Florida’s grim warning for America’s real estate

Zach Janik had all the makings of a Florida lifer. Born and raised in West Palm Beach, he spent most of his adult years in St. Augustine, a small beach town on the state’s northeast coast. In 2018, just shy of 30, he purchased a tidy three-bedroom house for $195,000. Life was good.

A few years into the COVID-19 pandemic, though, he no longer recognized the place he had long called home. The area around St. Augustine was bursting with new arrivals and vast expanses of cookie-cutter homes to meet the growing demand for housing. All those new residents clogged the roads, forcing Janik, who worked in sales, to spend long hours sitting in traffic to visit clients. Even if he wanted to move to another place in Florida, he couldn’t afford it — real estate prices had climbed so much that even a humble starter home like his was most likely out of reach.

Such tales of trouble in paradise are common these days. An undisputed winner of the pandemic relocation boom, the Sunshine State lured millions of movers with its siren song of beaches, balmy weather, and absence of a state income tax. Now it’s nursing a hangover. Residents across the state are experiencing an affordability crisis, hurricane-fueled insurance nightmares, and eye-watering property tax bills. Net migration to Florida has plummeted from the heady days of 2022. Owners of aging condos can’t find willing buyers. Home prices just dropped by their biggest percentage in more than a decade, with economists and analysts projecting a prolonged slide in property values.

It’d be easy to dismiss these challenges as unique to the curious appendage on the continental US, but the state is actually a solid bellwether for the rest of the country. Other markets, like the Southwest and the rest of the Southeast, show similar signs of softening. Climate risks are no longer solely a concern for the coasts. And of course, no place is immune to the broad trends quashing homebuyers’ dreams: mortgage rates that refuse to drop, prices that remain well above their pre-pandemic level, and general hand-wringing over the economy. Florida isn’t some anomaly. In fact, it’s as if all the forces driving the country’s real estate market converged there and got cranked up to max volume.

Most people I spoke with for this story were still bullish on Florida in the long run — the state’s natural appeal hasn’t gone anywhere. But the comedown from the pandemic-era highs will be messy, and some may choose to dodge it altogether. That includes Janik, who in 2023 moved out of his home state to Hershey, Pennsylvania. He was happy to trade what he described as the “overdevelopment” of St. Augustine for cheaper real estate and mountain views. Even though he eventually got fed up with Florida, his financial windfall is a testament to the state’s wild arc over the past few years: He sold his property for $345,000, a stunning gain of 77% in less than a five-year span.

“I miss the beach. I miss my friends,” Janik tells me. But at the end of the day, he says, “It just doesn’t feel like home anymore.”

The recent turn in Florida’s housing market may sound complex, but it boils down to principles straight out of Econ 101: supply and demand.

First came the demand. With white-collar workers liberated from their office desks, baby boomers cruising into retirement, and a general desire for easy living sweeping over the country, Florida made for an obvious destination. Plus, it was pretty cheap, especially for city slickers tired of their shoebox apartments or cramped homes sitting on million-dollar lots. Between April 2020 and July 2024, Florida saw a net gain of roughly 1.8 million residents, according to Census Bureau estimates, consistently jockeying for the title of fastest-growing US state. Florida continued to welcome plenty of snowbirds, sure, but it also lured venture capitalists, crypto speculators, and pretty much anyone who was sick of COVID restrictions or was just chasing that “vacation” feel. As one Business Insider headline read in late 2023: “Young people are flocking to Florida.”

