Investing in 2024 Florida
Hey investors. 2023 is over, and we have insights about what is shaping the real estate market in Tampa and across Florida. From subtle changes in rent growth to competitive sales dynamics, let’s go over what these trends mean for you. Stay ahead of the curve with this analysis, guiding your investment strategies for 2024 with real, actionable insights.
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2023 Florida Market Recap
In 2023, Florida's real estate market, including Tampa, experienced significant shifts. While rent growth dipped slightly, the overall housing market remained dynamic and competitive. The state witnessed a healthy increase in new listings and inventory levels, reflecting a vibrant sector. Despite a modest decrease in rent growth, key indicators such as median sale to list ratio and median sale price showed ongoing market competitiveness. Notably, about 14.5% of homes sold above list price, while 67.9% sold below, highlighting varied negotiation or listing dynamics. These trends suggest a market ready for investment, as it balances competitive pricing with a growing range of options and concessions for buyers. For more insights, you can view the detailed statistics and predictions on the Florida housing market on Norada Real Estate Investments.
Market Shift Toward a Traditional Balance
In 2023, Florida's real estate market saw a shift towards a more traditional balance. According to Florida Realtors’ Chief Economist Dr. Brad O’Connor, this shift is reminiscent of the market dynamics of 2018-2019, characterized by a balanced supply and demand. This marked a stabilization after the volatile years of the pandemic, inflation, and fluctuating mortgage interest rates. More details on this trend can be found in a report by Florida Realtors.
Economic Growth and Job Market Strength
The state's economy demonstrated robust growth, with a GDP increase of 4% in 2022, signaling a strong recovery from the pandemic. Florida also led in new job creation, surpassing other states. Despite the potential for a mild recession, the state’s economy is expected to continue growing, albeit at a slower rate. This economic perspective is elaborated in a comprehensive analysis by Real Wealth.
Construction and Development Boom
Florida experienced significant growth in residential construction, issuing over 212,000 building permits in 2022, making it second in the nation. This boom, especially in areas like Tampa Bay and Orlando, indicated a vibrant housing market. However, challenges such as delays in new home construction were prevalent due to labor and material shortages. The details of this construction trend are highlighted in the same report by Real Wealth.
2024 Investment Trends
Despite rising costs (ahem insurance) and financial challenges, Central and South Florida continues to be a hot area for real estate investment. The persistent demand for the South Florida lifestyle in particular is attracting both local, domestic and international buyers. Ongoing condo construction projects, particularly those financed with upfront buyer deposits, show active development. Our area's sustained growth makes it a promising area for investments long term.
We see a new balance happening in the market which started in 2023 and is expected to continue. With less than 3 months of inventory (2.7) on the market, the rule of thumb states this is a heavy sellers market. However, the real-time vibe is of a slight buyers market. We should be going back to supply and demand. The supply is low but appears to be picking up. The demand has been low as well and may not be picking up until and if rates go down this year - because that’s the publics perception right now. If rates remain flat, I believe the demand will pick up slowly and over time but take a bit longer for retail buyers to come to terms with affordability vs renting.
A large number of Florida's condos are aging, making condo terminations for redevelopment increasingly common. This trend is particularly noticeable in Miami-Dade and Broward counties. State regulations for repairs, combined with escalating construction and insurance costs, make condo redevelopment an attractive investment. Redeveloping aging condos caters to Florida’s growing population and housing demand.
Real estate flipping remains a popular investment strategy, where investors buy properties, renovate them, and sell for a profit. In rapidly growing markets like Tampa, flipping can be lucrative due to high demand and rising property values. However, investors need to be mindful of market dynamics and renovation costs to ensure profitability. If interest rates are to lower in 2024, flippers could experience a windfall.
PadSplit offers a unique approach to real estate investment, focusing on shared housing for affordable living. The platform enables property owners to convert single-family homes or apartments into shared living spaces. This model is particularly beneficial in cities with high apartment rental costs, like Tampa, where PadSplit has gained traction. By listing properties on PadSplit, owners can increase their rental income significantly. For instance, converting a four-bedroom unit to a seven-bedroom unit can result in a substantial increase in net income. Interest in PadSplit grew by 37% over the past year, indicating a rising trend in shared living arrangements. PadSplit's model is primarily discussed on platforms like Reddit, highlighting its growing popularity among users seeking affordable living options. The company experienced significant growth in 2021, tripling its year-over-year inventory of available units and expanding into new markets, including Tampa.
There are still ways to cash flow, but I would argue that the Central and South Florida markets are less of a hybrid between cash flow and appreciation now. They weigh more heavily on the appreciation side, so looking for strategies that capitalize on that is wise and much different than the old ways (buy any move-in ready single family and get $300/mo cash flow).
