ORLANDO, Fla. – We’ve traveled once around the sun since the COVID-19 virus rocked the real estate world. In the early days, fears about overall market health were common, but now the problem child targeted by economists is housing inventory.
Supply has been constrained for both new construction and the existing home market – that isn’t new. Data from Florida Realtors indicates statewide inventory has been low for years, with “Months’ Supply of Inventory” dipping below the generally accepted “balanced” level of six months since 2013.
Florida Realtors®’ March 2021 metrics reveal single-family inventory is 31,658, or about a 1.2 months’ supply of inventory. Similarly, townhomes and condos have just above 30,000 active homes on the market, though that’s equivalent to a 2.8 months’ supply of inventory since this property type has fewer closed sales.
As a metric, “months’ supply” indicates the amount of time it would take to deplete the current active inventory if no new properties are listed. To say new listings are essential to keep the well from drying up is an understatement. In just over a month, Florida wouldn’t have a for-sale inventory at all if no new listings came onto the market.
To provide a different perspective, inventory is 62% and 42% lower than last year’s levels for single-family and condo/townhomes, respectively.
The situation is more dire when considering affordable homes.
Let’s consider a typical Florida family. They have a household income of roughly $60,000, according to the 2019 American Community Survey. Based on a recommendation of allocating no more than 28% of your monthly expenses toward housing, the family could reasonably spend $1,400 per month. Using a one-percent rate for property tax and roughly $2,000 for property insurance calculates to a purchase price of $300,000.
Fees for homeowners’ and condo associations and other household expenses are not included, and a 20% down payment is also assumed; but for simplicity, we’ll use $300,000 and below as our basis for affordable.
Under one-third of Florida single-family homes on the market at the end of the first quarter of 2021 (roughly 10,000) are listed below the $300,000 price cap. Affordable inventory dropped over 69% from a still-low level of 33,000 in March 2020. Inventory is stretched even thinner in many areas of the state – particularly Southwest Florida.
Unfortunately, no area in Florida can breathe a sigh of relief. All metropolitan statistical areas have fewer active listings now than a year prior. Declines in most metro areas ranged from 60% to 90%.
Typically considered an alternative to detached single-family homes, townhomes and condos are pushing toward a similar fate. Inventory of homes priced less than $300,000 was cut nearly in half from March 2020 to March 2021.
The tailwind of higher new listings for both single-family and townhouses and condos in March 2021 wasn’t enough to combat the downward pressure on supply. Buyer demand remains strong amid modestly increasing mortgage rates, and new construction grapples to make up ground from prior years while struggling with increased material and labor costs.
But wait, there’s more! Affordable homes are also ripe for investors, both institutional and individuals, adding another layer to already intense competition. Continued demand is anticipated, so unless supply increases, inventory is likely to dampen even further.
By Erica Plemmons – is an economist and Florida Realtors Director of Housing Statistics
© 2021 Florida Realtors®