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Double blow for homeowners in Florida

The Florida real estate market is currently facing two major challenges: First, homes for sale are staying on the market longer, and second, buyers are hesitant to enter a market that is hampered by high mortgage rates, expensive home insurance costs and increased prices.

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Those challenges were illustrated by existing home sales data released Friday, which showed that single-family home sales in Florida fell 0.5 percent from a year ago. Condos and townhomes saw a nearly 9 percent decline, according to data from Florida Realtors, while listings and prices soared.

The median sales price of a pre-owned home rose 1.6 percent from a year ago to nearly $427,000, as listings increased more than 15 percent. Townhomes and condos saw prices rise 1.5 percent from a year ago to $330,000, as listings increased nearly 14 percent. This momentum comes at a time when mortgage rates have been hovering around 7 percent, though there have been signs of a slowdown in recent weeks.

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“While sales growth remains sluggish and new listings are still increasing year over year, inventory levels at the state level are still rising,” Brad O'Connor, chief economist for Florida Realtors, said in a statement.

A “For Sale” sign is seen in front of a house in Miami on March 26, 2013. The real estate market in the state is struggling with high costs for home insurance.

Joe Raedle/Getty Images

Holden Lewis, a real estate and mortgage expert at NerdWallet, said the increased cost of insurance coverage would help slow home sales in the state.

“Home insurance has become so expensive in Florida … that homeowners are having trouble affording the higher premiums,” he said Newsweek. “Many owners are putting their homes up for sale so they can buy or rent an affordable home. That's why inventory levels are rising.

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“Meanwhile, buyers are cautious as they consider insurance costs when making their home-buying decision,” he added.

Real estate economists point out that increased homeowners insurance could harm the existing home market in Florida.

According to Danielle Hale, chief economist at Realtor.com, Florida cities are seeing the highest growth in active listings, or homes that are being put on the market by their owners, in the nation. Tampa ranked first in those listings, Orlando third and Jacksonville fifth, Hale said.

One of the reasons for the high number of offers, says Hale, is that the houses are on the market longer.

“There are signs that homes are sitting empty longer. At the same time, we are still seeing a pretty significant increase in new sellers in these markets,” she said Newsweek. “So the houses are staying empty a little longer. But that hasn't stopped homeowners from putting their properties up for sale.”

In addition to the high cost of insurance, Florida also has a relatively high percentage of retirees who likely own their home outright and may be willing to wait a while for it to hit the market.

“These are the types of homeowners who are not affected by mortgage rate trends,” Hale said. “You can consider them to be fairly unencumbered in today's real estate market because they don't have to worry about it.”