What trends should consumers, Realtors and policymakers watch for when it comes to Florida real estate over the next year? Drivers for homebuyer demand include demographic shifts, changes in consumer housing preferences – like location, size and lot size, still-low mortgage rates and rapidly rising rental prices, Florida Realtors Chief Economist Dr. Brad O’Connor told more than 300 Realtors during the 2022 Florida Real Estate Trends summit last month.
“The biggest wave of millennials are now in their mid-30s and they’ll be in prime homebuying years for some time to come,” O’Connor said. “And who are they buying from? The Gen Xers – and there are a lot more millennials than Gen Xers. And, here in Florida, retirees are a pretty big deal – combined with the millennials, that puts pressure on the market here.”
The event was part of this year’s Florida Realtors®’ Mid-Winter Business Meetings at the Renaissance SeaWorld Orlando. In addition to O’Connor, the summit featured Dr. Jessica Lautz, vice president of demographic and behavioral insights at the National Association of Realtors® (NAR), who shared her thoughts on buyer demand via a recorded Q&A. It also included a panel discussion on buyer motivation featuring Deanna Armel, broker-owner, Armel Real Estate; John Boyd, principal, The Boyd Company; Melanie Schmees, director of business and economic research, Greater Naples Chamber of Commerce; and Kelly Smallridge, president and CEO, Business Development Board of Palm Beach County.
Dr. Brad O’Connor, Florida Realtors chief economist
Analysts are waiting to see what will happen with inflation and how that will impact interest rates long term, O’Connor added, noting that some predictions call for the 30-year fixed rate mortgage to be as high as 4.5% by the end of the year. “That’s what we experienced a few years ago, and if that happens, while it will certainly impact buyer demand and financing, we’ll see the market change and return to similar conditions,” he said.
Homebuilding and supply will also be a factor to watch when it comes to buyer demand.
“It’s a long-run problem; we have a long way to go when it comes to building,” O’Connor noted. “We need construction workers. Builders continue to face constraints, but have been building at the fastest pace in recent memory. However, high prices and low rates of starter home construction will remain a challenge.”
Looking at 2021, Florida Realtors latest housing data shows that Florida’s housing market had more than 528,000 sales of existing homes (all types), up 19% year-over-year – resulting in a total dollar volume of about $241 billion – despite the ongoing COVID-19 pandemic.
“In terms of sales, 2021 could also be called ‘The Year of the Condo’,” O’Connor said. “Over 160,000 existing homes in the condo and townhouse category sold in 2021, marking a more than 34% increase over 2020’s total. In contrast, the over 350,000 sales in the single-family home category, while over twice the size in number, represented only about a 13% increase, year-over-year.”
The lack of inventory impacted the housing market statewide over the year. “We got our hopes up for inventory, but except for a few months that didn’t happen,” he said. “We started the year with a 1.6-month’s supply of existing single-family homes, but we ended 2021 with a 1-month’s supply; and in many of your local markets, it’s down to a half-a-month’s supply. For years, Florida has had more existing condos than single-family homes, but by the end of the year, existing condos and townhomes are down to a 1.3-month’s supply, which is very close to the single-family category.”
Dr. Jessica Lautz, NAR vice president of demographic and behavioral insights
The median age of a first-time homebuyer is 33 years, the same age it has been for several years, Lautz said, noting NAR research found that first-time buyers usually are in a tight age range of 28-33 years.
“However, the age of typical repeat buyer has increased significantly,” she said. “Repeat buyers’ median age is 56 years, and some may be looking to downsize, which can be added competition for the first-time buyers.”
At the beginning of the pandemic, there was a quick uptick in multigenerational buyers as older parents came to live with their adult children and their families, who also may have had college age or older children come back home, according to Lautz. It has since leveled off to about 11%.
When asked about research on buyers and sellers working with real estate brokers and agents, Lautz noted that “agent use is trusted.”
“People are embracing technology and using technology with real estate professionals,” she said. “Agent use is extremely high now; 87% of buyers today are working with real estate agents, and the youngest buyers out there are using agents at the highest rates. For sellers, 90% are using an agent, and they’re working with someone who will be a one-stop shop for them with a broad range of expertise, who will handle it all.”
She added that FSBOs (For Sale By Owner) are at historic lows at just 7% today.
And finally, real estate is seen as “a refuge” and is attracting people seeking flexibility and independence – especially more women, according to Lautz.
“We see this wave of more Realtors entering NAR membership (1.5 million) than ever before,” she explained. “And we’re seeing more women agents and brokers; it’s a pretty stark change from 1978 to today.”