What do the future US and Florida housing markets look like?
First, let’s talk about where we have been and where we are today. In 2005, the United States produced just over 2.15 million permits while Florida produced 16,675 permits in July 2005. In 2022, the U.S. is tracking to produce 1.65 million and Florida produced 12,000 permits in July.
It is somewhat commonly thought that the U.S. has between a 4 and 5 million unit/home shortfall to meet the current demands. At this level of shortfall, it is said that the U.S. needs to build nearly 2 million new homes per year for the next 7 – 10 years before we level out. Numbers vary depending on where the information comes from, but at the very least we all can agree we have a ways to go.
In the next few months, I see the housing market in the U.S. slowing down, but staying at acceptable levels that will keep the economy healthy. Builders are already offering incentives to combat inflation and higher mortgage rates. Today we are all in shock over 5% mortgage rates, but we have to keep in mind the average rate over the past 30 years is right at 7.7% so we are still well below the historical average. Just 22 years ago, on August 4th, 2000 the 30 year rate was 8.12%!
Overall, the demand is present to keep the housing industry running strong. We need to find a healthy balance between labor and demand as well as inflation and mortgage rates. This may seem like a perilous task, but if we just take one step at a time it really is a task that can and has to be met.
We are beginning to see a leveling off or balance between the power struggle between the buyer and seller. This balance will allow prices to stabilize, increase the supply and allow builders and suppliers to catch up, maybe take a breath and reset. In Florida, trends indicate new for-sale inventory levels beginning to rise. Single-family sales in June 2022 were down 17.2% from 2021. In this same time period, the median price in Florida rose nearly 20% on average.
So what are we in for? I feel we are looking at a slight depression compared to where we have been however still a robust market. Home prices will continue to increase, although at a slower pace. Buyers will have more power than they have in some time which will cause sellers to get creative in order to become more appealing to the buyer. New permits will slow and will continue to build less than the market needs. Overall, the industry will remain healthy and prosperous and will yet again evolve into the next wave of frenzy building, buying, and selling!