Florida has been and is still a great place to buy real estate, whether for a primary residence, second home or real estate investing. But what is the Florida Real Estate Market Forecast for 2024, 2025 and 2030? Take a look:
Current Overview Of Florida Real Estate
Redfin recently reported that although starter homes have risen 4.2% year-over-year, affordability measures in several Florida metropolitan areas have changed from “unaffordable” to “affordable” within the past year.
The $76,995 income needed to afford the median-priced starter home of $250,000 declined by 0.4% because mortgage interest rates dropped from 7.07% to 6.50%. However, the average starter home may be a condo or townhome today, whereas a decade ago it would have been a turnkey four-bedroom home in a nice neighborhood.
After several years of low inventory levels, with sellers not wanting to give up their 3% mortgages, inventory levels have risen 36.2% in 2024. The median sales price as of July was $416,990, an increase of only 0.5% year-over-year. As of August, 32,061 homes sold year-over-year, a decrease of 5.2% from 2023. In addition, the 61 median days on the market increased by 18 days year-over-year. Zillow’s latest mortgage interest rate data for a 30-year fixed mortgage is 6.01%, but Bankrate shows it at 6.21%.
The Florida housing market still favors sellers. Demand for good homes still outweighs supply, recently about 4.3 months (6.0 is balanced). House prices have diminished slightly but are still running ahead of 2023. A new wave of buyers hit the market in September as the Fed cut its benchmark interest rate by 50 basis points. However, some may still not qualify for a mortgage at present levels.
So, with high house prices and mortgage rates above 6%, is it a good time to buy a house?
Factors Influencing Real Estate Prices
Factors influencing real estate prices include job growth, inventory levels, demographics, the economy and demand from other states and international buyers. Job growth in Florida is excellent, inventory is still low and demand remains high. While Florida was once considered a place for retirees, over the past several decades, more people of younger generations have moved there. Two reasons why are the Florida economy is good and there is no state income tax. The influx of younger generations has maintained high Florida house values.
What Makes Florida Real Estate Prices Go Up?
Supply and demand drive home prices. High demand continues as people worldwide are attracted to Florida and the inventory of homes cannot seem to keep pace with the demand. People are attracted to the climate, beaches and lower cost of living. In June 2024, prices in Florida hit an all-time high with a median house price of $419,000. With mortgage interest rates slated to decrease further, there remains room for more appreciation.
What Makes Florida Real Estate Prices Go Down?
Just like anywhere else, economic conditions could bring the price of homes down in Florida. Florida had one of the highest foreclosure rates in the U.S. during the Great Recession of 2007-2009. Foreclosed homes were selling for 30%-50% below the highs of 2006 and they dragged prices down on non-foreclosed homes, too.
A decrease in demand could also reduce prices. In May 2024, researchers from Florida Atlantic University and Florida International University determined that nine Florida housing markets were among the most overpriced in the U.S. All nine were in double digits, with Miami at 34.7%, ranking 11th among the most overpriced U.S. housing markets. When homes are overvalued, people may move to less expensive states.
Experts Are Predicting Higher Florida Home Prices By 2030. Ready To Buy A Home Now? Find The Best Lender Here.
People may be surprised to learn that the average 30-year mortgage rate increased from 6.08% to 6.12% last week. It was the first increase in seven weeks. That’s because the U.S. 10-year treasury bill bottomed on Sept. 13 at 3.59% and has since increased to almost 4% as of October 4. Since mortgage interest rates are closely tied to the 10-year treasury bill, this may cap the recent surge of buyers seen after the Fed lowered interest rates in September.
However, even with higher rates, leading real estate website Zillow expects house values to increase by 2.1% in 2024, above their previous projection of 1.8%.
According to the June 2024 updated Southeast Florida Housing Outlook, mortgage rates will be 6.6% by the end of 2024. Existing home sales will decline by roughly 5.5% in 2024. Despite the lower sales, single-family home prices will rise by 7%.
