Monday, November 27, 2023 / by Richard Eimers
More inventory? Lower mortgage rates? Lower home prices? What does the 2024 Florida housing market look like?
Are you hoping that mortgage rates fall back to the 3% range or for bidding wars to break out for your new listings? That likely won’t happen, however market experts do predict that the Florida housing market will be strong. And, there will still be plenty of opportunities for Florida real estate professionals who can put their knowledge and skills to work for buyers and sellers.
“Now is the time to foster relationships, showcase your professionalism and provide excellent service to every participant in a real estate transaction,” says Adam Grenville, sales associate with RE/MAX Premier Group in Wesley Chapel. “Focus on the fundamentals, remain sharp and prepared for whatever the future throws our way.”
Real estate coach Tom Ferry, founder of Tom Ferry International, agrees. “The smart agents stopped complaining about the market a while ago and are focused on action for today’s market reality.”
Looking ahead to 2024, state and national real estate experts expect Florida’s housing market to strengthen a bit, driven by population and business growth. “We are back to a pre-pandemic normal pattern of sales,” says Dr. Brad O’Connor, Ph.D., chief economist, Florida Realtors®. “Inventory is increasing, which has helped slow price growth. Many buyers and sellers are on the fence now, waiting to see what happens to mortgage rates, so it makes sense to plan how you would respond to a drop in mortgage rates, or what to do if they stay at the current level.”
Even if high rates persist, demand for Florida homes will remain strong, adds Diana Galavis, broker-associate, Watson Realty’s Southside office. “It will still be a seller’s market, although inventory levels will rise,” she says. “That means you need to know the statistics and trends in your farm area. Both buyers and sellers want to know those numbers, and that can help you manage their expectations regarding price points.”
Throughout the state, in-migration continues to fuel the demand for homes and condominiums. For the five-year period beginning next April, annual population growth year is expected to average nearly 300,000 or 817 per day, according to a midyear report from the national Demographic Estimating Conference.
“Florida is still a hot place to be as it’s an ideal location for ‘untethered’ remote workers with larger and more affordable housing compared to the Northeast and West Coast,” says O’Connor.
However, recent population growth has been concentrated in large metro areas, particularly Orange, Hillsborough, Lee, Polk and Palm Beach counties, according to a recent analysis of U.S. Census data by the Tampa Bay Times. Last year, Polk was the fastest-growing county in Florida and seventh-fastest in the nation.
“All of the nine largest metros in Florida are expected to grow by 10% or more in the next decade,” says Ken H. Johnson, Ph.D., associate dean of graduate programs, College of Business, Florida Atlantic University in Boca Raton. “Orlando and Southwest Florida may see 20% growth, well above the rates for South Florida.”
Many executives and professionals moving here from the Northeast and Midwest are bringing their businesses with them, adds Johnson. “That will contribute to job formation and strengthen both the residential and commercial sectors.”
Along with migration, Florida will see a steady increase in household formation, as young adults move into the rental and ownership markets. Nationally, the number of households headed by 25- to 34-year-olds is growing much faster than other age ranges, according to the Joint Center for Housing Studies at Harvard University.
“Now is a good time to start working with Gen Zers [born between 1997-2012],” says Johnson. Talk with adults in their 20s about their finances to see what they can afford to rent or buy. While they are more likely to rent, given today’s high prices, those relationships can pay off in the future.
“We are also seeing a lot of investors, from individuals to Wall Street firms, looking at residential real estate,” adds Johnson. That trend, combined with high demand for rentals, will create opportunities for brokers to add property management services to their portfolios.”
On the international side, Florida remains a top market for buyers from Canada, Latin America and Europe. “However, this sector is not recovering as fast as the domestic market,” says O’Connor. The strong dollar makes U.S. homes less affordable, and geopolitical uncertainties may cause some international buyers to delay their purchases.
New-home market demand
On the supply side of the real estate market, new single- and multi-family home production will be well below the demand, says Johnson. “We are having trouble building homes fast enough,” he adds, noting that South Florida needs about 200,000 new units a year, but is only adding about 20,000 annually.
But partnering with builders is a good option for expanding inventory options for buyers, says Lisa Hill, broker-associate, Keller Williams Realty at the Parks, Orlando. “A lot of buyers are thinking about new construction because the inventory of active listings is so low,” she says. “I tell them if they need to buy, they should purchase now, even with higher rates, as they can typically refinance later.”
O’Connor points out there are new residential developments spreading to the “exurbs” of Orlando and Tampa and east of I-75 in Southwest Florida, due to the lower cost of land and the growth in hybrid work. “People can live farther from the central business district or suburban office park if they only need to drive in a couple of times a week,” he says.
Grenville agrees, adding that in his local market in east Pasco County there seems to be new housing development or commercial projects breaking ground daily. “As sales professionals, we must be vigilant in exploring those new communities,” he says. “Those new-construction properties are a viable option for buyers now, and in three to five years when those communities are completed, homeowners will be looking to their trusted neighborhood advisor for guidance when they are looking to move again.”
New-development activity is also strong in the multifamily and hospitality sectors, according to Lorenzo Perez Jr., principal broker, Premier International Properties in Coral Gables. “There are plenty of multifamily projects in the pipeline, although new construction is slowing due to higher financing costs,” he says.
In contrast, there has been an explosion in condo-hotel projects that cater to U.S. and international buyers seeking a Florida vacation residence. “This sector is really on fire,” says Perez, noting that multiple developments are underway along the state’s east coast.
Pricing and rates
Home prices and mortgage rates will be the key issues facing buyers and sellers next year, along with high insurance premiums, says Logan Mohtashami, lead analyst for HousingWire. “With low active listings and strong demographic demand, it’s unlikely pricing will go down,” he says. “With high rates, cash sales will be a significant part of the market.”
Mortgage rates also impact institutional buyers—a relatively small percentage of the Florida market. Institutions paused their purchases when rates went up, but if rates fall, they will be more open to buying again, Mohtashami says.
Unless mortgage rates decline, first-time buyers may find it difficult to finance a purchase, says Hill. Therefore, affordable homes will be in high demand from renters—especially when their leases expire.
Mortgage rates and the move-up market
Higher rates also have a negative impact on the move-up market, says Grenville. “Many homeowners took advantage of the historically low interest rates over the past several years and now find themselves faced with trading in their 2.5% mortgage for a rate of 6% or more. That creates a massive void in the move-up market.”
In general, the luxury segment is less affected by rate changes, because so many buyers make all-cash purchases, says Grenville. “Couple the desire to own a nice home with the instability of the stock market, and I believe luxury clients and real estate investors alike will be active in this segment.”
In an uncertain mortgage environment, both buyers and sellers will turn to knowledgeable real estate professionals, says Johnson. “Buyers need the lowest price to keep their mortgage payments down, while sellers need every dollar they can get from a sale,” he says. “That underscores the importance of bargaining aggressively on both sides of the transaction.”
Looking ahead, Hill says it will be important to go back to the basics to generate business in 2024. “You need to use your database and stay in touch with your sphere of influence,” she says. “It will be a year where old-school real estate tactics such as open houses, door-knocking and ‘just-sold’ postcards will pay off for sales professionals.” #
Richard Westlund is a Miami-based freelance writer.