In recent years, the housing markets in Florida and Texas have been the top two states in the country for inbound migration. As you might expect, this trend caused a steep increase in homeowner’s market values, much to the delight of sellers, but not so much for buyers. It appears that the trend is now over.
In fact, Florida real estate is experiencing significant fluctuations, transitioning from pandemic-era booms to current challenges characterized by increased inventory and cooling demand.
During the COVID-19 pandemic, both states saw a substantial influx of new residents, attracted by factors such as warmer climates, lower taxes, and more relaxed pandemic restrictions. This migration led to heightened demand for housing, prompting a surge in construction to accommodate the growing population and unprecedented home prices. And of course, taxes rose with home valuations. Like all “bubbles”, this one could take no more, and living in Florida became SO expensive that migration trends have cooled to the point that inbound and outbound households have almost reached an equilibrium.
According to a report by Newsweek, the number of active housing listings in Florida and Texas has risen sharply, with some areas experiencing increases of up to 268% from their pandemic lows. This surge in available homes suggests that the rapid pace of construction may have outstripped current demand, leading to an oversupply in certain regions.
Robert Washington, a broker at Savvy Buyers Realty based in St. Petersburg, Florida, told Newsweek: “I believe the Tampa market is already in the midst of a correction that started around 4 months ago. Many attributed the slow down to the hurricanes that hit, but I think there was already weakness brewing in our market. I absolutely think the stigma from the hurricanes contributed to the softness, but I think that high interest rates have been the true culprit.
We also experienced a substantial increase in prices from 2021-2023 and I think over the last year our market has taken a breather in order to come back to reality. We have started to see an uptick in buyer activity over the last few weeks which is promising, hopefully that will turn into sustained momentum.”
In Texas, cities like Austin, which previously led the nation in housing market growth, are now witnessing a slowdown. A report from Business Insider highlights that despite the overall housing shortage in the U.S., both Florida and Texas are facing a unique situation where homes are lingering on the market longer than anticipated. This trend is attributed to the aggressive construction efforts during the pandemic, which have now resulted in a surplus of available properties.
Data from Redfin indicates that in cities such as Tampa, the number of condos for sale increased by 57.2% year-over-year in July, while pending sales decreased by 18.9%, and the median sale price fell by 4.9%. Factors contributing to this trend include rising homeowners association (HOA) fees and escalating insurance costs, which are deterring potential buyers.
The increase in housing inventory in these states can be attributed to several factors. The aggressive building during the pandemic, aimed at meeting the immediate demand from incoming residents, has now led to an oversupply as the influx slows. Additionally, rising construction costs and higher mortgage rates have made homeownership less affordable for many, further dampening demand.
Real estate analysts are closely monitoring these developments. Nick Gerli, a housing market analyst, has expressed concerns about the potential for price declines in Texas and the Southeast, noting that builders in Florida appear “a bit desperate” to move inventory. This sentiment reflects the broader challenges faced by builders who are now contending with higher costs and a more competitive selling environment.
Despite these challenges, some experts believe that the current market adjustments may lead to more sustainable growth in the long term. The increased inventory could provide opportunities for buyers who were previously priced out of the market, potentially leading to a stabilization of home prices. However, the market remains complex, influenced by factors such as rising insurance premiums due to recalibrated risk assessments by insurers facing heavy losses from natural disasters. This has led to higher costs for homeowners in high-risk areas, which theoretically should lower property values. Nonetheless, regulations and cross-subsidization have kept some insurance premiums artificially low, masking the true risk and costs.
As the market adjusts, both buyers and sellers will need to navigate these changes carefully, considering factors such as rising costs and shifting demand dynamics. The situation emphasizes the importance of monitoring local market conditions and remaining adaptable and prepared for the evolving economic landscape.
