The Florida Real Estate Market in 2023: A Shift Towards Balance

The Florida real estate market has been one of the hottest and most dynamic in the nation for the past few years, fueled by strong demand from domestic and international buyers, low inventory, favorable tax policies and a desirable climate and lifestyle. However, 2023 is bringing some changes that could affect the pace and direction of the market.

One of the main factors influencing the Florida housing market is the rise in mortgage interest rates, which have reached their highest level since 2010. According to the Mortgage Bankers Association, the average rate for a 30-year fixed-rate mortgage was 6.27% as of January 20, 2023, up from 4.65% a year ago. Higher rates make homeownership more expensive and reduce the pool of potential buyers who can qualify for loans.

Another factor is the increase in inflation, which has eroded the purchasing power of consumers and put pressure on household budgets. The Consumer Price Index rose 7% in December 2022 from a year earlier, the highest annual increase since 1982. Inflation affects the cost of living, especially for essentials such as food, energy and health care.

These economic challenges have dampened the demand for homes in Florida, especially among first-time buyers and investors who are more sensitive to price changes. According to Florida Realtors®, the state’s trade association for real estate professionals, the number of existing home sales in Florida dropped by 19.7% year-over-year in March 2023, while the median sale price increased by only 3.2%, compared to a 15.6% increase in March 2022.

However, not all is gloomy for the Florida real estate market. The state still attracts many buyers who are looking for a better quality of life, lower taxes and more space. Florida’s population grew by 1.6% in 2022, adding more than 350,000 residents, according to the U.S. Census Bureau. Many of these newcomers are coming from high-cost states such as New York, California and Illinois, seeking more affordable and spacious homes.

Moreover, the supply of homes for sale in Florida is improving, as more sellers are listing their properties and new construction is picking up. The inventory of existing homes for sale in Florida increased by 13.4% year-over-year in March 2023, while the inventory of new homes for sale rose by 9.9%, according to Florida Realtors®. This gives buyers more options and reduces the competition and bidding wars that characterized the market in previous years.

As a result of these trends, the Florida real estate market is expected to return to a more balanced and stable state in 2023, similar to what it was in 2018-2019, according to Dr. Brad O’Connor, chief economist at Florida Realtors®. He predicts that existing home sales will fall by about 7% year-over-year in 2023, while the median home price will rise by only 0.3%, reaching $385,800.

For Realtors®, this means that they will need to adjust their strategies and expectations to match the changing market conditions. They will need to educate their clients about the impact of higher rates and inflation on their affordability and financing options. They will also need to price their listings realistically and negotiate effectively to close deals.

The Florida real estate market is undergoing a major shift in 2023, but it remains one of the most attractive and resilient markets in the country. With its diverse and growing population, strong economy and appealing lifestyle, Florida will continue to be a magnet for buyers and sellers alike.