After almost two years of unbridled enthusiasm, home sales continued to fall sharply in Florida with the sale of single-family homes in October dropping 24.6% when compared to last year. Condominium and town house sales fell 26.9%.
The data was released by Florida Realtors on Nov. 18.
The drop in what not so long ago was one of the hottest real estate markets in the nation is largely the result of the Federal Reserve raising interest rates for several months in order to curb inflation. According to Freddie Mac, the average 30-year fixed rate mortgage was 6.9% in October, up from 3.07% a year ago. (Freddie Mac announced Nov. 17 that the average now stands at 6.61%.)
Economists say these higher interest rates are making it more expensive to mortgage a home and causing potential buyers to stay on the sidelines. This as existing homeowners stay put rather than risk paying a higher mortgage payment than they are now.
To drive home the point the market is cooling — if not completely cooled — Florida Realtors also reported housing inventory in the state was up 88.4% from last year for existing single-family homes and up 31% for condominiums and townhouses.
The supply of single-family existing homes increased to a 2.7-month supply, up from 1.3 a year ago, while existing condo-townhouse properties were at a 2.5-month supply in October, up from 1.6 a year ago, the trade organization reported.
“In terms of closed sales in Florida, 2022 started out a lot like 2021, but soon, the shock of the rapid rise in mortgage rates caused many buyers to suspend their home searches and sit on the fence; some even had to drop out when their planned budget for a home couldn’t keep pace,” says Brad O’Connor, the trade organization’s chief economist.
Florida is far from alone when it comes to slumping home sales.
According to a report from the National Association of Realtors on Nov. 18, existing home sales nationally fell 28.4% in October when compared with 2021. (NAR counts existing homes sales as completed transactions that include single-family homes, town homes, condominiums and co-ops.)
This was the ninth consecutive month existing home sales fell and all four regions in the country reported month-over-month and year-over-year declines, the association says.
Nationally unsold inventory is at a 3.3-month supply, up from 2.4 months in October 2021.
For those looking for a bright side, as Realtors are apt to do, an optimistic O’Connor says in Florida it’s the “fact that monthly sales still remain in the neighborhood of pre-pandemic levels despite today’s significantly higher home prices and mortgage rates.”
He says this shows “that despite these headwinds, housing demand in Florida continues to receive support from its recent surge in post-pandemic in-migration, vacation home purchases and the ever-increasing number of millennials looking to find a home for their growing families.”
Louis Llovio is the commercial real estate editor at the Business Observer. Before going to work at the Observer, the longtime business writer worked at the Richmond Times-Dispatch, Maryland Daily Record and for the Baltimore Sun Media Group. He lives in Tampa.