By Melissa Forte-Litscher
As Florida’s real estate market faces 2025, a mix of economic factors, mortgage rates and insurance challenges continue to shape buyer and seller behavior. While affordability remains a pressing concern, industry experts remain optimistic about the state’s long-term housing demand.
According to Dr. Brad O’Connor, chief economist for Florida Realtors®, mortgage rates remain the biggest factor impacting Florida’s housing market. Prices stopped rising when rates increased, as higher borrowing costs made homeownership less attainable. Inventory levels have grown—not because of an influx of new listings, but because homes are staying on the market longer due to reduced demand. However, inventory is still near 2019 levels, and distressed sales remain rare due to stable pricing.
With migration slowing across the country, including in Florida, O’Connor suggests that the best way to boost home sales is through lower mortgage rates or reduced prices. Millennials, in particular, remain eager to buy and are adjusting their expectations, willing to take on larger mortgages when affordability improves. Retirees with significant home equity are less impacted by mortgage rates, but may delay downsizing if they require a loan for the new home.
Logan Mohtashami, lead analyst at HousingWire, predicts that Florida’s market could see a resurgence if mortgage rates drop below 6%, especially in the western part of the state. Miami remains somewhat immune to these shifts due to its high percentage of cash buyers, but the rest of Florida depends on financing affordability.
For rates to fall below 6%, either a weaker labor market or Federal Reserve intervention addressing the housing affordability crisis would be necessary. However, home sales are unlikely to crash, as multiple generations—from Gen Z to Baby Boomers—are ready to enter the market when conditions improve. Each time rates hover near 6%, a surge in mortgage applications follows, indicating demand that has built up by people waiting to purchase. Historically, rates between 6 and 7% make for a healthy market.
Homeowner’s insurance rates could deter some buyers, especially those requiring home financing. Cash buyers typically self-insure, so those buyers are not as affected. Insurance costs remain a significant affordability barrier for Florida homeowners. As private insurers left the state in recent years, 1.3 million homeowners have turned to Citizens Property Insurance Corp., the state’s insurer of last resort. With hurricanes increasing claims, Citizens faces financial strain, making the situation worse. Unfortunately, we have seen that insurance issues killed multiple deals in 2024, particularly in our area. The increase in insurance prices often pushes a potential buyer out of their approved purchase limits. Even when an owner has had insurance for years with the same company, upon sale of the home, the buyers will be subject to purchasing a brand new policy at today’s rates and limitations. To attract buyers, sellers will need to consider replacing roofs older than 15 years, ensure their home’s plumbing and electrical is up to today’s code, or prepare to lower their asking prices. There is good news as a few more insurers entered the Florida market in 2024 and have taken over some Citizens policies due to significant legislation passed in 2022.
While insurance and affordability remain challenges, we are optimistic that the sluggish market at the end of 2024 is behind us, and we look forward to a stable, more balanced market for buyers and sellers in 2025. If you are interested in hearing more about real estate, call me, I’m at your service.
850.496.7444
Melissa@NextHomeCornerstone.com
destin-fwbrealty.com
