Housing Markets on Florida’s West Coast Are Cooling Faster Than Anywhere Else in the U.S., With Supply Rising and Demand Falling

Rhea-AI Summary

Redfin's latest report reveals that housing markets in western Florida are cooling faster than anywhere else in the U.S., driven by rising supply and falling demand. North Port, Tampa, and Cape Coral lead this trend, influenced by increasing natural disasters, a surge in new construction, and high insurance costs. North Port's home supply increased by 68% year-over-year, with the median price per square foot dropping by 1.2%. In contrast, housing markets in Rochester and Buffalo are heating up due to relatively low prices, attracting more homebuyers. The report highlights significant regional disparities, with Florida experiencing price drops and high inventory, while areas like western New York see rising prices and lower inventory.

Positive

• North Port's home supply increased by 68% year-over-year.
• Tampa's inventory grew by 62.9% in the same period.
• Cape Coral's inventory is up by 64%.
• Rochester's median price per square foot increased by 11.5% year-over-year.
• Buffalo's median price per square foot rose by 15.2% year-over-year.
• Lake County, IL, saw a 13% rise in median price per square foot.

Negative

• North Port's median price per square foot dropped by 1.2%.
• Cape Coral's median price per square foot declined by 2.9%.
• 42.6% of North Port sellers are dropping their asking price, up from 36% a year earlier.
• Cape Coral also saw 37.5% of sellers lowering their prices, up from 32.9% last year.
• Natural disasters have increased home insurance costs significantly in Florida.
• High mortgage rates and elevated home prices are pricing out many locals.

Insights

Real Estate Market Analyst

The cooling of housing markets in Florida’s west coast, especially in North Port, Tampa and Cape Coral, signifies a notable shift in the dynamics of the region. Several factors, including an increase in natural disasters, a surge in new construction and elevated insurance costs, are contributing to this trend. For a retail investor, understanding the shifts in supply and demand is crucial. The supply of homes in North Port rising by 68% and the median price per square foot dropping by 1.2% suggests an oversupply relative to demand, driven partly by new constructions to replace homes lost in natural disasters.

High insurance costs, rising by thousands of dollars in many cases, also play a pivotal role in cooling demand. This is essential as it affects affordability, pushing potential buyers away despite the falling home prices. Investors should watch for these factors as they could impact real estate investment trusts (REITs) or homebuilding companies operating in these areas.

In contrast, markets like Rochester and Buffalo are heating up due to relatively low prices compared to the national average. The affordability in these regions, combined with an inventory that is decreasing and price per square foot rising by double digits, makes them increasingly attractive to buyers.

Financial Analyst

The economic implications of the housing market cooling in Florida's west coast are multifaceted. For instance, the decrease in median price per square foot in markets like North Port and Cape Coral by 1.2% and 2.9% respectively, reflects a broader trend of declining home values driven by oversupply and reduced demand. This could lead to less revenue for property developers which might affect their stock performance.

Moreover, with 42.6% of sellers in North Port and 37.5% in Cape Coral dropping their asking prices, it indicates a highly competitive market where sellers are compelled to reduce prices to attract buyers. These price reductions, in conjunction with rising insurance costs and high mortgage rates, contribute to a complex economic environment where affordability is declining. Investors should be cautious as these factors could signal potential risks in real estate investments in these areas.

Furthermore, rising insurance costs due to increased natural disasters could have a ripple effect on other sectors such as insurance companies, impacting their profitability and stock prices.

Climate Risk Expert

The intensifying natural disasters on Florida’s west coast significantly influence the housing market dynamics. The increasing frequency and severity of such events not only cause immediate destruction but also long-term deterrents for potential homebuyers due to the associated high risk and increased insurance costs. In Cape Coral, for example, Hurricane Ian's destruction of 5,000 homes in 2022 highlights the vulnerability of the region.

For retail investors, this trend emphasizes the critical need to consider environmental risks when evaluating real estate investments. The surge in new construction to replace destroyed homes, while seemingly beneficial for builders, might be a temporary boost as long-term sustainability and buyer confidence remain uncertain. Also, high insurance premiums are a direct outcome of these natural disasters, making homes less affordable and less attractive.

In contrast, markets in western New York are less exposed to such risks, which adds to their attractiveness. This regional disparity underscores the importance of geographic risk assessment in real estate investment strategies.

