Florida Real Estate Market Lessons

Data show that Florida's housing market might be in a sweet spot. Prices remain low, as Florida was among the states hit hardest by the collapse of the housing bubble, but prices are on the rise, so a purchase now would appear less risky than it would have a year ago.

But Florida also offers some object lessons. Its volatile housing market demonstrates the importance of thinking clearly about the pros and cons of buying a home when you don't have to. Placing the wrong bet can be very, very dangerous.

A large portion of Florida's housing market is driven by people who don't really need to buy, such as retirees who could stay where they are in other parts of the country and second-home buyers who could wait if conditions aren't right. That makes them more fickle than people who must move for a job or growing family. As a result, Florida home prices tend to swing to extremes.

Because of the market's volatility, anyone considering buying a retirement or second home in Florida should pay special attention to some key questions.

First, how easily can the balance of supply and demand change? On many of the barrier islands off the East Coast, for instance, there's not much room for further development, so it's unlikely a flood of new homes will depress prices in these areas. But in many areas just a few miles away on the mainland there's plenty of undeveloped land. As prices rise, developers tend to break ground on single-family homes and condos, and that new supply slows the price gains or reverses them.

Home Prices Are Climbing At The Fastest Pace Since 1977

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RELATED QUOTES

SymbolPriceChange

ITB	21.91	-0.47
XHB	29.85	-0.76

 

Home prices (including distressed sales) climbed 11.9% year-over-year in June, according to CoreLogic's latest home price report. This is the sixteenth straight monthly rise in home prices. Prices were up 1.9% month-over-month.

Ex-distressed sales (short sales and REO transactions), home prices were up 11% on the year, and 1.8% MoM.

Meanwhile, in the first half of the year, home prices were up 10%. "This trend in home price gains is moving at the fastest pace since 1977," said CoreLogic's chief economist, Mark Fleming in a press release.

Here are some details from the report:

• Including distressed sales home prices rose the most in Nevada, up 26.5% and fell the most in Mississippi, down 2.1%.
• Ex-distressed sales home prices climbed the most in Nevada, up 23.6%, and no state saw home prices fall.
•  The peak-to-current decline in home prices, from April 2006 to June 2013, was 19%.
• The CoreLogic Pending home price index suggests that home prices will rise 12.5% on a YoY basis in July, and 1.8% on the month.

Here's a look at the trajectory of home prices from 2002 on: