Florida Price Increases to Continue
95% likelihood home prices will rise over next two years
GREENSBORO, N.C. – Jul 19, 2018 – The number of existing homes for sale hasn't been this low since analysts started tracking the data in the early 1980s, making it a difficult market for buyers, according to the new Summer 2018 edition of The Housing and Mortgage Market Review (HaMMR), released by Arch Mortgage Insurance Company.
Below-normal levels of construction coupled with a strong job market suggest that home prices have a 95 percent chance of rising over the next two years, though in Florida the report says it's 92 percent. The increases are likely to occur more rapidly in the entry-level housing segment.
"Fewer people are selling starter homes to trade up to bigger houses, and that's a trend that will continue now that the majority of homeowners have lower mortgage rates than they could get on a new loan," says Dr. Ralph G. DeFranco, Global Chief Economist for Arch Capital Services, Inc.
"Millions of entry-level homes were converted from owner-occupied to investor-owned rentals during the foreclosure crisis and higher development costs – ranging from utility hook-up fees to building permits – are leading builders to focus on constructing larger, more expensive houses. With fewer new starter homes, the most likely scenario is continued – rapid price growth of existing homes, particularly at the lower end of the market."
High demand and rising home prices are good news for current homeowners. The Arch MI Risk Index – a statistical model based on nine indicators of the health of local housing markets – estimates that the average probability across the country of home prices in 2020 being lower than they are today remains at 5 percent (8 percent in Florida), which is unchanged from the prior quarter.
The states with the highest risk of having lower home prices in two years are Alaska (27 percent) and West Virginia (22 percent).
Among larger metros, the cities with the highest risk of lower prices over the next two years include Houston, Texas (22 percent) and San Antonio, Texas (16 percent), mainly because their home prices are far higher than expected compared to the historical relationship between prices and incomes.
© 2018 Florida Realtors®
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