Northeast Florida Housing Market: A Complex Picture

The Northeast Florida housing market presents a perplexing situation: rising inventory levels yet persistent price growth, making homeownership increasingly challenging, particularly for families looking to buy their first home.

When residential housing inventories rise, this typically results in a buyers' market, with prices coming down to move the inventory. “Among the nation’s 400 largest metro area housing markets, 59 markets ended November 2024 with more active homes for sale than they had in pre-pandemic November 2019," according to Fast Company. "These are the places heading into 2025 where homebuyers will be able to find the most leverage or market balance.”

Jacksonville made the list at 42. Yet, home prices are not going down.

This complex scenario is influenced by several factors, including the significant presence of institutional investors. The data indicate that institutional investors own a substantial portion of the single-family rental market in Northeast Florida. “While institutional investors own roughly 2% of the single-family rental housing stock across the U.S., they own a much greater share of homes in certain markets, particularly in the southeast,” according to the National Low Income Housing Coalition.  “GAO estimates that institutional investors own 25% of Atlanta, GA’s single-family rental housing market, 21% of Jacksonville, FL’s, 18% of Charlotte, NC’s, and 15% of Tampa, FL’s single-family rental market.“ This high concentration of institutional ownership exerts a significant influence on sales prices and inventory.  

• Impact on Prices:

  • Increased Competition: Institutional investors possess substantial financial resources, enabling them to outbid individual buyers, driving up prices.  

  • Reduced Supply: As institutional investors acquire properties, they remove them from the market accessible to traditional homebuyers, further limiting supply.  

    
    

• Rental Market Impact: The increased presence of institutional landlords leads to more rental inventory as opposed to available properties to homestead and higher rental prices, making it more difficult for renters to save for a down payment and ultimately become homeowners.

Beyond Institutional Investors:

• Interest Rates: The Federal Reserve's efforts to combat inflation have led to a series of interest rate hikes. Even with rate reductions this has significantly increased the cost of borrowing, making mortgages more expensive and reducing affordability.

• Inflation: Inflation has eroded the purchasing power of wages, making it harder for potential homebuyers to save for a down payment and afford monthly mortgage payments.  

• Limited Supply of Affordable Housing: The region faces a shortage of affordable workforce housing options, further exacerbating the challenges faced by first-time homebuyers and local businesses in the affected communities to hire qualified help.

Quantifying the Impact:

• Price Growth: While inventory has increased, prices have continued to rise, albeit at a slower pace. This indicates that factors like institutional investment are still exerting upward pressure on prices.

• Affordability Decline: The Home Affordability Index has declined, reflecting the growing gap between home prices and the ability of average families to afford them.  

  
  

Challenges for First-Time Homebuyers:

• Higher Down Payments: Rising prices necessitate larger down payments, a significant barrier for many homebuyers at at time when savings are at historic lows.  

• Increased Mortgage Costs: Higher interest rates translate to increased monthly mortgage payments, making homeownership less affordable.  

• Competition: Individuals are having to compete with institutional investors.

Looking Ahead:

The Northeast Florida housing market faces a complex set of challenges. While the increased supply of available homes provides some hope for families, the combined impact of institutional investment, rising interest rates, and inflation continues to make homeownership a significant hurdle for many.