Real Estate Market Update Spring 2023
As of early May, U.S. financial and real estate markets remain in flux. Key decisions being made by the Federal Reserve will likely continue to affect the national real estate market in the coming months. The Fed raised rates again last week. We anticipate mortgage rates to increase again, further limiting buyers’ purchasing power (even though the mortgage rates don’t move in lockstep with the Federal Reserve). Fears of inflation, high interest rates, and uncertainty in the banking industry have everyone a little “jumpy”.
In real estate, the old adage, "location, location, location" matters now more than ever. According to the Wall Street Journal, in all of the 12 major housing markets west of Texas, plus Austin, home prices fell in January on an annual basis, according to mortgage-data firm Black Knight Inc.’s home-price index. In the 37 biggest metro areas east of Colorado, except Austin, home prices rose year-over-year. This marked difference between east coast and west coasts is unprecedented.
Florida Real Estate Market
While price drops have occurred in the West, we are not seeing this scenario play out in the Northeast Florida real estate market. Our team continues to see a significant influx of out-of-state buyers who are attracted by Florida’s robust business growth and by tax savings for individuals moving from states with personal income taxes. Jacksonville’s GDP is 3.7% (which is above the U.S. average of 2.6%) and Florida is growing 1% faster than the rest of the country. In fact, in 2022, over 444,000 people moved to Florida.
This market is different from the 2008 recession and we don’t expect a “real estate market crash”. One point of difference is that the rate of foreclosures is significantly lower than in 2008 and not anticipated to increase. Right now, 76% of American homeowners have at least $100,000 of equity in their home.
Northeast Florida Real Estate Trends
In Northeast Florida, the news is mostly good. Prices are holding firm, and in some areas, especially Ponte Vedra Beach, prices are up slightly. Here are some important statistics from the Northeast Florida Association of Realtors (at the end of Q1):
- Median days on the market are up significantly. The average days on the market is now about 40. This is still far below historical averages.
- Pending sales (a leading indicator of the strength of the market) are down. This is primarily due to the fact that inventory is tight and buyers don’t have a lot of homes to choose from.
- Low inventory is also a result of current owners feeling “locked into” their existing 3% mortgages, making a change to a higher rate (associated with taking out a new mortgage) less appealing.
- Overall, the month's supply of inventory, while higher than last year, is still low with only 2.5 months of inventory available.
- New listings are up about 20%, but still not enough to meet buyer demand.
We’re noticing buyers have become more discerning this year than last year. They’re more likely to want to negotiate on price and, if the house needs repairs, buyers’ expect sellers will make repairs before closing. We’re also seeing many buyers “waiting” until prices drop — which in our area is not likely to happen. Some analysts are speculating that mortgage rates may drop in the third or fourth quarter. Buyers who are on the fence may act rather than continue to watch the market. This action may come from buyers realizing that any cost savings that might be realized from a decrease in mortgage rates will likely be offset by the increase in home prices.
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