Trouble in the Sunshine State: Florida Dominates List of At-Risk Housing Markets

June 26, 2024

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min read

Executive Summary

We analyzed ~1,000 US housing markets using the Parcl Labs API to identify early signs of market stress that could lead to home price declines.
Using API data and an algorithm (open sourced here), we surfaced 15 markets showing:
- Supply-demand divergence, as evidenced by rising listings for sale and declining sales transactions.
- Increasing price cuts, demonstrated by >35% of inventory seeing price reductions.
- Significant appreciation since 2020 (>50%) that has not yet translated into price declines since peaks (<5%).
Florida is the epicenter of supply and demand imbalances that could lead to home price corrections. 13 out of 15 identified markets are in Florida; exceptions are Myrtle Beach, SC and Daphne, AL.
- Top 5 markets with biggest supply and demand divergence: Pensacola, FL (+52% supply increase, -28% demand decrease), North Port, FL (+50%, -18%), Naples, FL (+44%, -14%), Port St. Lucie, FL (+40%, -22%), and Palm Bay, FL (+39%, -18%).
- Top 5 markets with the highest percentage of price cuts are: North Port, FL (52% of listings with price cuts), Tampa, FL (49%), Naples, FL (46%), Myrtle Beach, SC (46%), and Palm Bay, FL (44%).
- Of the 15 markets identified in our analysis:
  - 11 markets are starting to show initial price declines: Lakeland, FL (+51.36% since 2020, currently -4.63% from peak), Sebastian, FL (+61.43%, -4.14%), Gainesville, FL (+50.21%, -2.28%), Deltona, FL (+55.46%, -1.96%), Myrtle Beach, SC (+56.65%, -1.06%), Homosassa Springs, FL (+67.03%, -0.96%), Tampa, FL (+66.55%, -0.92%), Ocala, FL (+60.38%, -0.90%), Port St. Lucie, FL (+65.50%, -0.49%), Miami, FL (+63.73%, -0.42%), and Orlando, FL (+56.10%, -0.31%).
  - 4 markets have maintained their gains with no decline yet: Palm Bay, FL (+93.80% since 2020, 0% from peak), Naples, FL (+89.04%, 0%), Crestview, FL (+60.29%, 0%), and Daphne, AL (+59.31%, 0%).
These dynamics are rapidly evolving. Don't make decisions based on stale, lagged data. Want to stay ahead and identify the next housing markets at risk? Sign up for the Parcl Labs API today.

Background

Since 2020, the US housing market has experienced sustained home price appreciation. A key question now facing the industry is: when and where will the signs of weakness in home prices emerge?

The US index can be traded today on the Parcl exchange, providing real-time investment opportunities based on housing market analysis.

To address this problem, we used the Parcl Labs API, which provides real-time supply, demand, and price metrics for every US market. The API data served as input for an algorithm designed to identify markets showing distress in supply and demand metrics but not yet exhibiting corresponding price corrections. This report details our methodology and findings. Let's examine the data.

Methodology: We used the Parcl Labs API to systematically detect early signals of housing market stress

Our methodology started at the highest level, analyzing ~1,000 US metros to find where supply and demand are beginning to diverge (more supply, less demand). Using a multi-step algorithmic approach, we aimed to identify "needle in the haystack" markets showing early signs of potential price declines.

The first step identified markets where supply (listings for sale) and demand (sales) are starting to show divergence. We targeted markets meeting the following conditions:

Minimum volume threshold: ≥500 sales and ≥500 listings
Demand decline: Rolling 3-month moving average of year-over-year percentage change in demand ≤ -10%
Supply increase: Rolling 3-month moving average of year-over-year percentage change in supply ≥ +20%

The use of rolling 3-month moving averages mitigates short-term volatility, providing a more robust indicator of emerging trends.

This initial analysis resulted in 38 markets (out of the original ~1000) across the US.

We then refined our focus to markets showing signs of stress in the listing market, evidenced by price cuts on listings. This narrowed our results to 17 markets, with 14 located in Florida and 3 in other states (Arizona, South Carolina, and Alabama).

In the final step, we examined price performance to date. We honed in on high-flying markets that have yet to give up significant price gains – specifically, those that have appreciated at least 50% since 3/1/2020, but have given back less than 5% of that price appreciation. This analysis surfaced 15 markets, all located in Florida with the exception of Myrtle Beach, SC and Daphne, AL. We found that several of these markets were just beginning to show downward price performance.

The sections below details each step and provides additional context on drivers for these trends.

Step 1: YoY Changes in Supply vs. Demand Surface Markets with Emerging Imbalance

The scatter plot below visualizes the first step of our process. It maps year-over-year changes in supply against demand across 38 U.S. markets as of May 2024, all of which met our initial criteria (minimum volume threshold: ≥500 sales and ≥500 listings; demand decline: ≤ -10%; supply increase: ≥ +20%). This visualization helps us identify the areas where these metrics are diverging significantly.

