Shared Courtesy of the Wall Street Journal May 24, 2023
Editor’s Note: If you’re a homeowner and selling, this is encouraging news, reflecting the solid prices we’ve seen in our community. But, it’s wise to remember that the Florida housing market is fickle, and cyclical.
Debbie and Jeff Stevens retired last year, and immediately began plotting a cross-country move from Washington state to Florida. They pictured a waterfront condo in Clearwater with sprawling views, a swimming pool and tennis courts.
But, they quickly learned: All of that would come with a price.
Even with their $1.2 million budget, the Stevenses kept coming up empty, or getting outbid. This month, they finally found a two-bedroom waterfront condo that met their requirements — and made an offer, without setting foot inside.
“We saw it on FaceTime and put in an offer within the hour,” said Debbie, 65. “It was so difficult to find what we wanted. I kept thinking, ‘What? I thought the housing market was calming down. This is crazy.’”
The U.S. housing market has slowed considerably in recent months, with many parts of the country in a full-blown housing slump. Prices of existing-homes sales fell 1.7 percent in April, marking the sharpest annual decline in more than a decade, according to the National Association of Realtors.
But not in the Sunshine State, where a steady stream of new residents is continuing to prop up home prices in 11metro areas, including Miami and Naples. The median home sales price in the state was $410,000 in April, flat from a year ago, but up from $405,000 in March, according to data from Florida Realtors, a trade association.
Although there are signs that prices are beginning to moderate, many economists say the Florida housing market has held up remarkably well, particularly compared with other pandemic hot spots, such as Seattle, Austin and Silicon Valley, where home prices have fallen about 12 percent in the past year, according to Black Knight, a mortgage technology and data provider. As a result, although Florida bore the brunt of the 2008 housing crash, the state appears to be insulated this time around.
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“Prices in Florida are still going up, which is really shocking because home prices in many parts of the country, particularly out west and along the coasts, are coming down,” said Ken H. Johnson, a real estate economist at Florida Atlantic University in Boca Raton. “Not only are we short of housing units, but we’re seeing extraordinary population growth. Put those two things together, and you get unaffordable housing.”
The pandemic spurred nearly 1 million people to move to Florida from 2020 to 2022, transforming the state’s economy and rocking its already hot housing market. Florida’s population grew by nearly 2 percent last year alone, faster than that of any other state and five times the rate of national growth, Census Bureau data shows. Much of that growth, economists said, has been propelled by an influx of white-collar professionals who’ve decided that if they can work from anywhere, they’d like to log on from the beach.
Businesses also are heading to the shore: Hedge fund giant Citadel, Windstar Cruises and fitness chain Barry’s all recently moved their headquarters to Miami. Asset management firm ARK Invest left New York for St. Petersburg, while InnovaCare Health relocated from White Plains, N.Y., to Orlando.
“We are seeing a significant evolution of our economies, especially in Orlando, Tampa, Southeast and Southwest Florida,” Johnson said. “Tech firms and health-care companies are moving in. And it seems like every day, a new hedge fund or finance house opens a new branch or moves its whole headquarters here.”
As a result, Florida prices have remained surprisingly buoyant, even as high interest rates have dragged down inventory and sales.
Although many cities nationwide are seeing steep monthly drops in housing prices, as much as 8 percent in a month, home prices rose in at least 11 Florida metro areas, including Miami, Fort Lauderdale, Pensacola, Naples, Tallahassee and Sebastian, between February and March, according to data from Moody’s Analytics. Sebastian and Vero Beach, on the state’s east coast, saw some of the biggest gains, with prices up nearly 6 percent between February and March, and 9 percent from last year.
“If you’re looking at the beaches or coastal areas, it’s still a fistfight with multiple offers,” said Cyndy Tomassetti, a real estate broker associate in Jacksonville Beach. “People move here thinking it’s going to be cheap, but it might as well be Aspen.”
About 70 percent of her customers are from out of state, she said, and are moving for jobs at some of the area’s largest employers, including CSX, Johnson & Johnson and the Mayo Clinic. Often, they have little time to find housing and don’t mind paying a premium, especially if they’re moving from pricier markets such as Seattle or San Francisco.
Ryan Lutz and his wife, both software engineers, moved to Land O’ Lakes, north of Tampa, early last yearfrom a Minneapolis suburb, in large part because Florida doesn’t have a state income tax. Both had gotten high-paying remote jobs during the pandemic and wanted to stretch their money.
“It got us thinking, ‘Why in the world are we paying 8 percent state income tax and dealing with negative-40-degree winters?’” said Lutz, 37.
The couple bought a $900,000 lakefront house in a gated community with a swimming pool and hot tub, which Lutz calls “a little patch of paradise.” Culturally and politically, though, it’s taken some getting used to.
“It’s a stark difference, and the attacks on education, women and LGBT folks don’t sit very nicely with me,” he said. “But then, it’s hard to be too mad at the world while you’re cruising around a lake on a Jet Ski.”
The Federal Reserve has raised interest rates 1o times in the past year, causing mortgage rates to double to 6.4 percent for a 30-year fixed mortgage. That has had a chilling effect on the housing market. Overall U.S. home sales have plummeted 3.4 percent in the past year, as Americans rethink their plans.
Wealthy buyers, though, are increasingly eyeing Florida real estate as an investment opportunity. Rafael Corrales, a Redfin real estate agent in Miami, said there’s been a spike in foreign investors from Latin America, Asia and Europe, coming in with all-cash offers, which is helping keep prices high.
“When interest rates started rising last summer, it was like an automatic switch: Mortgage applications dropped, which opened the window for cash buyers,” he said. “Investors are saying they’d rather park their funds in tangible real estate here than deal with turmoil in the banking system.”
But just because prices have so far held steady doesn’t mean they won’t eventually tumble. Housing economists cited a number of potential concerns, including an increasingly polarizing political environment and climate change, as factors that could drag down the state’s real estate market.
“Florida really is in the eye of the storm when it comes to climate risk,” said Mark Zandi, chief economist at are, who owns a home in Vero Beach. “You can’t get excess flood insurance anymore. Insurance rates are going up dramatically — and are going to keep going up. That has got to hit home prices sooner or later.”
But for now, many say they’re still being priced out of the local housing market. Tegan and Justin Wolfepack moved toFlorida’s Gulf Coast from Denver early in the pandemic.
They were drawn to St. Petersburg because of its beaches, professional sports teams and “good community vibes.” Plus, they figured, they’d be able to save up for a year, then buy a house.
But three years later, those dreams have been dashed. Homes in their neighborhood that sold for $480,000 in 2020 are now on the market for $1.25 million. Meanwhile, their $2,500 rent is slated to go up by 10 percent this year.
“We thought we were going to rent for a year and think about buying, but we were immediately priced out,” said Tegen, 37, a graphic designer. “It’s kind of nerve-racking because we don’t know if there’s anywhere to go anymore.”
For the Stevenses of Washington, the new condo in Florida — which they finally visited last week— represents a fresh start. Debbie worked for years as a nurse, and Jeff as an engineer at Boeing. The pandemic prompted them to rethink their priorities. They sped up their retirement plans and decided that instead of spending winters in Florida, as previously planned, they’d move there altogether.
Their new home overlooks both the Intracoastal Waterway and the Gulf of Mexico. The $907 monthly amenity fee covers a swimming pool, weight room, kayak launch, and tennis and pickleball courts. They’ll be paying more than they did in the Seattle area, but Debbie says, “getting so much more.”
“We decided life is really short and you know what, let’s go all in,” she said. “Instead of maintaining two households and going back and forth, why don’t we just move to Florida?”
