Florida has long been one of the top states in the country for real estate investor demand. With this said, recent market dynamics has significantly impacted the investor buyer demand in The Sunshine State. Following a record-breaking year in 2022, investor purchases of homes in Florida fell by 49% year-over-year in the first quarter of 2023. Overall, purchases of U.S. investor homes dropped 29.7% year-over-year in the third quarter of 2023. This figure is even greater than the reduction seen in overall home purchases of 22.2%, which was the lowest on record since 2012.
Florida metro investor purchases
In a recent analysis of investor home purchases in metro markets throughout the country, six Florida metros were included. Overall, a decrease in investor purchases was observed across all Florida markets as follows:
- Jacksonville: Down 48.2%; 19.5% of all sales by investors
- Orlando: Down 42.6%; 19.1% of all sales by investors
- Tampa: Down 41.3%; 17.9% of all sales by investors
- Fort Lauderdale: Down 19.1%, with 19.5% of all sales purchased by investors
- Miami: Down 14.0%; 30.5% of all sales by investors
- West Palm Beach: Down 7.6%; 17.1% of all sales by investors
Factors impacting investor demand
- High home prices: Although the housing market overall has cooled in Florida, prices have remained high. This is due to a limited inventory of homes for sale combined with steady demand from out-of-state buyers still moving to The Sunshine State.
- Rising interest rates: Although there are many real estate investors that are cash buyers, there are also many that require financing. Higher interest rates have made it more expensive for investors to borrow money to purchase homes.
- Low to moderate price increases ahead: Given the current housing market conditions, it is expected that home prices will stabilize or only increase moderately over the coming year. Therefore, this results in less returns for home investors.
- Inflationary pressure: Persistent inflation continues to provide a headwind for the housing market and economy as a whole. With this said, these higher costs for virtually everything has greatly diminished the number of potential home buyers in the market. In addition, inflation is also causing the cost of all building materials and labor to rise. These additional costs can greatly eat away at any potential profit margins for investors.
In closing, the current housing market is certainly providing some challenges for real estate investors. With this said, the demand for Florida real estate should remain consistently high for the foreseeable future. South Florida in particular, is still considered to be one of the most desirable locations in the country to live. For investors, buying properties to rent out and hold for some time may be the best bet for the foreseeable future.
Are you thinking about buying an investment property in the South Florida area? We can help! Contact Natasha at Live South Florida Realty, Inc. today! Also, be sure to download the free Florida Home Search app for your mobile device.