The Pros and Cons Waiting to Buy in Florida Until Home Prices Drop After the Next Recession
The number of people moving into and out of Florida, drastically affects home prices
Huge numbers of people move to Florida every day for what they hope will be a better life. Large numbers of people each day also move out. These people, who had previously moved there, learned that Florida wasn’t right for them. Now having better information they decide where they moved from really wasn’t that bad and move back. The chances of this happening are far higher than what people now considering a move to Florida would guess. Almost everyone that moves to Florida believes it’s a permanent relocation. Population researchers know better.
If you’ve read the Florida Move Guide, you know Florida’s real estate prices are like a roller coaster. When the number of people moving in is high during good times, Florida real estate price increases usually outpace other states because of supply can’t meet demand. During recessions the number of people moving to Florida can slow terribly and quickly put an end to that strong demand and cause prices to tumble. During these slowdowns, the number of people who want to leave Florida usually remains steady or increases due to job losses adding to supply at a time when demand decreases.
During downturns when money becomes tight and consumer confidence falls, fewer people vacation in Florida. Hotels, restaurants, golf courses and other tourism related businesses suffer and don’t need as many workers so they let them go. Not as many homes need to be built. Fewer people furnish homes or buy boats. All of this adds up to significant job losses. Tough times in Florida can cause people whose previous honeymoon with Florida is now over and are on the fence about moving “back home”, to make the decision to leave, further increasing the supply of homes that need new owners. When real estate prices drop below what people owe on their Florida home, foreclosures start to increase, further accelerating price drops.
When Florida home prices become too high for many people to afford to buy
Many people who currently would like to give Florida a try, have decided over the last couple of years they couldn’t afford to move to Florida because Prices shot up too high. Many are waiting until the next time Florida home prices drop. They dropped 60% on average during the last recession. I expect a similar situation in the near future. But what are the pros and cons of buying a Florida home or condo after large price drops?
The Pros of buying real estate in Florida during downturns after prices crash
- You can usually buy a home at a significant discount, up to 60% off compared to the previous “bubble” pricing.
- The market can quickly flip to a strong buyers market and some sellers will do anything to accommodate a buyer to sell their home.
- The number of homes for sale will grow dramatically and delight buyers because it will be more likely they will get exactly what they want and for a price they can afford.
- As prices drop in Florida, so do property tax assessments so buyers may save on real estate taxes and possibly insurance rates.
- During downturns, buyers for Florida homes become like an endangered species and real estate agents will treat you like royalty.
- If you buy at a bargain price in Florida and end up discovering that Florida isn’t right for you, chances are your home will be worth far more that what you paid when you want to sell and move out. Unlike most of the people who bought when times were good and prices were high, you may actually break even, or at least not lose as much when the total cost of multiple home sales and long distance moves to Florida and back is tallied up.
Article from the Wall Street Journal: Another recession is looming…
The Cons of Buying Florida real estate at a bargain price after a downturn
- If you couldn’t afford to buy when prices were high, you may not be able to afford your bargain when Florida home prices rebound sending real estate taxes, insurance and other ownership and maintenance costs higher. This can be especially true if you are on a fixed income or otherwise not in a position to increase your income as the cost of living increases.
That’s it. That’s all I have. The pros seem to greatly outweigh the cons.
However, here’s the big problem with waiting to buy in Florida until prices drop.
We all know that buying low and selling high is better than the opposite. So why do far more people buy when home prices are high in Florida than when they’re “on sale” for 50% off? Why will most people, maybe even you, even knowing how much better it would be to buy when homes are half price, not be able to take advantage of the coming buying opportunity?
- Because during the next downturn, it will be tough as nails to sell your home where you live now in order to buy in Florida.
- Most prospective Florida real estate buyers won’t or can’t buy in Florida until their current home sells.
- The real estate market where where you live now will also likely have few buyers and prices may stagnate or even drop.
- It probably won’t be anywhere near as bad a Florida, but finding a buyer during economic downturns is never easy.
- You’ll also likely feel less comfortable as the stock market drags 401k’s, IRA’s and other accounts in a southerly direction.
There are some excellent strategies to make the real estate markets in your state and Florida work to your advantage. I’ll make them available soon
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Ron Stack “That Best Places Guy”
- Want to be certain if moving to Florida is right for you or your family? You’ll know after reading the Florida Move Guide.
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Hi, Ron,
Re: this subject, we decided to sell our home this past spring, while the local market here in Indiana is healthy. Our plan is to rent for the next year or two, while I finish up work and retire. This way, while we watch the Florida market and hopefully see the bubble burst, we can move quickly on a property we like and not have to wait to sell the house. That’s the plan, anyway 🙂
Thanks again,
Steve
Hi
I’ve been reading ( January 2019 ) that they don’t expect another crash like the last one. Currently people are still moving to Florida in large numbers , builders are not over building and banks are being more conservative with home loans supposedly prices won’t tank. Do prices gradually go down or is it literally like a crash?
Hello Anne,
You wrote: “I’ve been reading ( January 2019 ) that they don’t expect another crash like the last one.”
The “experts” weren’t expecting the crash 10 years ago either.
