Florida ranks as one of the least affordable states to purchase a home, based on the latest data from the Mortgage Bankers Association (MBA). High mortgage rates and elevated home prices are keeping many prospective buyers out of the market.

Market Trends and Context

During the COVID-19 pandemic, Florida became a popular destination due to its warm climate, relaxed lifestyle, and relatively low cost of living. However, the markets that flourished during the pandemic have cooled significantly over the past year, as inbound migration slowed and new housing inventory increased.

Experts suggest that high mortgage rates, combined with elevated home prices and rising homeowners insurance premiums, are straining affordability. This combination is expected to reduce demand and potentially lead to price decreases across the state.

Affordability Metrics

The MBA uses the Purchase Applications Payment Index (PAPI) to assess home affordability. This index reflects the cost of a mortgage, including interest, relative to household income. In November, Florida’s PAPI stood at 209.9, placing it among the least affordable states, following Nevada (248.7), Idaho (244.2), and Arizona (220.7). The national PAPI for the same period was 163.3.

Although Florida’s mortgage rates for a 30-year fixed loan are slightly below the national average—7.06% compared to 7.09% as of Tuesday—the state’s high home prices and insurance costs continue to burden buyers.

Impact of High Mortgage Rates on Florida’s Market

Real estate analyst and Reventure App CEO Nick Gerli attributes Florida’s market slowdown to its lack of affordability. “Home sales are down 40% from their pandemic peak. Inventory is at its highest level in nearly a decade, and prices are starting to decline, but not quickly enough for many buyers,” he noted on social media.

Gerli highlighted that the average mortgage payment in Florida now constitutes 40% of household income, with typical buyers needing approximately $30,000 annually to cover mortgage, taxes, and insurance. The median household income in Florida is $75,000.

Expert Perspectives

Gerli described the current mortgage payment-to-income ratio as unprecedented, comparable only to the mid-2000s housing bubble. A recent Senate Budget Committee report warned that rising insurance costs and limited availability of coverage could further complicate homeownership, particularly for buyers relying on mortgages.

Sean O’Dowd, a real estate investor, noted the critical role of insurance. “Without proof of insurance, lenders won’t approve a mortgage. High insurance premiums can push monthly payments beyond what many first-time buyers can afford,” he explained.

Outlook for Florida’s Housing Market

Experts, including Gerli, anticipate continued cooling in Florida’s housing market, driven by reduced demand, lower migration, and increased supply. Gerli’s firm predicts price declines across the state, which could improve affordability for buyers.

Redfin economist Chen Zhao and other analysts expect certain Sun Belt markets, including Florida, to offer more opportunities for buyers in 2025. Norada Real Estate Investments identified Gainesville, Palm Bay-Melbourne-Titusville, and Lakeland-Winter Haven as areas at high risk of a downturn, with potential price drops of up to 15%.

Conclusion

As Florida’s housing market adjusts to changing conditions, prospective buyers may see more favorable pricing. However, affordability challenges persist, underscoring the need for careful market monitoring and financial planning.