On the downside, supply chain and labor market shortages, high oil and gas prices and high inflation continue to be a challenge. The state was also rocked by hurricanes Ian and Nicole, and there are ongoing challenges in the international travel sector. The economists say there was possibly a hidden silver lining to the dual natural disasters: recovery can be an economic engine.
But there’s another issue lurking as well: prohibitive homeowner’s insurance rates.
“It’s a real problem and it has been for a while. The primary issue is excessive litigation. We get 80% to 90% of all the litigation in the country,” O’Connor said. “Louisiana and Texas get hurricanes too, but they don’t have the same issues we do.”
O’Connor said the issues of a lack of competition for insurance and high litigation costs aren’t going to go away overnight, but he is encouraged by recent work to address the issue by the Florida legislature during a recent special session. “I think they’ve taken good steps,” he said.
So What's An Originator To Do?
As mentioned above, higher mortgage rates are likely to discourage both would-be buyers and sellers from making a move in 2023. Florida Realtors predict that the situation will lead to fewer pending sales, and as a result, fewer closed sales. Silver lining — a softening in prices is possible as sellers are forced to accommodate buyers facing higher rates. Those accommodations would include a return to concessions and accepting reasonable offers.
The new housing market won’t help much either as high cancellation rates have caused builders to pull back, exacerbating an already-low supply of units.
Florida Realtors economists have THREE pieces of advice:
- Avoid comparisons to the boom years and look instead at the monthly and annual numbers to get a broader picture of the marketplace when it was still somewhat normal;
- Look again at 2018-19 to know what the normal transaction pacing should be, because even though it’s taking longer to sell a home than during the last few years, they are selling more than 30% faster than they did pre-pandemic;
- And take the time to understand your market to ensure that you know what’s really going on. Your clients will benefit from your local knowledge so make sure you use your local association as a key resource to understanding what’s happening.
O’Connor added that a 1 or 2 percentage point drop in mortgage rates — which is possible if the FOMC backs off after two more expected small increases — is foreseeable and will get millenials and retirees back into the mood to buy.
But a price crash is not in the cards unless the economy takes a nosedive. “A recession would have to be really bad, and we don’t see that,” he said.
