realtors