Meanwhile, housing markets in Rochester and Buffalo are heating up, with homebuyers attracted to relatively low prices

SEATTLE--(BUSINESS WIRE)-- (NASDAQ: RDFN) — Housing markets in western Florida are cooling faster than anywhere else in the country as natural disasters intensify, new construction soars and the pandemic-era homebuying demand boom fades further into the rearview mirror. That’s according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage.

North Port’s housing market is cooling fastest, followed by Tampa and Cape Coral. There are three other Florida metros on the list of 10 housing markets cooling quickest: Orlando, FL comes next, followed by Denver, Houston, Minneapolis, Jacksonville, FL, Lakeland, FL and Dallas.

This is according to a Redfin analysis that ranks the 100 most populous U.S. metros for which full data is available, based on how quickly measures of homebuying demand and competition cooled from April 2023 to April 2024. The measures are year-over-year changes in home prices, price drops, inventory, sale-to-list price ratio and the share of homes that sell within two weeks.

Measures of homebuying demand and competition are dropping off quickly in Florida, and listings and price drops are surging. Take North Port, the nation’s fastest cooling market, as an example: The supply of homes for sale is up 68% year over year, the second-biggest increase of the metros in Redfin’s analysis. Meanwhile, the median price per square foot is down 1.2%, making North Port one of just four metros where price per square foot declined (the others are Cape Coral, San Antonio and Austin, TX), and 42.6% of sellers are dropping their asking price—up from 36% a year earlier. In Cape Coral, inventory is up 64%, median price per square foot is down 2.9%, and 37.5% of sellers are dropping their price, up from 32.9% a year earlier.

There are several reasons housing markets on the west coast of Florida are cooling quickly, most of them tied to the growing prevalence of natural disasters in the area:

• Increasing intensity of natural disasters: Hurricanes, floods and other severe weather events have become more frequent and intense in Florida. Destruction from climate disasters cost Florida more money than any other state (tied with Texas and Louisiana). In the Cape Coral metro alone, 2022’s Hurricane Ian destroyed 5,000 homes and damaged nearly 30,000 more. Natural disasters are not only destroying homes—which is one contributor to a surge in new construction, as builders replace homes that have been lost—but they’re scaring away some prospective homebuyers from the area.
• A surge in new construction: Florida is building more new homes than any other state in the country (aside from Texas, which is also home to two of the nation’s 10 fastest-cooling housing markets), a building boom coming at a time when high prices and mortgage rates are dampening homebuying demand. The oversupply of inventory is cooling competition.
• Sky-high insurance costs: Natural disasters have pushed up Florida’s home insurance costs. Many homeowners are reporting their insurance jumping by thousands of dollars, and a recent Redfin survey found that 70% of Florida homeowners have seen home insurance costs rise recently.
• Soaring home prices: Although prices in some parts of Florida have started declining in recent months, homes are much costlier than before the pandemic homebuying boom, when many affluent remote workers moved in and pushed up prices. North Port prices are up about 60% since 2019, and Tampa prices are up nearly 70%—much bigger than the national increase of about 40%. Elevated prices and insurance costs, combined with today’s high mortgage rates, are pricing out many locals. They’re also discouraging some older Americans from moving into a state that has traditionally been popular with retirees.

“Inventory is back up to pre-pandemic levels along the west coast of Florida as natural disasters continue to shape the region’s housing market by leading to more supply and less demand,” said Redfin Senior Economist Elijah de la Campa. “Construction is booming in the wake of recent climate disasters, and there’s less demand to buy new homes as the region braces for another intense hurricane season. While that's disappointing for sellers, who may have to part with their home for less money than they would like, a bigger pool of listings to choose from is good news for the region's homebuyers. More supply is the best way to bring down prices and combat the housing affordability crisis buyers are facing today—and that's exactly what's happening in parts of Florida.”