Markets in the upper-left quadrant, particularly those from Florida (shown in red), exhibit substantial increases in supply (30% to over 50%) coupled with notable decreases in demand (15% to 40%). This pattern is especially pronounced in Pensacola, North Port, Sebastian, Port St. Lucie, and Naples, FL. While Florida markets dominate this quadrant, we also observe non-Florida markets such as Mobile, AL, Fayetteville, NC, and Hilton Head Island, SC displaying similar characteristics.

This bar chart offers a supporting view on the supply and demand dynamics across the 38 markets that met our initial criteria. This chart ranks the markets based on the magnitude of supply growth relative to demand reduction.

The visualization reinforces our earlier observations by clearly illustrating the concentration of Florida markets (labeled in red) on the right side of the chart. These markets consistently show the largest supply increases coupled with significant demand decreases.

Pensacola, FL and North Port, FL, which were notable outliers in the scatter plot, are prominently positioned at the far right of this chart. Their extreme spread between supply growth (exceeding 50%) and demand decline (over 30%) is clear.

Step 2: Rising Price Cuts Highlight Markets Under Stress

The next step in our analysis was to hone in on the actual behavior of the supply, as evidenced by price changes in listings. This approach allowed us to identify markets showing signs of stress in the listing market.

From our initial list of 38 markets, we further refined our focus to those exhibiting significant price cuts on listings. This narrowed our results to 17 markets:

Miami, FL
Phoenix, AZ
Tampa, FL
Orlando, FL
North Port, FL
Lakeland, FL
Deltona, FL
Palm Bay, FL
Myrtle Beach, SC
Port St. Lucie, FL
Naples, FL
Ocala, FL
Gainesville, FL
Crestview, FL
Daphne, AL
Sebastian, FL
Homosassa Springs, FL

14 out of these 17 markets are located in Florida. The chart below visualizes these price cut trends from October 2022 to June 2024.

The price reduction chart demonstrates theses markets show an increasing percentage of inventory with price reductions over time, indicating growing pressure on sellers. Florida markets (North Port, Tampa, Naples, Lakeland, Miami) consistently show higher percentages of inventory with price cuts compared to the national average (USA, shown in red). Some Florida markets are witnessing over 50% of inventory with price cuts as of June 2024.

Step 3: Cracks Are Emerging in Markets That Have Significantly Appreciated Since 2020

The final step in our algorithm was to understand the price impact of the emerging supply and demand dynamics. We focused on markets that have experienced substantial appreciation (50%+) since the start of the pandemic (March 1, 2020) but have not yet shown significant (<5%) price corrections.

This step surfaced 15 markets out of the 17 that met both the supply/demand divergence and price cut criteria:

The chart below clearly demonstrates these price dynamics. Since 2022, these markets have clearly outperformed the US national benchmark.

Palm Bay, FL and Naples, FL stand out as the top performers, with appreciation exceeding or at 90% since the pandemic's start. Most markets show a similar trajectory of rapid appreciation through 2021 and 2022.

As of May 2024, while none of these markets have given back substantial gains, some initial signs of price pressure are becoming apparent. Our data reveals the beginning of declines from peak values in several markets:

We have real-time price feed coverage for 6 of these markets, allowing us to analyze real-time trends up to June 25, 2024. Our analysis reveals emerging signs of weakness in previously robust Florida housing markets.

As of this date, all six markets - Tampa, Miami, Deltona, Orlando, Crestview, and Lakeland - are experiencing downward price trends.

The data also highlights increasing the Florida markets’ price volatility in 2024. This volatility marks a departure from the stable appreciation observed in earlier years and could indicate growing market uncertainty.

These real-time insights suggest that the subtle "cracks" identified earlier in our analysis may be widening. The consistency of downward trends across multiple Florida markets indicates that previously observed supply-demand imbalances and increased price cuts are now translating into actual price declines. This emerging weakness in prices, particularly in high-performing markets like Tampa and Miami, could signal the early stages of a market correction in the region.

Conclusion

Our data-driven analysis efficiently narrowed down from 1,000 U.S. markets to 15 key markets that warrant close monitoring for price performance in relation to supply and demand dynamics. Notably, all 15 of these markets are located in the Southeast, with 13 in Florida. This geographic concentration provide quantitative support for the growing concerns about Florida's housing market.

This approach corroborates intuitions and qualitative evidence about Florida's heightened risk factors, including:

Significant, perhaps unsustainable price appreciation since the pandemic
Recent spikes in home insurance premiums
Rising property taxes
Policy changes, most notably the implementation of new condo assessment fees

Traditionally, a research project of this scope would require weeks of effort, multiple disparate datasets, and teams of data engineers and analysts. The Parcl Labs API enabled us to complete this comprehensive analysis in just one day.

The value of this approach extends beyond a one-time analysis. By leveraging the API and our algorithm, we can continuously update our findings, allowing for dynamic, real-time market monitoring. This capability ensures that we can track emerging trends and identify markets meeting our criteria as conditions evolve.

With the API, we can also explore the drivers of these trends. For example: what’s the impact of new construction on supply?

As of May 2024, several Florida markets show high percentages of new listings from new construction. Notably, Ocala, FL leads with over 20% of new listings from new builds, followed by Crestview and Pensacola, FL, both exceeding 12%.