What’s Happening with Home Prices?

What’s happening with home prices?  Depending on who you ask, some people may tell you that home prices are coming down as they notice price reductions happening more frequently.  Others may tell you that they continue to go up.  They would both be partially correct.  While we are seeing more price reductions than the previous post covid years, prices continue to go up but at a slower pace.

“For the first time in state history, the median sale price for Florida exceeded that of the national number and has stayed there for several months.”  This was the headline of a recent Florida Realtors news story.  One would think that with uncharacteristic prices increases and mortgage rates hovering around 7% that prices would not keeping going up.  However, they do!   Let’s look at why.

Both nationwide and in Florida, the housing market continues to be plagued by high prices and supply challenges:

Nationwide:

Price Trends:

Home prices in the U.S. have seen significant increases.  This had been inflamed by a housing deficit estimated at 4.5 million homes as of 2022, up from 4.3 million in 2021. This shortage has driven up prices, making homeownership increasingly unaffordable for many families.

Market Dynamics:

Despite mortgage rates hovering around 7%, demand remains strong, influenced by factors like remote work flexibility and demographic shifts. However, the supply of homes for sale or rent has not kept pace with demand, leading to continued price escalation.

Affordability Challenges:

The ratio of home prices to household income has increased sharply since the COVID-19 pandemic, reaching levels that strain affordability for average households. This disparity is particularly acute in metro areas where the median home price far exceeds what typical families can afford without significant income levels.

Florida:

Market Conditions:

Florida’s housing market reflects many national trends but with some unique characteristics. The state has historically been known for more affordable housing compared to other parts of the country, but recent years have seen rapid price appreciation.

Price Trends:

Median sales prices for single-family homes have risen steadily. As of May 2024, the statewide median sales price for single-family homes was $426,581, up 1.6% from the previous year. Using the median instead of average sales price prevents outliers, or prices that are wildly high or low, from skewing the picture of the overall market.

Inventory and Sales:

While inventory levels are improving slightly year-over-year, they are still below pre-pandemic norms in some areas, especially in South Florida. This imbalance continues to put upward pressure on prices, though recent increases in inventory suggest a potential for moderating price growth in the near future.

Affordability Concerns:

The affordability gap has widened in Florida, with median home prices surpassing national averages for several consecutive months. This trend is driven by factors such as wealth migration, high demand from both retirees and younger professionals seeking more space and better living conditions.

Future Outlook:

Economic indicators, including rising interest rates and increased inventory levels, may contribute to a slowdown in price appreciation. However, the overall market remains robust, supported by ongoing demographic shifts and economic factors influencing housing demand.

What’s Happening with Home Prices in Okaloosa County?

In May 2024 median sales price for a single-family home was $375,000.  This is up from $360,000 in May 2023.  In May 2022 homes on average sold for 101% of list price.  In May 2023 they sold for 99% of list price and May 2024 for 98% of list price.  So even though price reductions are happening, the actual median sales price is still increasing.

What about Niceville?

In May 2024 median sales price for a single-family home was $575,000.  The national median for May was $419,300.

In summary, while both the U.S. and Florida housing markets face challenges such as supply shortages and affordability issues, there are indications that price growth may moderate as market conditions evolve. Economic factors, including interest rates and inventory levels, will likely play crucial roles in shaping future housing market trends.  Don’t hold your breath expecting prices to come down any time soon.