The Florida real estate market, once booming during the COVID-19 pandemic, is now experiencing a slowdown, and the abundance of homes available on the market can be attributed to two main causes: increased construction and the impact of rising interest rates.
1. Surge in New Construction and Inventory
During the pandemic, Florida, alongside Texas, was a hotspot for new housing developments, driven by an influx of tourists seeking warmer climates. The state’s new construction pace was set to meet the increasing demand, resulting in more properties being available than before. According to Home Builders Weekly, new construction permits in Florida increased by 10% in 2024, with Northeast Florida seeing a notable 25% rise. This surge in new homes contributed to an overall increase in inventory.
As a result, Florida experienced a 4.8% rise in newly listed homes, adding to the national inventory and creating a backlog of homes on the market. Even though winter typically slows down the housing market seasonally, Florida saw a larger inventory pile-up compared to other states, with many properties staying listed for longer periods. Cities like New Smyrna Beach, Palm Coast, Panama City, and Gainesville reported properties sitting on the market for 90+ days.
2. Impact of Rising Interest Rates and Reluctant Buyers
The rising interest rates have also contributed to the abundance of homes in Florida. The average 30-year fixed mortgage rate has risen to around 7%, making it more difficult for potential buyers to afford homes. Many existing homeowners, especially those with mortgages locked in at rates below 4%, are unwilling to sell, thus limiting the pool of potential buyers for new properties. According to Realtor.com, 83% of mortgages in the U.S. have interest rates of 6% or lower, and 33% of homeowners hold rates between 3% and 4%. This reluctance to enter the market has contributed to a slowdown in transactions.
The impact of these factors has left Florida with an abundance of homes for sale, as newly built homes remain on the market longer and the pool of interested buyers becomes smaller due to the high cost of homeownership.
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