All those transplants needed places to live. The lower half of the US, otherwise known as the Sun Belt, has traditionally been a hotbed of home construction, helping keep prices in check despite the region’s population growth. But even by the Sun Belt’s development-friendly standards, builders in Florida were busy. They completed more than 760,000 new homes between April 2020 and July 2024, the census estimates, a nearly 8% increase in the state’s housing stock. Only five states saw bigger building booms on a percentage basis, though with the exception of Texas, all have far fewer residents than Florida. The Sunshine State is home to about 6.8% of the nation’s population, but it accounted for nearly 12% of new home construction permits issued last year, an analysis by Realtor.com found. In both Texas and Florida, homebuilding activity “got close to or exceeded subprime, crazy construction days,” Rick Palacios Jr., the director of research at John Burns Research and Consulting, tells me, referring to the heady times just before the 2008 collapse. But even the most ambitious builders couldn’t keep up with the influx of transplants, investors, and vacation-home buyers in Florida. As more people angled for homes, prices soared. According to data from the real estate search portal Redfin, the median home price in Florida peaked at $423,000 in April 2024, up 61% from the onset of the pandemic.

Many of those fresh arrivals eventually soured on paradise, though: too hot, too expensive, or just not home. Even a vacation, it turns out, can get a little old. And when lots of new housing supply hits just as buyer demand is waning, the stage is set for prices to drop — just ask builders in Texas. Last year, I wrote about the cooling of the Austin market, where home prices are now down about 14% from their peak, per Redfin. In many ways, the story there is repeating itself in Florida: A bunch of people moved in, home prices shot up, and builders responded by putting tons of shovels in the ground. Then interest rates jumped, home loans got more expensive, and buyer demand hit the skids. Cue the price cuts.

It just doesn’t feel like home anymore.Zach Janik, former Florida resident

There are, of course, some more Florida-specific factors at play. Back-to-back hurricanes tore through its western coast late last year, adding to the existing home insurance quagmire. Premiums have skyrocketed in the past few years, and multiple home insurers have abandoned the state entirely. The average cost of home insurance in Florida climbed 45% from 2017 to 2022, according to an analysis by the Florida Policy Project. Steep HOA fees, along with the hefty insurance outlays, have made it difficult for owners of aging condo units to offload their properties. Florida has also lost some of its luster among US movers. Four of its biggest metros — Tampa, Miami, Orlando, and Fort Lauderdale — were among the 10 areas around the country that saw the steepest dropoff in net domestic migration from 2023 to 2024, Redfin found.

So far, the about-face in Florida’s housing market has put only a small dent in headline property values. Sales prices in Florida are down roughly 3% from their high point in spring 2024, per Redfin — hardly even “correction” territory, let alone a bust. But Florida could still have a ways to fall. Builders and agents in Texas — where the pandemic frenzy has cooled off considerably — seem to have found an equilibrium, Cara Lavender, a senior research manager at John Burns, tells me. Sure, they’re selling fewer homes each month, but they’ve slashed prices enough that they’re able to keep things moving.

“It doesn’t feel like we’ve hit that point in Florida,” Lavender tells me. “They haven’t found the bottom.”

Parcl Labs, a real estate analytics firm, recently looked at the supply and demand dynamics in 42 metros around the country to deliver a “bullish” or “bearish” rating for each one — basically, whether they think prices will rise or fall over the next year. Miami and Jacksonville got positive ratings, but Orlando, Tampa, Lakeland, Deltona, North Port, and Cape Coral all got slapped with the bearish tag. The key in those places, Parcl’s CEO, Trevor Bacon, tells me, is the number of homes sitting on the market.

“There is a ton of supply,” Bacon tells me. “Like, a ridiculous amount of supply.”

Homebuilders are an optimistic bunch by nature, but even the ones in Florida are now saying they expect to end the year down slightly on their prices. “For a builder to even report in a survey that they’re going to be negative year over year on pricing is incredibly meaningful,” Lavender says. During a call with analysts in late March, Jon Jaffe, the president and co-CEO of Lennar, one of the country’s largest builders, said buyers in Florida and Texas generally needed more help than those in most other places around the country. Builders in the state are dropping prices, lending a hand on closing costs, and chipping in thousands of dollars to help buyers get lower mortgage rates, all in an effort to keep sales moving. Even then, Jaffe said, the company didn’t see the typical pickup in nationwide sales that usually comes with the start of the spring selling season.

