Space Coast

Research shows $1 million buys a lot less than it used to

Steve Goode

Link copied

The year 2022 saw the U.S. enter into a recession, as property prices rose drastically as a result of inflation. For 2023, the financial experts at IBRinfo.org have revealed their property inflation predictions. New data released by the firm also shows $1 million buys a lot less than it used to in three Florida cities.

Before analyzing the data for 2023, it’s important to establish the relationship between inflation and property prices. Inflation refers to the rate at which ‘purchasing power’ drops and prices for goods and services rise to the point that they are no longer affordable for the majority of people. This ultimately has a knock-on effect for the property market as house prices increase, and mortgage interest rates climb in an attempt to bring inflation back down to more manageable levels.

In 2022, home prices increased by over 6% compared to figures from 2021, according to Forbes. This led to far fewer homes being sold, as the majority of people are unable to afford these higher prices. This has resulted in the supply of homes for sale being far greater than the demand for homes to buy.

IBRinfo.org expects to see things remain relatively the same throughout 2023, as inflation is gradually reduced. Unfortunately, although the rate of inflation is being brought down slowly over time, there is unlikely to be any major financial relief to come to the housing market in the next year. Nationally, mortgage rates will remain almost twice as high as those in 2021, with the typical payment increasing to $2,430 — up 28% (Realtor.com). Across the U.S., home prices will rise another 5.4% in 2023 — with a few select areas seeing prices reduce from those in 2022.

Florida Property Inflation Trends

IBRinfo.org predicts that house prices in Florida will remain the same in 2023 rather than decrease due to the consistent demand for properties in this state. House prices remained slightly below the national average throughout 2022, with median house prices sitting at $382,000 compared to the national median of $385,000. This is expected to continue throughout 2023.

Unlike other states, the property market in Florida is expected to grow in 2023, with house prices in major metropolitan areas such as Miami projected to increase by 9.8% in April 2023 (CoreLogic). By the end of 2023, IBRinfo.org expects mortgage rates to level out at 5% due to an increase in cash buyers, placing less strain on money-lending markets.

IBRinfo’s research into the rise of home prices in a decade found that properties in both Tampa and Orlando cost just over $70 per square foot in 2012 and over $200 in 2022, highlighting how quickly and drastically property prices have risen in just 10 years.

Unfortunately, although the rate of inflation is being brought down slowly over time, there is unlikely to be any major financial relief to come to the housing market in the next year.

Inflation Thoughts

Across the U.S., IBRinfo.org’s team of experts expect to see inflation remain high throughout the entirety of 2023, with a very gradual decrease as the year comes to a close. House prices will steadily decline in some areas, whilst mortgage rates will remain high overall.

Despite some states seeing house prices starting to fall, purchasing power will continue to decline in 2023 due to increased interest rates, leaving the demand for housing at a similar rate to 2022.

What $1 Million Buys

The website also conducted research to establish the difference between property values in 2012 and 2022.

To do this, they compiled a list of the biggest cities in each of the 50 states by both size and population. They then used property price data per square foot for these cities, taken from both Zillow and Redfin, spanning the first eight months of both 2012 and 2022. They then calculated how much square feet of property you could buy with $1 million in each city.

The research aimed to identify how much property $1 million was worth in 2012 and 2022. Despite being only 10 years between the two sets of price data collected, the differences between the figures were fascinating.

Three Florida cities made the list.

In Jacksonville in 2012 $1 million would buy 15,152 square feet, but that number in 2022 was 5,316 square feet., a decline of 9,836..

In Orlando in 2012, $1 million would buy 13,889 square feet, but that number in 2022 dropped to 4,533, a decline of 9,356. Tampa was close behind. In 2012, $1 million would buy 12,658 square feet, but that number dropped to 3,955 in 2022, a decline of 8,704.