Florida Real Estate Forecast For 2025
The Southeast Florida Housing Outlook also noted that the projected interest rate cuts and strong economic fundamentals in Southeast Florida should lead to a sales recovery and sustained price growth in 2025. There will be strong demand for single-family homes and flat sales of condominiums. Single-family home prices could rise nearly 10% in 2025.
Of course, projections are never perfect and the Outlook was created by Gay Cororaton, the Miami Realtor’s Chief Economist. Real estate economists often have unbridled optimism. Ms. Cororaton sees interest rates declining to 5.7% by the end of 2025 with the Fed cutting rates four times.
So is it a good time to buy a house? If the predictions are true and lower interest rates, lower taxes and a strong economy spur increased demand, then it’s still a good time to buy a house. By waiting, Florida could become much more expensive.
While mortgage rates are expected to tick lower as the Fed cuts interest rates again by the beginning of 2025, homebuyers should not expect to see the 3% mortgages again that were prevalent in 2020-2021. Greg McBride, chief financial analyst at Bankrate, thinks the low 5% range is more realistic if the U.S. gets a soft economic landing.
Florida Real Estate Forecast For 2030
Housing market predictions are always subject to unknown economic factors. Few people in 2003 could have predicted the Great Recession of 2008, which devastated the U.S. real estate housing market. Another factor that makes housing market predictions tough is that housing market news comes out at different times of the month, data varies from different sources and the data is often lagging.
While it’s more difficult to make a real estate forecast for the next five years in Florida, Dr. Lawrence Yun, the Chief Economist of the National Association of Realtors (NAR), recently said he believes the national market will appreciate 15% to 25% over the next five years. Working from home means more migration to areas such as Florida. If Yun is right, the forecast for Florida price appreciation should be equal to or greater than the national average.
According to Ken H. Johnson, an associate dean at Florida Atlantic University’s College of Business, Florida needs at least 200,000 new homes each year to keep up with demand, but only about 20,000 are built. That means it’s likely that house values will continue to rise.
Consumer sentiment among Floridians is climbing and they are optimistic about the next five years. In August, Florida’s unemployment rate was 3.3%, compared with 4.2% overall in the U.S. Since jobs drive demand and subsequently real estate prices, the low unemployment rate means increasing house values are likely.
Challenges And Opportunities In Florida Real Estate
It would take a strong recession to challenge the optimistic predictions for Florida’s house prices. Even hurricanes don’t seem to deter people from moving to Florida. Things could be more problematic for investors though. Rents will have to keep pace with housing prices for investors to generate a viable return on investment.
One possible opportunity for lower prices is if the next administration decides to limit hedge fund home purchases. If the hedge funds are forced to sell large positions, that would create a dramatic rise in inventory. Florida would quickly become a buyer’s market for both owner-occupants and investors.
Is Florida Real Estate A Good Investment?
Florida real estate has been a solid investment for a long time, as home prices have risen considerably over the past three decades and the demand for housing has been strong. Rental property demand has also seen large increases. Therefore, real estate investing in Florida has been lucrative, but it’s quite competitive, with many investors even bidding prices up on distressed properties.
However, there are some risks to investing in Florida Real Estate. Florida is a peninsula where hurricanes can destroy property, especially near the coasts. As of Oct. 1, estimated insurance losses from Hurricane Helene are at $656 million and rising. Thus, Floridians can expect their insurance premiums, which are already some of the highest in the U.S., to increase again.
On the other hand, property taxes are very low compared with other large states. On primary residences, state law limits the annual increase in the assessed value of homesteaded property to 3% or the Consumer Price Index (CPI), whichever is less. Homestead exemptions also decrease the property’s taxable value from $25,000 to $50,000.
The average Florida homeowner pays $2,338 in property taxes annually and its effective tax rate on the median home value is 0.91%. New York has an effective tax rate of 1.40%, Ohio’s is 1.59%, Texas 1.68% and Illinois is at 2.08%.
Conclusion
Most forecasts for Florida real estate in 2024, 2025 and 2030 are for lower interest rates, increasing demand for single-family homes and ultimately higher real estate prices. If you are interested in purchasing and want to learn more about buying a home in Florida, you should contact a reputable Buyer’s Agent and mortgage lender in specific areas in which you have interest.