Anyone with a crystal ball in early 2020 sure didn’t let us know what the year had in store. While the global pandemic and economic impact negatively affected many industries, real estate was an exception. With the mass exodus out of big cities, many areas experienced a housing market boom.
People fled New York City, San Francisco and Los Angeles for places like central Florida. Homebuyers eschewed urban apartments for cottagecore. Housing prices skyrocketed, and soon it became clear the pace was not sustainable. With vivid memories of 2008’s housing bubble burst, many now ask will the Florida housing market crash in 2021?
Market Demand Effect on Home Value
With homebuilders unable to fulfill demands for new housing, the demand for previously owned houses increased. An already short supply of available houses on the market has caused fierce competition among buyers for preferred real estate. The rise in remote work situations pushed demand beyond the usual urban and suburban areas, as well. High demand for housing and limited inventory drove home values soaring in 2020.
These explosive sales prices ultimately began to affect housing affordability, including in the Orlando and central Florida markets.
Ridiculously low interest rates below three percent for new mortgages fueled the frenzy by making payments more affordable for buyers. Even homeowners not interested in selling benefited from refinancing and shortening payment schedules. In 2021, many experts expect mortgage rates to slow their drops but do expect them to continue to hover around record lows. However, the favorable interest rates that boosted home buyer confidence in 2020 will likely continue to do so throughout 2021.
A Seller’s Market
Double-digit increases in home value also show no signs of slowing, and demand continues to outpace supply. Nationally, Realtor.com found the average home spent just 66 days on the market during the month of December. That was 13 days fewer than the same time the previous December. The National Association of Realtors predicts that markets that have performed well throughout the pandemic will continue momentum in 2021. The initial impact of quarantine lockdowns on home sales have gradually improved, quelling speculation of a housing market crash.
Impact on Rental Property
Rising home prices can exclude many homebuyers from entering the market, driving a demand in rental property, including in Florida. Two housing data markers – Freddie Mac House Price Index and Kiplinger’s analysis of housing affordability – predict effects on rental markets. Demand for affordable housing will likely grow, even of one-bedroom apartments in suburban areas, as remote work continues to gain popularity. This continues to make rental property an attractive investment, particularly in highly desirable markets like The Sunshine State.
The Realty Medics Can Help!
If you own investment property, you may quickly find yourself overwhelmed with ever-changing forecasts. You may be unsure what the right rent rate is now for your property. You may even question whether it would make more sense to sell (have you done the Napkin Test?). The Realty Medics can help! We take the guesswork out of property management and give you property management peace of mind.