Understanding Market Trends: Florida Real Estate in the 2017-2020s

The Florida real estate market has seen a dynamic and often roller-coaster journey from 2017 to the first quarter 2024. Characterized by periods of rapid growth, market corrections, and significant shifts in buyer behavior — while navigating a pandemic and incredible population growth — Florida's luxury residential market has proven resilient despite economic fluctuations and natural challenges. Below, we explore the key trends and factors that have shaped the trajectory of Florida's real estate market over the past seven years and offer insights into what the future may hold.

The period leading up to the COVID-19 pandemic saw steady growth in Florida's real estate market. Home values across the state increased dramatically, ranking Florida among the top states in the nation for home value appreciation over the past seven years. From 2017 to 2020, home values increased by 24%. Fueling the growth were many of the same factors that always led to out-of-state relocation to Florida, including the state's attractive climate and lack of state income tax.

However, the real estate landscape during this period posed a few challenges. Hurricane Irma, which hit in 2017, fueled a spike in homeowners' insurance costs due to an unforeseen number of claims filed over the next three years. This had a ripple effect on property costs and affordability. Interest rates during this period were relatively moderate, with average annual rates ranging from 3.99% in 2017 to 3.11% in 2020, which helped sustain the demand for home purchases.

Of course, we live in a time when the world, specifically real estate, is viewed through the lens of the COVID-19 pandemic. When the pandemic began in early 2020, most predictions in March and April of that year foresaw unprecedented changes to the Florida real estate market—many of them negative. The opposite turned out to be the more accurate prediction.

After the whole country ground to a halt in April and May 2020, Florida kept moving along. Slowly at first, but the state began seeing a massive influx of residents from states with strict lockdown measures, drawn by Florida's more relaxed policies and the newfound flexibility of remote work. This migration significantly increased demand for housing, leading to a boom in property values. From 2020 to 2023, home values in Florida rose by 43%, nearly double the increase between 2017 and 2020.

This period also witnessed historically low mortgage rates, dropping to around 2-3%, which spurred a buying frenzy. Profit-driven institutional investors and a surge of Airbnb investments further fueled the market, leading to competitive bidding wars and rapid price escalations. However, the rapid appreciation also meant that many prospective buyers were priced out of the market, leading to a housing shortage exacerbated by supply chain disruptions and increased construction costs.

Entering 2024, the Florida real estate market has shown signs of stabilization despite rising mortgage rates, which reached a 23-year high of nearly 8% in October 2023. While higher rates typically dampen buying activity, Florida's market has remained robust due to high demand and limited supply. The state's unique geographic constraints, especially in South Florida, where the Everglades dominate the southern portion of the peninsula, also limit development. The Atlantic Ocean to the east and the Gulf of Mexico to the west create narrow corridors of developable land that have contributed to sustained high property values.

In South Florida, the market dynamics reflect broader state trends. As of April 2024, the median sale price of a home in the Miami metropolitan area was $560,000, significantly above the expected value based on historical trends. The market conditions are partly due to the continuing influx of new residents and businesses relocating to the region, particularly from high-tax states like California and New York.

While Miami is the bellwether, all of Florida's major metro areas are seeing similar levels of growth. Between April 2020 and April 2024, Miami's median sale price has increased by 62%. In the same time frame, Tampa increased by 50% and Orlando by 47%.

Looking ahead, Florida's real estate market will undergo a period of correction. Buyers shouldn't expect a rapid descent in home prices but more gradual appreciation and slight declines in some home values. This adjustment is a natural response to the rapid price increases of recent years. Expectations are for any corrections to be measured thanks to stricter lending practices and a more stable economic environment compared to the pre-2008 era.

Inventory will remain a significant pressure point. Some areas, such as Miami, are approaching a balanced market with a six-month supply of inventory (5.2 months in April 2024). Tampa and Orlando, however, both hover at a three-month supply.

Although several factors will continue to influence Florida's real estate market — the upcoming election, mortgage rates, general changes in housing policy, the climate, and insurance—Florida remains among the most attractive states in the U.S. for out-of-state relocation. Should mortgage rates decline at any point in the next 6 to 12 months, there will be an influx of buyers, further driving demand and property values.

Florida's luxury residential real estate market has demonstrated remarkable resilience and adaptability over the past seven years. From the pre-pandemic growth period to the pandemic-driven boom and the current stabilization phase, the state remains a prime destination for homebuyers and investors, with its unique combination of favorable tax policies, desirable climate, and vibrant communities continuing to attract new residents.

If you want to discover more about investment opportunities in Cape Coral, Fort Meyers, or Port Charlotte, contact Phillip Serna with Integra Development Group today to begin your Southwest Florida real estate journey.