After historic run, here’s where Orlando’s cooling housing market is headed next.
For the first time in a couple of years, KeAusha Jordan is knocking on doors again.
In the last few months, the agent at Orlando-based Mainframe Real Estate LLC resorted to classic methods of finding clients, including mailers, fliers and going door-to-door, she told Orlando Business Journal. That’s a change from the last 18 months, when a frenzied local housing market had people swarming to agents and their listings.
Starting in summer 2020, Central Florida’s housing market saw historic levels of demand driven by low mortgage rates and accelerated migration to Florida from across the U.S.
During that time, Orlando became one of the top destinations for real estate investors wanting to capitalize on the red-hot resale and rental markets. That depleted the region’s home supply, causing property bidding wars and soaring prices.
Orlando still boasts a bustling housing market, but the winds are shifting as interest rate hikes lead to climbing mortgage rates, prices become increasingly unaffordable and the economic outlook is increasingly gloomy. These trends are important, as every home sale in Florida generates an estimated $112,500 in local economic impact, per the National Association of Realtors. Real estate activity also supports thousands of area jobs. Plus, the housing market often is considered a reflection of the local economy’s overall health.
For this special report, OBJ analyzed key performance metrics in the last 12 months in three areas of Orlando’s housing market: general, luxury properties and investor purchases. In addition, OBJ asked Realtors and economists to share what’s happening in the residential real estate sector and where it’s headed. Read on for more.
General housing market
In the last couple of months, sales have tapered off, inventory got a bump and more sellers are slashing listing prices than at any point in the past year. Still, homes are selling quicker than last year, and the median price is climbing, meaning buyers see limited relief even as demand declines.
The luxury market
When a couple from New York flew down to Orlando in June to see a $6 million estate near Lake Nona listed by Realtor Peter Luu, they bought it the same day. That shows the region’s high-end homes market still attracts out-of-state buyers willing to drop big bucks quickly. However, luxury home inventory is building back up while prices fluctuate, and even this market is experiencing changes.
The investor market
The number of Orlando homes bought by investors is falling alongside general home purchases, but investors are as big a part of the local housing market as ever. They typically seek homes priced below the market average to flip or convert to a rental property. That said, rising interest rates and prices cut into their expected returns.
More inventory, less sales — but no price drops
The housing market is approaching, if not already at, an “inflection point,” according to Abbey Omodunbi. That’s because multiple signs point to an industrywide slowdown, including escalating mortgage rates, cratering consumer confidence and concerns of a looming recession, the senior economist of PNC Financial Services Group Inc. told OBJ.
Meanwhile, Florida’s recent “unsustainable” home price appreciation is coming to an end, per recent projections by Orlando economist Sean Snaith, director of the University of Central Florida’s Institute for Economic Forecasting. The institute expects home supply in the area to recover from the rock-bottom levels reached last year.
With more homes on the market and prices stabilizing, the Institute for Economic Forecasting expects home sales across Florida to rise again as job seekers and retirees migrate to the Sunshine State.
What’s not being forecast? A housing market meltdown reminiscent of 2008. In fact, 60% of the 100 economists and experts included in a Zillow Group Inc. survey in June said the nation’s housing market is not in a bubble. Rather, the recent uptick in home prices can be explained by the lack of homes to buy and a growing preference for a single-family house, survey respondents said.
Despite all these signs of a slowdown, the market still favors sellers, according to experts. Looking ahead, expect home prices to appreciate at a slower rate but they won’t tumble on a wide scale, Omodunbi said.
“We might see more inventory come online and less sales.”