I’ve found that real estate agents, like builders, tend to see the sunny side of things — after all, it’s pretty much their job to preach the gospel of homeownership even when the market is less than accommodating. But when I talked to Laurie Rose, a real estate agent and longtime resident of Naples, in southwest Florida, she was clear-eyed about the challenges facing buyers in her chosen state. Rose and her husband moved down from New Jersey in 2003, mostly for the weather. For a while, it felt like the move was paying off: Gas was cheaper, and groceries didn’t stretch their budget. The lack of a state income tax kept more dollars in their pockets. Now everything is more expensive, she says, including everyday items like food and clothing. On the plus side, home values are way up since she and her husband bought their place. But even if they sold, she says, there’s no way she could buy back into the area in which she’s now living. Rose still says Florida is a “great place to live,” but the state’s natural draws aren’t always enough to keep people there. She tells me several of her friends have recently moved to Tennessee, Georgia, and the Carolinas in search of the cheaper living that Florida once promised.

Sellers have been caught up in this thing of, ‘I can put whatever price I want on my home, and someone’s going to buy it. Now all of a sudden they’re going: ‘Oh, crap.’

Rose’s work as a real estate agent has also given her a front-row seat to the mounting challenges for both sellers and buyers in Florida. Buyers are leery of all the costs that come with homeownership — not just the higher mortgage rates and steep sticker prices that have eaten into affordability, but also the insurance premiums, property taxes, and HOA fees. With more homes sitting on the market and prices starting to drop from last year, there’s no rush among buyers to get in on the action. Sellers, meanwhile, will have to come to grips with this new state of play if they want to get their properties sold.

“Sellers have been caught up in this thing of, ‘I can put whatever price I want on my home, and someone’s going to buy it,'” Rose said, “Now all of a sudden they’re going: ‘Oh, crap. People aren’t buying, and people aren’t even looking.'”

This isn’t just a Florida story. Large-scale housing trends often obscure the quirks that make each local market unique, Jake Krimmel, a senior economist at Realtor.com, tells me, but Florida offers a neat microcosm of the national numbers. Around the country, supply is back up to levels we haven’t seen since the start of the pandemic, handing more power to buyers who now have the luxury of choice (provided they can afford it). Homes are sitting on the market longer, and sellers are coming around to the fact that they’ll have to cut asking prices if they want to see some offers. The softness in Florida’s market appears to be spreading to the rest of the Southeast and Southwest, where metros such as Phoenix, Denver, Atlanta, and Raleigh now show negative prices year over year in John Burns’ data.

“The Southeast and the Southwest aren’t as weak as Texas and Florida right now, but they could very well be on their way there if supply continues to increase and buyer demand stays where it is,” Lavender tells me.

I want to be clear that the sky isn’t falling here. The pandemic-era frenzy couldn’t last forever, and a pullback in demand was to be expected given just how many people bought and sold homes before rates went up in 2022. If builders hadn’t delivered all that supply to Florida over the past few years, the affordability picture there would be all the more dire. Just look at the Midwest and the Northeast, where fewer homes were built and the supply remains tight. They may not be seeing a drop in prices now, but that means buyers aren’t getting any relief, either.

Florida’s growth during the pandemic was “unsustainable,” Nelson Stabile, a principal and cofounder of the Miami-based development firm Integra Investments, tells me. But he’s still a staunch believer in the state’s future.

“I think we’re at a healthy pace now, and I think the whole country has woken up to the fact that Florida is not just a retirement destination,” Stabile tells me. “It’s a place where folks can raise their families, where they can have an incredible quality of life. Is it perfect? No. But is it better than most areas? Probably, yes.”

Keith Poliakoff, a real estate attorney in Florida, is similarly bullish on his state. But he also says other states should learn lessons from Florida’s saga — to cut red tape that gets in the way of building affordable housing, as the state legislature recently did through the Live Local Act, and strengthen building codes to withstand climate disasters.

“Florida generally hits the wave before the rest of the country,” Poliakoff tells me. “It’s a good indicator of what’s to come.”

James Rodriguez is a senior reporter on Business Insider’s Discourse team.

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