By Jennifer Warner
Florida starter home prices have jumped since 2018, with rising rates and investor competition making it more difficult for first-time buyers.
ORLANDO, Fla. — The deck is stacked against typical Floridians trying to get into their first home in today’s market. Price increases, high interest rates and competition from investors have edged people out of what is considered a starter home, changing the profile of a first-time home buyer significantly as a result.
How did we get here?
After the Great Financial Crisis in 2008, Florida’s home prices began recovering in 2012 and have made modest but steady gains over the next eight years. The median price for all property types in Florida in 2019, the last year before the pandemic upended the housing market, was $240,000. Between 2012 and 2019, home prices grew by 9%. Given how low prices were to start, that ending place was high relative to history but in line with affordable limits for many Floridians. Also, interest rates were stable and relatively low, putting the monthly payment for a typical mortgage under or around $1,000 per month for the median priced home.
Price increases for homes in Florida have undergone significant restructuring during and post-pandemic. In the four years since Covid hit, prices have continued to climb another 58% to a median sale price of $420,000 (as of 12/5/2024 using October 2024 numbers). Combine that with higher borrowing costs, and the typical payment for a median priced home exceeds $2,000 today — and that’s just principal and interest!
Price tier differences
We know there are nuances within price tiers that are important to consider, particularly when considering a way to enter the market. We took a look at sale prices for all property types, we created “starter home”, “mid-range home” and “higher-priced home” groups based on percentiles. For example, “starter homes” is the bottom 40%, mid-range homes is the middle 20%, and higher-priced homes is the top 40%
From 2018 through October 2024, the average price for a “starter home” has nearly doubled, increasing by 82%, going from $128,000 to $233,000 in under six years. This has pushed up the entry point for a first-time homebuyer significantly, making it more difficult to make the initial purchase of a home. Mid-range and higher–priced homes certainly moved up too, at 67% and 74% respectively. However, for those who already own a home, the immense equity gained during this time helps offset those increases when trading up.
Impact on first-time buyers
What this means is the barrier to entry has increased for first-time home buyers in Florida. Just coming up with a down payment is significantly harder now. A 5% down payment on a starter home in 2018 was $6,400, whereas the same percent down now translates to $11,650. Factor in interest rates that are nearly double what they were in 2018, and the purchasing power of today’s first-time buyer is greatly diminished. The result — fewer first-time homebuyers are in today’s market. According to the National Association of Realtors® (NAR), in 2023, first-time homebuyers in Florida made up just 20% of all buyers, compared to 32% nationwide.
Those who are able to buy look a lot different than first-time buyers of previous generations. According to NAR's 2024 Profile of Home Buyers and Sellers Report, they are older, wealthier and using different sources of income for both purchase and down payment. These buyers are increasingly using stocks as sources of down payment in addition to the Bank of Mom and Dad, as well as good old savings.
What’s a Realtor® to do?
This may mean re-thinking what a first-time buyer is and what they want. Since today's buyers often have more financial resources than previous generations, and starter homes are increasingly costly, consider showcasing "trade-up" properties as a first option. The price difference may be minimal compared to starter homes.
These buyers may be more established in their lives and careers. They may not have families but will likely have pets, so considering amenities that cater to the furry family members will be beneficial. Take some time to review demographic trends in your area, breaking down sales by price tier to get a sense of what is trading in your area, and chat with your peers about who is in the market today. Staying on top of trends (beyond counter material) will set you apart and help you get ahead of the continually changing world of real estate.
Jennifer Warner is an economist and Director of Economic Development
© 2024 Florida Realtors®
