Condo Crack: Florida Market Research Update

Executive Summary

• Our analysis of 1000 US housing markets using Parcl Labs API identified Florida as the epicenter of home price correction risk. Follow-up investigation highlighted condos as a significant factor in Florida's housing market volatility.
• Florida has a heavy concentration of condos. In core markets like Miami, nearly 50% of active listings are condos. Disruptions in the condo market can destabilize the overall housing market in the region.
• This disruption is now unfolding live. Across Florida, there are substantial year-over-year shifts in increased condo supply and decreased demand. Top markets:
  • Miami: +27% Condo Supply, -23% Condo Demand
  • Tampa: +38% Condo Supply, -18% Condo Demand
  • Orlando: +54% Condo Supply, -16% Condo Demand
  • Jacksonville: +59% Condo Supply, -12% Condo Demand
  • North Port: +38% Condo Supply, -14% Condo Demand
  • Cape Coral: +44% Condo Supply, -19% Condo Demand
• Florida condo sellers are highly motivated to exit, with significant inventory seeing price cuts; in Tampa, 60% of condos have had price reductions, and Florida's price cuts, as a percentage of total inventory, are double the national rate.
• Price cuts are particularly acute for older condos (built in the 1980s or earlier), which face deeper price cuts (10% or more) and struggle to find buyers.
• Why is this happening? Two big drivers:
  • Regulatory Changes: New condo assessment regulations post-Surfside Collapse create financial pressure on older buildings.
  • Overall Affordability: Florida has observed outsized pandemic-driven price increases (60% or more in many markets), and rising costs (insurance, taxes) limit the buyer pool.
• Are these supply and demand dynamics manifesting in the predicted price corrections? The situation is evolving, and we will release a piece next week on these supply-demand shifts and their impact on prices as demonstrated by our real-time price feeds.
• If you can’t wait, access to Parcl Labs API is free and available to track these trends live.

‍

Background

Florida's housing market has recently captured our attention through a series of data-driven analyses. Here's how our investigation has unfolded:

• The Big Picture: (June 2024): We analyzed 1000 US housing markets using the Parcl Labs API. Our data pointed to Florida as the epicenter for home price correction risk.
• Narrowing the Focus: (Earlier this week, July 2024): Intrigued by these initial results, we published a follow-up analysis on Florida. This investigation sought to understand the submarkets and product types contributing to volatility. A key discovery: condos were identified as a major factor warranting further examination.
• The Condo Factor: This brings us to our latest investigation. We're zooming in even further to examine the supply and demand dynamics playing out across Florida's condo market.

This progression from macro to micro analysis has allowed us to isolate and examine the specific factors contributing to Florida's housing market volatility.

‍

Florida’s Condo-Heavy Landscape

Florida's real estate market is heavily weighted towards condos. In core markets like Miami, nearly half of all active listings are condominiums. This concentration sets the stage for our analysis.

Condo Supply and Demand is Widening

Florida's condo-heavy real estate market matters because it is experiencing significant volatility, with potential to destabilize the broader region’s housing market.

Our data reveals a dramatic imbalance between supply and demand across the state:

• Statewide Trend: Florida metros show increased condo supply coupled with decreased demand, consistently outpacing the national average.
• Key Markets
  • Gainesville: Supply up 70%, demand down 34% (YoY)
  • Jacksonville: ~65% supply increase, ~30% demand decrease
  • Miami: 35% supply growth, 20% demand decline

Visualizing the Imbalance

To illustrate the condo market dynamics in Florida, we plotted each metro area on a graph:

• X-axis: Demand (Sales) Year-over-Year % Change
• Y-axis: Supply (Inventory) Year-over-Year % Change

Key observations:

• Every Florida metro analyzed shows increased supply and decreased demand, clustering in the upper-left quadrant. The national average (marked 'USA') sits significantly lower than all Florida markets, emphasizing the state's unique situation.
• Extreme Cases:
  • Gainesville and Ocala lead with ~70% supply increase and 30-35% demand decrease.
  • Jacksonville and Orlando follow with 60% and 55% supply growth respectively.
• Major Markets:
  • Miami shows more moderate shifts but still outpaces the national trend.
  • Tampa falls in the middle of the Florida cluster.

This visualization illustrates the widespread and severe nature of the supply-demand mismatch across Florida's condo markets, with implications for potential price pressures and market corrections.

Condo Seller Behavior: Cracks Forming

While an oversupply doesn't automatically lead to price drops, we're seeing clear indications that sellers are feeling the pressure:

• There's an upward trend in inventory with price cuts.
• In markets like Tampa, 60% of condos have seen price cuts.
• The national average for condos with price cuts is around 30%, but Florida's hotspots are seeing double that rate.

These data points suggest that sellers are increasingly willing to negotiate, a key leading indicator for potential price corrections.

‍

The Age Factor: Vintage Matters

Not all condos are created equal in this market. Our analysis shows that the age of the condo plays a significant role in its market performance:

• Condos built in the 1980s or earlier are struggling the most.
• These older units are seeing deeper price cuts, often 10% or more.
• Even with these substantial discounts, older condos are having trouble finding buyers.

This trend suggests that older Florida condos are struggling to find a clearing price in the current market.

Understanding the Drivers

Two key factors are contributing to this situation:

• Regulatory Aftermath of the Surfside Collapse
  • New condo assessment regulations are on the horizon.
  • Older buildings and their owners face potentially massive compliance costs.
  • This regulatory uncertainty is making buyers hesitant and adding financial pressure on current owners.
• Affordability Crisis
  • Florida condo prices have skyrocketed since the start of the pandemic.
  • Many markets have seen price increases of 60% or more.
  • Some areas have even doubled the gains seen in the broader US condo market.
  • This massive price appreciation, combined with rising costs like maintenance, insurance, taxes, and general cost of living, have significantly shrunk the pool of potential buyers.

Looking Ahead: Will Florida's Condo-Driven Market Face a Home Price Correction?

The situation remains dynamic, and we'll be watching closely. Our real-time price feed coverage across Florida allows us to track market movements as they happen, providing up-to-the-minute insights into this evolving situation.

We'll soon release an update on how these supply-demand shifts are impacting prices. If you don’t want to wait, access our API to track these trends live.