Florida Metros: How Are Their Real Estate Markets Changing?
Jun 03, 2024![Florida Metros: How Are Their Real Estate Markets Changing?](https://kajabi-storefronts-production.kajabi-cdn.com/kajabi-storefronts-production/file-uploads/blogs/2147504575/images/15ace67-407-2a4-7155-d048a25c3813_Full_Monthly_Update_14_.png)
If you search for information on Florida's housing market you'll see headlines with phrases like "crash," "complete collapse," "overdue correction," and "fire sale" to name a few. ๐ฑ
A few weeks ago, I researched the topic by reviewing the big picture in months of supply in Florida.
In short, the people calling for a crash are pointing out that inventory is way up since 2022. This is true.
However, they ignore the fact that inventory in Florida is even with 2019 and significantly lower than the 2008 era. ๐ซฃ
We've got a housing shortage throughout the U.S. (including Florida) that will likely exist for a long-time.
This week, I zoomed in on Florida to see how inventory has changed since 2019 in each major metro area. ๐
Let's take a look!
Florida Metro Area Housing Supply
Months of supply is the most important metric to track when determining the health of a real estate market. ๐ก
It's the number of active listings divided by the month's closings.
This gives us a complete picture of supply and demand in one single number.
It's normal for months of supply to rise each year. It doesn't automatically mean that prices will go down immediately if months of supply rises.
A rapid, large , and/or prolonged increase in inventory, on the other hand, is a red flag that should be watched closely. ๐ฉ
Looking back to the Great Financial Crisis of 2008, you'll see that months of supply skyrocketed ahead of the crash and gave us a head's up that trouble was around the corner.
For instance, in Miami-Dade County months of supply went from 6 to 10 (rapid, large, and not typical for the market) at the end of 2005.
The same happened in the Fall of 2006 in Jacksonville.
If we'd been watching months of supply back then, we would have had a 1-2 year warning that something wasn't right in the market and we should prepare for challenges. ๐คฏ
Here's the same ranking of metros showing the current months of supply (color coded to match the previous graphic):
Historically, months of supply under 8 has resulted in little risk of prices going down. ๐ก
Naples is the primary market that appears to be in the danger zone.
Before jumping to conclusions though, we need more context. ๐ง
First, it's worth noting that the median sale price is up 2% year-over-year (YOY). The average sale price is up over 11% YOY.
This tells us that even though inventory is rising, buyers are still active in the market - especially in the luxury market.
Second, Naples approached 10 months of supply in 2017, 2018, and 2019 so it isn't something totally out of the ordinary.
Over that time, home prices in Naples held steady.
So, instead of expecting a crash, I'd expect prices to level out unless we see inventory head above 10-12 months of supply. ๐ฒ
Finding Opportunity
Unfortunately, analysis like this isn't sexy and doesn't get millions of views. ๐ฎ๐จ
That's exactly why you wont see it going viral on YouTube or any website that makes money off visitor traffic.
Yet, it's the type of approach we have to take to get a rational, accurate picture of the markets.
Instead of getting sucked into the fear mongering crashing Florida real estate market videos, we need to recognize that some markets are seeing a relatively big increase in supply and others are still very low on inventory. ๐
In many cases, Florida metros are normalizing after essentially selling out of homes in 2021.
You can use this information to identify markets that might offer better deals (higher months of supply) and others that could see prices continue to rise significantly (lower months of supply).
โ Here's my pick for best deal in a major metro based on the numbers: Punta Gorda.
The main caveat is you can't be too worried about another hurricane in the area.
Since December 2022, the median home price has averaged -1.4% YOY.
Even though Naples has a higher months of supply, it's averaged a median price increase of 4.7% over the same time frame.
What opportunities do you see? ๐
Dr. Alex Stewart
Founder
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