Housing-market data for the nation’s fastest-cooling metros April 2023 to April 2024
Metro area	Median price per square foot	Median price per square foot, YoY change	Price drops	Price drops, YoY change (in percentage points)	Off market in 2 weeks	Off market in 2 weeks, YoY change (in percentage points)	Average sale-to-list price ratio	Average sale-to-list price ratio, YoY change (in percentage points)	Inventory, YoY change
North Port, FL	$271.42	-1.2%	42.6%	6.6	31.1%	-12	96.5%	-0.7	68.2%
Tampa, FL	$229.88	3.7%	43.1%	8	39.2%	-11.8	97.3%	-0.5	62.9%
Cape Coral, FL	$243.70	-2.9%	37.5%	4.6	26.1%	-11.7	96.3%	-1	64.1%

“Despite prices softening and the influx of listings, today’s local buyers face challenges with elevated mortgage rates, special assessments and the complexities of securing affordable flood insurance,” said Isabel Arias-Squires, a Redfin Premier agent in the Cape Coral area. “Many buyers are discovering that new-construction homes offer a compelling solution. These properties are not only abundant in our area, but builders like Lennar and DR Horton offer attractive incentives, such as contributions towards closing costs and competitive mortgage rates through in-house financing options. Those incentives can alleviate the financial strain caused by high interest rates.”

Western New York is heating up

Housing markets in western New York and the Midwest are holding up best: Rochester takes the number-one spot, followed by Lake County, IL and Buffalo. Compared to last year, inventory in those metros is down, price per square foot is up by double digits and more homes are selling within two weeks.

Homebuying demand and competition is heating up in Rochester and Buffalo because although prices are increasing, homes are still much more affordable than they are in most of the country. The typical home sells for roughly $250,000 in both Rochester and Buffalo, compared to $440,000 in the U.S. as a whole and $750,000 in the New York City metro, where many remote workers who move to upstate New York come from.

Housing-market data for the metros holding up best April 2023 to April 2024
Metro area	Median price per square foot	Median price per square foot, YoY change	Price drops	Price drops, YoY change (in percentage points)	Off market in 2 weeks	Off market in 2 weeks, YoY change (in percentage points)	Average sale-to-list price ratio	Average sale-to-list price ratio, YoY change (in percentage points)	Inventory, YoY change
Rochester, NY	$157.69	11.5%	15.5%	1.2	84%	4	113.2%	2.7	-15.5%
Lake County, IL	$197.96	13%	11.3%	1.1	17.7%	2.6	101.2%	0.9	-11.3%
Buffalo, NY	$169.42	15.2%	22.2%	1.3	73.7%	3.4	104.4%	1.5	-4.2%

Rounding out the top 10 housing markets holding up best are several metros in the greater New York City area, along with a few other places. Nassau County, NY comes in fourth, followed by New Brunswick, NJ and Chicago. Next come Anaheim, CA, New York, Newark, NJ and Seattle.

To view the full report, including graphics and metro-level data, please visit: https://www.redfin.com/news/housing-markets-cooling-fast-florida

About Redfin

Redfin (www.redfin.com) is a technology-powered real estate company. We help people find a place to live with brokerage, rentals, lending, title insurance, and renovations services. We run the country's #1 real estate brokerage site. Our customers can save thousands in fees while working with a top agent. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can have our renovations crew fix it up to sell for top dollar. Our rentals business empowers millions nationwide to find apartments and houses for rent. Since launching in 2006, we've saved customers more than $1.6 billion in commissions. We serve more than 100 markets across the U.S. and Canada and employ over 4,000 people.

Redfin’s subsidiaries and affiliated brands include: Bay Equity Home Loans®, Rent.™, Apartment Guide®, Title Forward® and WalkScore®.

For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center. To be added to Redfin's press release distribution list, email press@redfin.com. To view Redfin's press center, click here.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240611951502/en/

Redfin Journalist Services:

Angela Cherry

press@redfin.com

Source: Redfin

FAQ

Why is the housing market cooling in western Florida?

The market is cooling due to increasing natural disasters, a surge in new construction, and high insurance costs.

What is the trend in North Port's housing market?

North Port's home supply increased by 68% year-over-year, and the median price per square foot dropped by 1.2%.

How has Cape Coral's housing market changed?

Cape Coral's inventory is up by 64%, with a 2.9% decline in median price per square foot.

What are the main challenges in the Florida housing market?

Key challenges include high insurance costs, elevated home prices, and high mortgage rates.

Why are Rochester and Buffalo's housing markets heating up?

These markets are heating up due to relatively low home prices, attracting more homebuyers.

What is the impact of natural disasters on Florida's housing market?

Natural disasters have increased home insurance costs and led to more new constructions, cooling the market.

What factors are affecting the demand for new homes in Florida?

High prices, elevated mortgage rates, and increased insurance costs are reducing demand.

How are home prices in Tampa changing?

Tampa's home prices are elevated, up nearly 70% since 2019, although inventory is increasing.