What to expect from Florida's housing market in 2023
The real estate market has been increasing in recent years, but many analysts expect property sales in most markets in the U.S. to slow down in 2023. Nevertheless, you want to get the most out of your money, so investing in a state with a healthy real estate market is essential. Therefore, check out this sneak peek into the 2023 Florida real estate market to make more informed investing decisions.
Slowdown in sales
The National Association of Realtors predicts sales will decline in Florida's major metropolitan areas in 2023. Cities such as Jacksonville, Miami, Fort Lauderdale, West Palm Beach, Lakeland, and Winter Haven will likely see no more than a 5% drop in property sales. With projected decreases in sales nearing 30%, North Port, Sarasota, and Bradenton will see the worst market slowdowns in the state. In November, the First Coast saw a 26.7% drop in sales of single-family homes compared to the previous year, so residential property investors can expect to have difficulty finding buyers in this region in 2023.
Rising prices
Home sales may decline throughout the state, but prices will continue to rise. While sales in Jacksonville are expected to drop by 3%, property prices should increase by 4.6%, making Jacksonville one of the most stable markets in Florida in the foreseeable future. Most other cities in Florida will see more modest price increases accompanied by more significant sales drops.
The graph below shows the latest home price forecasts for 2023 nationwide.
Nationwide home price forecast for 2023.Photo byMyKCM.com
Higher interest rates
Interest rates were raised aggressively by the Federal Reserve in 2022 to curb inflation. As a result, mortgage rates shot up because of a mortgage rate of 3% in December, and some analysts believe that rates could rise to 11% by the end of 2023 if the current trend continues. Rising mortgage rates will significantly impact single-family homes in middle-class markets. However, cash-rich buyers don't need mortgages, so investors in luxury markets should remain unaffected by the Federal Reserve's anti-inflation measures.
Continued population growth
Florida's annual population growth peaked at 1.6% in 2021. While growth has slowed in 2022, the current growth rate still exceeds analysts' expectations. According to the 2022 Florida Demographic Estimating Conference Forecast, the state's population should grow by 1.34% in 2023, with a net migration of over 310,000 new residents. While property sales will slow down in most markets, the influx of hundreds of thousands of new residents may benefit landlords.
Fluctuations in commercial real estate sales
Office spaces have remained vacant throughout the country following the COVID pandemic. Over 36% of employees worked from home in 2021, and many employers implemented policies to facilitate remote work in the same year. Because more and more businesses have adopted hybrid work models, many executives can no longer justify the cost of extensive office space. With that in mind, investors across the state should carefully research emerging norms in major local labor markets to get the most out of their commercial real estate investments.
The competitive real estate market has pushed longtime residents of Little Haiti and other working-class Miami neighborhoods. Rentals are becoming more expensive, so immigrant communities and working-class residents are moving away from Florida's most expensive cities. Over 95% of apartments are currently occupied in Florida, which will likely remain the same in 2023. Thus, landlords in Miami, Orlando, Tampa, Ft. Lauderdale, and other big cities should have no trouble raising rent and filling vacancies. Landlords in rural and suburban markets should also expect greater demand for rental units as working-class families move to more affordable areas.
State housing legislation and new local regulations will contribute to the Florida real estate market in 2023.Photo byEKATERINA BOLOVTSOVA
State housing legislation and new local regulations
The housing crisis will continue to affect many of the state's residents in 2023, so state and local officials must take quick action if they want to keep their jobs. The CEO of the Florida Housing Coalition, a nonprofit affordable housing advocacy group, expects to see the Sadowski Housing Trust Fund increase to $403 million in 2023. and may prevent rental vacancies and allow struggling homeowners to avoid foreclosure in cities walloped by inflation.
Reemergence of COVID
The COVID outbreak nearly wrecked the global economy and has unprecedentedly impacted housing markets across the country. Thankfully, new COVID cases in Florida have been shallow since September. However, a new COVID mutation could arise at any point. If the state faces another lockdown, many residents may be unable to afford their rent or mortgage payments. In turn, prices could decrease as foreclosed homes and empty rental units flood the market.
Resumed U.S. visa processing for Cuban citizens
Starting in 2023, the U.S. Embassy in Havana will begin processing total immigrant visas for Cuban citizens for the first time since 2017. Florida has been the primary destination for Cuban immigrants and visitors to the U.S. for decades. Because of this, many Cuban nationals have friends and family in the state, so Miami and other cities with high Cuban populations may see an influx of Cuban immigrants in 2023. As more people move to these cities, demand for houses and rental units will increase, so sales and prices may rise significantly.
Prepare with knowledge
Smart spending consists of many factors. Home affordability calculations are essential for long-term success. Here are a few crucial considerations that I always suggest to my friends, family, and residents.
Costs of home to the income ratio. Are you earning enough to afford a house in a specific price range? Your budget should reflect a mortgage not exceeding 28% of your monthly income. FHA programs can allow for more grace, averaging 31%, but you will want to be mindful of all other expenses.
What funds are available for the down payment and the required closing expenses?
Key factors often overlooked are the incidental costs such as HOA fees, PMI, property insurance, taxes, etcetera.
Do you have a minimal amount of six months of living expenses in the event of an emergency?
Nobody wants to lose money on a bad investment. But unfortunately, property values are in constant flux across the country, and the investing norms of yesteryear will only help a little in the modern real estate market. Therefore, you must conduct thorough market research before pouring too much money into any city or sector in Florida.
"Yes, things in Florida are not as sunny as they once were. Homes stay on the market longer these days with higher interest rates and insurance costs out of reach for many people. But we manage to stay in first place with the out-of-state folks moving in."- Tony Rodriquez, resident of Tampa.
This article is for informational purposes only. It should not be considered Financial, Real Estate, or Legal Advice. The market fluctuates; therefore, not all information will remain the same. Consult a Financial or Real Estate attorney before making significant real estate decisions.
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