In my opinion Florida is headed for a downturn in the local real estate market. I am a licensed FL Realtor and part owner of a FL Real Estate Brokerage. I see a lot of transactions here in my market firsthand. Most agents in my market have seen a noticeable decline in activity that really started in Q4 of 2023. This downturn was really pronounced this year with most agents transaction volume down by 40% or more.

So what is causing this current downturn in Florida? Some claim it is the new NAR rules (it isn't). Some claim it is election year (most likely not the reason – just an excuse). And some claim it is a shortage of inventory (we have the most listed homes on my market since Q4 of 2012 just after the great recession – i.e. there is no inventory shortage). What is driving the Florida market is simply it is too unaffordable for someone to buy a home here.

I am based in Bradenton, FL (Manatee County). The average household income here is $79,524. The median price of a single-family home in July 2024 (most recent information available) is $499,000. This is down slightly from the peak in August 2023 of $525,000 – a 4.95% decline. Using a 30% of gross income to represent what most consider a safe amount for a mortgage payment, the average person could only afford a monthly payment of $1,988. Given our higher insurance costs (usually 0.7% to 1.0% of purchase price as a rough guide -$291/mo on low end) and property taxes (typically between 0.5% and 0.7% of purchase price as a rough estimate -$208/mo on low end) that leaves only $1489 for Principle and Interest. At current market rates of 6.2% for 30 year fix mortgage you could only safely afford a $243,114 mortgage amount. So the average person would need to put a 51.3% down payment to afford a median priced home here ($255,886 down payment plus a mortgage of $243,114 on a $499,000 purchase price). Most buyers do not have this large of a down payment and thus this is why my market is slowing.

To make housing affordable again, one of several things needs to happen. Either people need to start earning more money (we can debate this since it looks like we are already in a recession here), interest rates need to decline (looks like the Fed is about to start doing this) or prices need to decline which has already started to happen.

My vote is on lower interest rates and price declines until the market finds its balance and you see transactions start to increase. My speculative guess is that you see a further decline of 15% to 20% off the peak (August 2023 – here) and interest rate declining to 4.5% in the next 18 months to bring the market to a more affordable level. If the median home value declines 20% and interest rates decline to 4.5% for a mortgage, it would bring the down payment to 21.4% of the new purchase price ($85,593 down payment on a $399,200 purchase price) for the average person here to afford the average home. While still a challenge saving up the down payment it is closer to the realm of possibilities versus where we are at today.