What Lies Ahead for Buyers and Sellers in Florida's Gulf Coast Housing Market in 2025?
Budge Huskey
Chief Executive Officer of Premier Sotheby’s International Realty
Special to the Herald-Tribune
As we close the chapter on 2024, it is an opportune moment to reflect on the housing market’s recent trajectory and ponder where it might be headed. This past year has been defined by significant shifts – three hurricanes directly impacting Florida’s Gulf Coast, evolving brokerage policies, a contentious national election, and ongoing affordability concerns for many due to prices and stubbornly inflexible borrowing costs – all of which have set the stage for what could be a pivotal and transformative year ahead.
The pressing question remains: Will the turbulence of recent years finally give way to stability? Experts caution that underlying challenges such as elevated mortgage rates and less than historical demand may likely linger; yet, amidst some trepidation, there are encouraging signs of a more positive year ahead.
The Price Landscape
Home prices in 2024 rose a modest 3% nationally, a stark contrast to the double-digit surges of the pandemic era. While this represents a deceleration with select markets witnessing even a small erosion in average sales prices, they remain 50-60% higher in our markets than five years ago. Hopes of significant reductions in mortgage rates due to Fed actions were tempered by a 10-year treasury note rate shaped by renewed inflationary reservations.
The interplay of resistant home values and high mortgage rates created formidable barriers for many, though even slight further dips in rates may entice sidelined buyers back into the market as they remain well under the historic average. The key is adjusting expectations from the extremes of recent years to a new normal.
Prices overall, however, are a function of supply and demand. Even with expectations of increasing demand ahead, inventory levels along the Gulf Coast, which are 30-40% higher than last year, will result in relative stability vs. the progression of former years.
The Sales Conundrum
Home sales failed to meet expectations in 2024, marking the second consecutive year of sluggish activity. With an estimated 4 million sales for the year, far below pre-pandemic levels, the market nationally proved the weakest in three decades. Considering the significant population gains since we last saw such a pace, it is clear the market is out of alignment and home sales should be far greater.
In areas such as Florida, the pandemic sales gains far exceeded that seen in most of the country, leading to a wider correction gap. In the end, real estate markets tend to revert to the mean. We went far above the trend line, dipped below it these last two years trailing the country, and should now enter a period of returning to the mean and a sense of normalcy. Forecasts vary as they do every year, yet a consensus is building around an approximate 5.0% to 7.0% increase in closed sales with an even higher lift on the new construction side.
Florida’s Unique Position
Florida, a perennial favorite for its growth and economic resilience, experienced a cooling in its housing market in 2024. Hurricanes, rising insurance premiums, and the financial implications of new structural and reserve requirements for condominiums created a climate of uncertainty.
On a positive note, insurance reforms have attracted more carriers to the state, though premiums are unlikely to decline significantly. Buyers must now consider these additional costs when evaluating affordability.
Reasons for Optimism
Florida remains the envy of the country, with many of our markets winning awards for being among the best places to live or retire. Florida is also home to nine metro areas among the nation’s top 100 housing markets. And on the Gulf Coast, we continue to draw more attention and interest around the country from untraditional feeder markets. The pool of potential buyers has expanded dramatically in recent years, and we simply need to unleash the pent-up demand.
And the data is telling. NAR’s newly released November sales statistics (December’s figures won’t be released until late January) reflect a lift in closings over the same month last year. While the variance is subtle, it represents an important turning point as the second consecutive month of year-over-year growth after over 40 months of declines. We are coming off the bottom.
Beyond the numbers is something intangible, yet equally powerful, with the conclusion of the election. Regardless of one’s opinion of the outcome, there is validity to the reduction of uncertainty and the release of “animal spirits.” Perception and emotion have always proven enormous influences on the housing market, especially in the luxury and second home sectors, and initial readings suggest a greater willingness at this time to move forward with sizable asset purchases.
A Resilient Market Amid Uncertainty
As we look to 2025, the housing market will demonstrate something we have not seen in many years: Normalcy. Surely you may remember when prices trended at the rate of inflation with sales increasing at a sustainable pace based on fundamentals and demographic drivers. Perhaps the exciting roller-coaster of real estate may be ending. I, for one, am ready to get off this crazy ride and back to the business I once knew.