Florida housing crisis described in five chilling words as homeowners brace for market collapse
Chen Zhao, the head of economics research for Redfin, described South Florida as the 'epicenter of housing market weakness' in the US.
'The question for the rest of the country is, will this spread? Florida is uniquely bad right now,' Zhao told Bloomberg last month.
The area saw a huge influx of new residents during the Covid-19 pandemic. Americans, freed by work from home orders, arrived in search of sunnier weather and lower taxes.
But now the bubble has well and truly burst, and homeowners are struggling to sell amid a growing condo crisis and soaring insurance and mortgage rates.
In April, contracts to buy homes in the Miami, West Palm Beach and Fort Lauderdale regions fell dramatically from the year prior. Homes also lingered longer on the market.
Pending sales fell 23 percent in Miami, according to Redfin, which was the largest drop among the 50 most populous metro area across the US.
Transactions were down almost 19 percent in Fort Lauderdale and tumbled around 14 percent in West Palm Beach.
Chen Zhao, the head of economics research for Redfin, described South Florida as the 'epicenter of housing market weakness' in the US
Homes also spent an average of 83 days on the market in West Palm Beach and Fort Lauderdale, and 81 in Miami.
This is more than double the national median of 40 days in April.
It is a stark turnaround from the height of the pandemic, when homes in these regions were snapped up quickly and regularly sold for more than their listing price.
'I think you're seeing a really long, slow deflation of that bubble,' Zhao told Bloomberg of the southern markets that boomed during Covid.
Prices in the region are also taking a hit as sellers try to incentivize buyers and offload properties.
In April, West Palm Beach, Fort Lauderdale and Miami saw nearly 5 percent of sales close below listing price, according to Redfin.
Condo prices, in particular, are plummeting, and Florida is being hardest hit.
The average condo sale price in the US fell 2.2 percent year over year to $354,100 in May, according to separate data from Redfin — the second largest drop in records dating back to 2012.
The 2021 collapse of a condo building in Surfside led to a new law that requires condo buildings to undergo structural inspections and shore up reserves
In May, Deltona, Florida, saw prices fall over 32 percent year-over-year, which was the steepest decline nationwide.
Seven of the top ten metros with the largest price declines were in Florida, and two in Texas.
Sellers in parts of Florida have had to drop prices below $10,000.
Rising Homeowners Association (HOA) dues and insurance costs have exacerbated the slowdown for condos in the state, paired with the increased risk of deadly natural disasters and heightened building regulations.
The 2021 collapse of a condo building in Surfside led to a new law that requires condo buildings to undergo structural inspections and shore up reserves.
This has meant that Many HOAs have been hiking fees and doling out hefty special assessments to comply with the new rules, which has reduced demand for condos.
One Miami condo association filed for bankruptcy in June, buried under tens of millions in debt.
Experts fear it could be a warning sign of what is to come for other aging complexes across Florida, as communities are pushed to the brink by a perfect storm of issues.
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