You also wrote: Currently people are still moving to Florida in large numbers
This was true of the last crash too, lots of people were moving to Florida back then also, until all of a sudden they weren’t. During bad times, the large number of people that move out of Florida every day no matter what the economy looks like, increases.
Do prices gradually go down or is it literally like a crash?
People move to Florida for the weather and other reasons, then move out because of the weather and other reasons. This happens every day, Florida is a transient revolving door state. When times are good, far more move in than leave and home prices increase faster than most places. During bad times this reverses because the number of people moving in slows because they can’t sell where they are but people in FL still want to leave. This causes prices to sink faster than anywhere else. If buying in a state that has wild swings in real estate prices, it’s best to become aware of where we are in the economic cycle (successive hurricane years, red tide, etc. can all add to the effect) because you may be paying a high price for something that may drop in value quickly not long after purchasing. That’s okay if we’re aware and choose to go ahead anyway. Good luck Anne.
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Ron Stack “That Best Places Guy”
Hi Ron,
We will be relocating to Florida soon, but will be renting first. Maybe its my wishful thinking but it seems house prices in Central Florida are on.the market longer and being reduced in price before they sell? What are your thoughts?
You don’t have to guess what the market is really like. You don’t have to ask an “expert” who may just give you an opinion that could be different than the facts, or worse yet, be given a standard “you better buy now because if you don’t homes will just cost more next year…”.
You can learn the facts for yourself.
Just go to https://www.realtor.com/realestateandhomes-search/Orlando_FL for Orlando, or put any city in the search bar, and then scroll down near the bottom of the page, below all of the listings, until you see “Facts about Orlando, FL”.
On 2/27/19 the number of home listings was growing, the number of days homes were sitting on the market was growing, and when these 2 things happen, prices go down eventually. That is exactly what the page showed, median home prices in Orlando were heading down. But this is nothing compared to how far prices will drop when the next recession hits and that could be this year Most economists see a US recession by 2020 (Wall St Journal)
Here are some more articles to learn how to know when it’s the best time to buy:
Don’t buy a home until you know this
Is it a good time to buy a house in Florida
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Ron Stack “That Best Places Guy”
Thanks for the information. We were going to move to Florida around 2012, but decided to let my youngest graduate in our current state. We could have paid cash. I can not believe how the prices have gone up. I think way overpriced. Even the new constructions have skyrocketed. We are going come down this Summer and rent. Hate renting but i can’t see overpaying, hoping prices come down. I’m going to have to get your books.
Lets realize the truth here. NO home prices will be as low as the previous crash in Fl. Fl. has tried and always WILL want to compete with the home prices north of them. This can and never will happen! This recession starting in Sept. 2020 will be as logical as one thought. Job losses-IRA’S crashing- sadly ones losing their homes only brings this sticky situation more bound as CRAZY glue! Florida may see in some areas a price drop of as high as 20%. This is not bad… considering this recession will only last till 2022.
Have you been smoking your crazy glue? The severity of the next recession will be determined by how the elections go in 2020. If one party wins, any recession will be mild and home prices won’t be hit that bad except in the same states that became foreclosure basket cases in the last one. If the other party wins, the next recession will be far worse and last longer than the last one. Regardless of what happens, buying a home anywhere, but especially florida, when they’re badly overpriced right before a downturn is always a bad idea.
Hello Ron. When dealing with the luxury market, do $3,000,000+ home values move in line with average homes that are priced in the hundred thousands during recessions? My question is even though the market is inflated right now, would now be an Ok time to buy a $3,000,000 home? Or, are homes at that level also subject to possible 50%+ corrections? Thank you.
Hello Jeff,
Great question. Economic slowdowns can affect one market far differently from the other, depending upon what caused it. Overall however, it has been my experience that high end properties in the past usually weather storms better because most of their owners (who often have multiple homes) usually don’t come under such financial pressure that they have to sell. This prevents that market from becoming saturated with sellers and prices to sink. Luxury real estate owners also usually know home values will recover eventually, then continue to increase. So they just wait until better times return to sell. Also, there always seems to be money out there no matter how gloomy things get, to buy better located homes when they need to be sold and they’re discounted. But that’s how it usually worked in the past…
Will a major change in tax policy, if in fact a bill does actually get passed and become law, where trillions need to be raised (solely?) from high net worth individuals and those earning over 400k, change the Florida luxury real estate market?
There has been so much intervention in the markets since 2008, and so many policy changes enacted and proposed (which seems to change daily right now 11/10/2021), it’s next to impossible to know now, what may happen in the future and if it will be anything like the patterns of the past.
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Ron Stack “That Best Places Guy” of Zeus Press Inc
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Its March 2022 and my husband didnt want to buy in 2020 because he didnt like any houses we looked at. We are going on 5 years of renting and now pretty much screwed, as the homes that we qualified for are now crap holes due to inflation. Not sure what to do now because he is screaming about paying more for a home and cant see it happening. SHOULD WE RENT ANOTHER YEAR AND WAIT THIS OUT? Please help. I had the perfect home picked out in 2020 and he said NO. Now he is mad because of being a fool and losing out! Thanks for any info~