2 States Where Home Prices Are Falling Because There Are Too Many Houses and Not Enough Buyers Close to three-quarters of Florida homeowners noted rising insurance costs or changing coverage in a new report.
Key Takeaways
- Despite a US housing shortage, Florida and Texas have too much supply, Redfin said.
- The states accelerated construction to take advantage of pandemic-era demand.
- But many are now priced out, while Florida's rising insurance costs are pushing down demand.
This article originally appeared on Business Insider.
A lack of U.S. housing has fenced off most would-be buyers, but two states are dealing with the opposite problem — an overflow of homes.
According to Redfin, Florida and Texas have properties stagnating on the market, as demand is shifting away from these areas.
Cape Coral and North Port, Florida saw the country's biggest surge in homes for sale, with volumes up around 50% from a year ago in March. The number of homes also jumped 25% in McAllen, Texas, Redfin reported on Thursday.
Both states have been building more homes than in any other part of the U.S., in a race to make room for pandemic-era newcomers.
"Two years ago, the North Port metro was one of the most competitive housing markets in the country because it was affordable for remote workers and there was a shortage of homes for sale, but none of those things are true today," local Redfin sales manager Eric Auciello said in the report.
Instead, buyers are now finding themselves priced out, and price growth has slid as a result. Of the country's top 10 metros where sellers were most likely to slash listed prices, seven are located in these two states.
"Out-of-town homebuyers no longer see Florida as a place to get amazing value. Now they're moving to North Carolina or Tennessee to get a good deal. Many local blue-collar workers have been priced out of homeownership, too," Auciello noted.
Adding to Florida's headwinds is a rising insurance crisis, with close to three-quarters of the homeowners noting rising insurance costs or changing coverage.
This has become a growing concern for the national housing market, as worsening climate risks amplify costs to insurance providers. A September study from First Street calculated that, amid hiking premiums and the loss of coverage in certain areas, home values could significantly erode.
"We're at an inflection point. A hefty insurance bill isn't always a big deal for a luxury buyer, but it can be a really big issue for someone buying a waterfront home on a smaller budget," Auciello said.
Both markets are also exposed to the same strains as the wider housing environment. High mortgages, now at around 7%, are keeping many homeowners from upgrading to a better home.
Nationally, the stubborn mortgage highs have caused new listings to fall 6% month-over-month in March, marking the biggest drop since January 2022, Redfin said.
Meanwhile, a shortage of homes has pushed the median US sale price 5% year-on-year, to $420,357. That's only 3% off the record-high price of $432,496.
