In recent years, Florida experienced a booming housing market, fueled by a surge of newcomers during the Covid-19 pandemic. The state's warm weather, low taxes, and relatively affordable housing market attracted many Americans, driving up home values. However, new data from Redfin suggests that Florida's housing bubble may have burst, as prices stagnate and the housing supply soars in some areas.

On the west coast of the state, there has been a notable increase in the number of properties on the market, leading to longer selling times for homes. According to Redfin, sellers in Florida are also cutting their asking prices at a faster rate than anywhere else in the US. This slowdown in the market can be attributed, in part, to the fact that many local residents have been priced out of homeownership.

One area particularly affected is Cape Coral in southwest Florida, where the number of homes on the market has surged by 51 percent in the last year. Eric Auciello, a local Redfin sales manager, highlights that "out-of-town homebuyers no longer see Florida as a place to get amazing value" and are instead seeking better deals in states like North Carolina or Tennessee. Additionally, many blue-collar workers in Florida have also been unable to afford homes.

The increase in homes for sale is not unique to Cape Coral, as six out of the ten metro areas with the largest year-over-year increases in supply are located in Florida. North Port-Sarasota tops the list, with a 48 percent increase in supply, followed by Fort Lauderdale with a 30 percent increase. Other areas experiencing significant supply growth include Tampa with a 29 percent increase, Orlando with a 23 percent increase, and West Palm Beach with a 20 percent increase.

In terms of price cuts, five out of the ten metro areas with the highest likelihood of sellers reducing list prices are located in Florida. North Port-Sarasota leads the pack with 48 percent of listings last month having a price cut. Tampa follows closely behind with 44 percent of homes experiencing price reductions, and Cape Coral with 41 percent.

Eric Auciello explains that the North Port metro, which used to be seen as one of the most competitive housing markets due to its affordability and shortage of homes for sale, no longer holds these advantages. He describes Sarasota as being overvalued for decades and asserts that the Tampa metro has fared slightly better.

Redfin data shows that the median sale price in North Port-Sarasota has dropped by 4.6 percent in the last year, and homes took 20 days longer to sell in March 2024 compared to the previous year. Cape Coral experienced the largest jump in selling time nationally, with homes taking 31 more days to sell than in the previous year.

The slowdown in Florida's housing market can be attributed to various factors. Individual sellers struggle to attract buyers due to builders offering attractive concessions, causing regular listings to remain on the market. Furthermore, some sellers overprice their properties initially and are forced to reduce prices later.

In addition to these challenges, the state's growing insurance crisis has further complicated home purchases and, in some cases, delayed transactions. Redfin's separate survey reveals that 70 percent of Florida homeowners have been affected by rising insurance costs or have been dropped by their insurer, significantly higher than the national average of 44.6 percent. Rising insurance costs have also become a reason cited by 11.9 percent of Floridians planning to move in the next year, double the national average of 6.2 percent.

The situation in Florida mirrors trends seen in parts of Texas, with surging supply and sluggish demand. In Texas, the metro areas of McAllen and Dallas have experienced the largest year-over-year increases in supply. Houston and San Antonio are also among the top metro areas where sellers are most likely to cut list prices.

As the market dynamics shift, Florida's housing bubble appears to have burst, leaving sellers and buyers in a new landscape with slower sales, price reductions, and a surplus of homes. Adjusting to this buyer's market may prove challenging for homeowners, especially those who have built up substantial equity but are hesitant to sell due to high mortgage rates.