After the wild party in real estate during the latter part of 2020 and throughout 2021, the housing market has certainly had to deal with a hangover effect through all of 2022 and likely 2023. Overall U.S. home purchases fell 40.8% year-to-year in Q4 2022. As for real estate investors, home purchases fell a record 45.8% year-over-year in the fourth quarter 2022. For perspective, the second-biggest decline in investor activity occurred in 2008, when it dropped by 45.1% during the subprime mortgage crisis. Of course, overall U.S. home purchases fell by 40.8% year-over-year as of Q4 2022.
Concerns for real estate investors
- Home price declines: Overall, investors have seen a mild drop in home prices across several metro markets throughout the country. This has led to a more wait-and-see approach to investing.
- Higher home prices: Although some markets have seen slight home price drops, these prices are still high. This makes the numbers more difficult to work with, particularly in a slowing housing market.
- High interest rates: In addition to higher home prices, the cost to obtain a loan has also risen considerably. This puts significant downward pressure on profit margins.
- General economic concerns: High inflation has essentially impacted all aspects of life. With many economists predicting a recession, we are already seeing many households cutting back on their spending due to looming economic concerns. Thus, real estate investors are opting to wait out the recession as opposed to embark on projects that could leave them exposed and over-leveraged.
Q4 2022 real estate investment trends in Florida
With national real estate investment purchases dropping by 45.8% as of Q4 2022, how did Florida metro markets do? Overall, not as bad as the national picture, however The Sunshine State still saw a considerable decrease in real estate investor activity.
- Fort Lauderdale: down 37.3%
- Jacksonville: down 57.1%
- Miami: down 35.4%
- Orlando: down 51.8%
- Tampa: down 50.7%
- West Palm Beach: down 11.4%
Overall, Florida continues to enjoy growth as more Americans opt to relocate to paradise. With this said, these new residents will certainly need a place to live. Although home purchase activity is down considerably, we are also seeing pockets of the rental market slowing down as well. This overall slowdown has resulted in real estate investors opting to sit on the sidelines during these challenging economic times. Of course, higher home prices and interest rates has led to a significant slowdown in home buying in general. With more people still moving to Florida, wouldn’t that mean tremendous demand for rental housing, at least? The answer is yes and no. While there is still strong demand for rental housing, many Americans are dealing with the overall economic slowdown. This is resulting in more demand for lower-priced rental housing. As is typical during any recession, Americans are forced to decrease their expenditures across the full spectrum of their budget. This not only impacts the type of housing they live in, but also the types of cars they drive, clothes they wear, and food they eat. As a result, we are also seeing rental prices decrease slightly across many markets as well.
Are you looking to invest in real estate? 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 and have the power of the South Florida MLS right in your pocket!