Has the Coronavirus Quarantined Florida’s Residential Real Estate Market?
Updated: Mar 16
Having practiced real estate law for the last twenty-plus years, I witnessed wide swings in the Florida real estate market. From the 2009 mortgage bubble crash to the coronavirus, Floridians buy and sell real estate with caution.
Real estate is an essential business under the Florida Governor's executive order allowing it to remain open. Still, residential real estate by its nature is personal and, therefore, in most cases, handled through person to person. Coronavirus restricted this interaction, and the reduction directly translated to a loss of sales in real estate.
Q1 2020 showed a 4.3% increase in residential real estate sales over Q1 2019, with a 13.2% increase in Broward County home prices. April 2020, homes sales dropped a whopping 47% from the same time in 2019. Home prices similarly slowed off the Q1 pace to 9.5% increase over the same time in 2019, as shared by Broward Board of Realtors.
Don’t lose heart; however, the number to watch is inventory. 2020 home inventory has only dropped 10% from 2019 during the coronavirus stay at home order. So, people are still selling, buying, and moving during the coronavirus outbreak.
Inventory drives pricing. Less product for buyers to choose from translates to buyers willing to pay more to secure the product over other buyers. Economic cause and effect.
Real estate markets are lived locally but driven by national trends. Here is where Florida's real estate is well-positioned.
The Sun-Sentinel in January 2020 noted that Northerners are migrating to Florida in large numbers, and this has directly resulted in a net gain to Floridan's income of $4.5 billion in 2018. The Orlando Weekly highlights in July 2019 that more than 300,000 new residents are coming to Florida annually.
With increased wallets and more buyer competition, Florida real estate may have slowed, but a southern turn to 2009-2010 market levels is unlikely due to coronavirus.
More importantly, coronavirus's impact on the Northern states that traditionally send residents to Florida for a safe personal income tax haven: New York, Connecticut, New Jersey. With Florida, a top choice, social instability with the loss of small businesses in these communities has accelerated the flight to southern states. As the clique says, "A butterfly flaps its wings in New York, and there's a hurricane in Florida."
July 2020, the New York Post discussed how coronavirus had broken NYC's housing market where 2/3 of its residents are renters. Businesses are closing, and their owners are leaving. Tenants not paying rent due to loss of work and evictions halted until September 2020 has resulted in small landlords defaulting on July 18% property tax payments, mortgage payments, and upkeep. This trend may lead the way back to the 1970's fatal housing period when owners abandoned properties where rent rolls didn't cover costs, let alone produce an income for the owner's livelihood. Loss of housing or poor housing options will increase southern migration.
The escalation of the northern housing market collapse means more residents for Florida's communities and more reliance on online tools to locate housing before relocation. Coronavirus transformed daily life with zoom meetings and grocery deliveries. Coronavirus limited person to person contact in real estate. Home renters and buyers are becoming more conformable with making online real estate choices because of increased competition, convenience, and the speed the medium offers.
As home rentals fill with new out of state occupants, rents increase with lower vacancies. Increased rents with low-interest rates keeping mortgage payments low create new home buyers who see value in paying a mortgage over renting. New home buyers create more competition for home purchases. Lower home inventory increases home prices.
National economics during the coronavirus pandemic is driving the local markets.
Take heart, Florida. Our real estate market will remain steady with healthy increases for years to come regardless of coronavirus. With new residents arriving daily with their wallets and willingness to rent or buy real estate, we have a product in national demand.