February 2022: Demand & Prices Continue to Surge

February 2022: Demand & Prices Continue to Surge

Brad O’Connor directly addresses camera: Two years ago, in February 2020, Florida’s housing market was chugging along nicely to its best winter in several years. The average 30 year fixed mortgage rate had fallen into the neighborhood of three and a half percent, almost a full percentage point lower than it was a year prior. And the result was accelerated growth in both home prices and the overall number of sales.

The median sale price for existing Florida home sales was up by over 7% year over year, while the number of closed sales had likewise increased by over 9%. It was looking very much like this strong growth in the market would continue into the spring buying season two. The number of existing homes going under contract in February 2020 was up by twelve and a half percent compared to the year before.

While the condo and townhouse market was still balanced at 5.4 months, supply of inventory the sellers market for single family homes was gaining steam. Having fallen to just 3.3 months supply at the time its lowest level since Florida Realtors began tracking it in 2008. These were significant numbers at the time, but today they seem like child’s play. So now let’s look at 2021 close sales were up by over 19% for the year. The median sale price was up by more than 19% as well. And at year’s end, there was only a one month’s supply of single family homes and a 1.3 month supply of condos and townhouses on the market. February 2020 was the final month before the COVID 19 pandemic took hold across the US and sent our economy and housing market on a roller coaster ride that we are all frankly still on. And although we may have gone through the biggest stomach churning rises and falls of this ride, we still need to be on the lookout for more unexpected twists and turns as we continue to coast back to a more stable and balanced market.

So let’s take a look at the latest statistics from Florida Realtors, which cover February 2022. To get a sense of where we’re at right now. In February, close sales of existing single family homes were down compared to a year ago, but only by a little over 1%. That’s been the trend over the last four months. Single family close sales have been about the same over this period as they were the year before. But remember that by historical standards, the level of sales, while no longer growing, still remains quite high. This February’s count of 23,661 closed sales is still 14% higher than the 20,693 sales that closed in February 2020.

Why has single family home sales growth slowed down? Several factors are in play, but primarily it’s the result of our continued lack of inventory in combination with rising mortgage rates and home prices. There’s still no shortage of housing demand, but affordability is becoming a bigger challenge for potential buyers as each month goes by, although a fair number of homes are still being listed for sale. We are falling way short of where we need to be on the supply front. This problem isn’t going to go away overnight in the long run. We simply need more housing to be built.

For now, though, prices continue to rise rapidly. Florida’s median single family sale price in February was over $381,000. About 21% higher than a year ago. We do expect, however, that price growth will eventually slow in the face of higher mortgage rates. Sales growth may slow as well. New pending sales were down 12.6% year over year in February, which might indicate this has already begun. If that’s the case, we should expect sales next month to be below last year’s levels, but still well above pre-pandemic levels. Slower price growth may follow in the late spring, but there’s still a lot of uncertainty here. The timing is hard to predict. The condo and townhouse market, in contrast to the single family market, had a much stronger year in 2021. Much of that was due to there being a much more abundant relative supply of condos and townhouses on the market, especially early on. But as of February 2022, we are down to about 1.2 months supply. That’s still better than our 0.9 month supply of single-family homes. But both markets are currently difficult for prospective buyers.

Closed sales of condos and townhouses were down 3.6% year over year in February, while the median sale price was up a whopping 24.3% to $290,000. But new pending sales in this property type category were down over 17% in February compared to last year as inventory continues to dwindle.

The crystal ball remains hazy, but as of right now, our baseline expectation is for higher mortgage rates to cool down the market somewhat throughout the year. Sales in 2022 are currently expected to be somewhat lower than last year, but still above the totals from the pre-pandemic years of 2018 and 2019. Price growth should eventually slow as well, but will remain above historical growth rates. So even if we have a decline in the total number of sales, we still expect the sales volume for 2022. In terms of dollars to be similar to that of last year, the dollar volume of sales in February was up 15.5% year over year for single-family homes and 14.8% for condos and townhouses. Despite the decline in closed sales for both categories, these are, of course, the statewide trends. But what about the area where you live and work? Different areas of the state are seeing some different trends. Many luxury markets, for instance, are seeing some solid sales growth so far this year compared to the overall figures.