Is it a Good Time to Buy a House in Florida?
Q) Is Now the Time to Buy Real Estate in Florida?
A) No, In My Opinion It is Not a Good Time to Buy a Home in Florida. Why?
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- It’s still a seller’s market, so buyers are paying more than they need to.
- Prices won’t be going much higher, much longer, so if you can wait you will be better off.
- Florida homes will be selling at a huge discount again in the not too distant future.
Allow me to explain these 3 reasons further…
#1) It’s Still a seller’s market in most of of Florida.
Unless you’re a fan of buying high and selling low, I wouldn’t buy a home in Florida now or recommend that to any of my family or friends. Buying a home in seller’s market should be avoided if at all possible, even in non-transient states, but especially in transient Florida’s yoyo real estate market.
During the last recession Florida home values dropped 60% on average. Did you buy a house in Florida during the last seller’s market in 2006 for $250,00? Congratulations, that home would only be worth about $100,00 in 2009, if you could find a buyer, but chances are you couldn’t. That’s why Florida became the foreclosure leader in the US for years. Thousands of people quit Florida every week, and for years, people just moved out of Florida and left their underwater home behind to go into foreclosure.
Buying a home in a seller’s market wouldn’t be the worst thing in the world to do in many states in the US. However, in a highly transient state like Florida that has a real estate market that rises and falls like a yo-yo, it can cost you a lot of money if you buy in a seller’s market. Most people moving to Florida believe they will enjoy living in the state far longer than what actually happens, but studies show that for a high percentage of people, that’s not what happens. Paying a high price for a home in a seller’s market, increases the odds that you will buy high and sell low. Over 10 million people (and growing every day) have moved to Florida only to move out latter. If you buy an overpriced Florida home at the top of the market and then find you can no longer live in the state, but home prices have tanked, you could end up like so many people have before, with a home worth far less than you payed.
Besides, if you’re going to buy a home in Florida, why not do it when it’s a buyer’s market. Why not buy when everyone is selling in Florida and homes are selling for up to 50% off or more and there are tons of homes to chose from?
#2) Florida Home Prices will Stagnate
I wouldn’t rush into buying a home out of fear that the prices will just be higher next year or in 5 years. Recent Florida home buyers have been able to go far deeper in debt and buy far more expensive homes that ever before, with just an average income, because of the historic lowest mortgage rates in history. Here’s why that’s dangerous:
When the Fed starts raising interest rates, buyers will no longer be able to buy as much home with their income. With every tick up in interest rates, and we have a long way to climb, buyers will be forced to consider smaller older homes than what they had been looking at. At best, Florida home prices will stagnate when interest rates start to rise. There’s a chance that rising interest rates alone may cause Florida home prices to stall, then sink badly.
#3) A Florida Bargain Buying Opportunity is Coming, But Will Anyone Want to Buy?
I have many reasons to believe that Florida home prices will collapse yet again and present brave buyers with a bargain hunters paradise, in the not too distant future. History shows Florida has a pattern of real estate booms and busts, and the peaks are usually higher and the valleys lower than all other states with the possible exception of other transient states. But rather than cite all of the reasons that will cause the next real estate bust, I’m only going to cover one in this update because I don’t see anyone else even considering it.
Hurricanes, hurricane evacuations and everything that Florida’s normal 6 month annual hurricane season brings, is just one of the many reasons people normally move out of Florida. People moving to Florida never really consider what the effect on their lives hurricanes would have, until after they moved to Florida and a storm larger than the state itself is heading toward their home. But that hasn’t happened in Florida for a long time. Florida hasn’t been hit by a major hurricane for a record 10 years, until recently.
That’s good, right? Yes it is, but that means that the “normal” number of people who would have left Florida each year for 10 years after experiencing the devastation, evacuations or just the stress of normal hurricane seasons, are still in Florida. I feel that a return to even the “normal” devastation or disruption from major hurricanes hitting Florida again could cause that 10 year backlog number of people to decide that Florida isn’t for them, and head for the exits all at the same time. As those folks leave, news coverage of the recent hurricane devastation on the news will cause less people to consider moving to Florida.
When this happens (remember, hurricanes causing people to leave Florida was the normal pattern for decades before the “hurricane drought”) a huge number of homes will flood the market because people want to sell and get out, at the same time when less people will be moving to Florida. More home supply and less demand will lead to lower home prices. If this were to coincide with rising interest rates, home prices in Florida could get real ugly. The decline could rival the Great Recession we just recovered from. This could be exactly what is about to begin in 2018.
So if I didn’t have a compelling reason to buy in Florida immediately, I would wait for the next buyer’s market because it’s just around the corner. If I were one of the few brave souls who moved to Florida between 2008-2012 and bought when prices were 50% off, now would be a good time to consider selling and cashing in your chips, especially if your honeymoon with living in Florida is over and you’re on the fence about moving out. You’ll kick yourself if you wait until another major negative event pushes you to sell, because it will be too late when everyone is selling again and Florida home prices will drop like they have many times in the past.
SOURCE: https://www.stateoffloridaliving.com/good-time-buy-house-florida/
Author: Ron Stack “That Best Places Guy”
