The Florida real estate market is collapsing, listing prices are falling to a 30-month low but are still way too high, inventory is piling up, institutional investors are becoming net sellers

Whoever panics first panics best. Mr Holmes, who hasn't received any offers for nine months, has missed that train and is seeking lower prices.

By Wolf Richter for WOLF STREET.

So let's take the example cited by the WSJ of “Anthony Holmes,” who bought a home in a suburb of Tampa, Florida, for $550,000 in 2021 after real estate prices exploded. He invested another $50,000 and now has $600,000 in it. And then he had to move to Virginia for his job. He put his house on the market in February 2024, expecting an easy sale, maybe a bidding war or whatever, and an easy profit. But nothing. He then reduced his original price five times to $583,900.

“I can’t unload this thing,” Holmes told the WSJ. “In eight months I had zero offers. Nobody showed up at the open days. No one.”

We knows why he “can’t unload the thing”: the price is too high.

The problem with no one showing up is the listing price compared to similar homes in similar areas. You can sell almost anything if the price is low enough. People are buying houses in Florida, it's not that no one is buying, but sales have plummeted and the price can no longer be arbitrary. If no one is interested, the price is too high, it's that simple. And probably by a lot. If it's just a little too high, you'll get a few nibbles. This is the situation Mr. Holmes is facing and time is not on his side (data from Realtor.com):

The median list price in September fell to $437,251, according to Realtor.com, its lowest level since February 2022. On the way down, it steadily broke through the normal seasonal high in June 2024, and the decline has accelerated since then.

List prices are prices that sellers like Mr. Holmes want or think might work. It is not the price the buyers agreed to pay.

Mr. Holmes spent the last nine months chasing his competitors' faster-falling list prices.

Compared to the seasonal peak in June 2022, the median list price is down 11% and we get the impression that this has only just begun.

Transaction prices (Closed sales) for single-family homes in Florida have fallen for three straight months since August, reducing their year-over-year gain to 1.5%, according to Zillow data. Condominium prices have fallen for the eighth straight month since August and are 2.5% year-on-year below levels two years ago.

Discounts to counteract a list price that is too high.

There were 52,554 discounted listings in Florida in September, the second-highest September ever in 2016 data, behind 2018. They are up 76% since September of last year.

Mr. Holmes' five price reductions resulted from his inflated asking price and were far too timid and slow, as evidenced by the fact that no one came to the open houses.

For buyers, it doesn't matter how much money Mr. Holmes put into the house; it is irrelevant to them. He said he would like to break even but that is irrelevant to buyers. Shoppers are looking for deals rather than paying anything.

List prices need to be reasonable first and foremost, and if they don't catch on, price cuts need to be bold and stand out in this competitive space as there is now a lot of competition (Realtor.com data).

Large institutional investors have become net sellers.

Major landlords of single-family homes moved years ago to building their own rental apartments with rental and maintenance offices and community facilities – the hottest trend in housing construction. These communities are more efficient to operate than individual houses scattered all over the place.

In their earnings releases, some of them began emphasizing last year that they would sell some of their scattered rental properties that they had purchased in the wake of foreclosures during the mortgage crisis, and particularly in 2012 and 2014, when Blackstone and others entered that market got in, with encouragement from the Fed. Now, after these massive price increases, they are making huge profits on the sales, even if they price the home aggressively. They are the professionals, they know what they are doing (Who are the largest landlords of single-family homes and multi-family apartments? Who owns the rental housing stock in the US?)

Institutionally owned single-family homes accounted for nearly 5% of listings in Tampa, Orlando and Jacksonville over the past 60 days, according to a Parcl Labs analysis cited by the WSJ. Institutional investors own between 2% and 4% of single-family homes in these three markets and have been net sellers in these markets over the last 90 days – reducing their portfolios.

This is the competition that Mr. Holmes has to deal with.

These companies don't have $600,000 in house. They bought them for a fraction of that during the housing crisis, and they make huge percentage gains if they can sell them for $400,000.

Every month that Mr. Holmes doesn't sell his vacant house is an expensive month. Transportation costs are significant, even with 2021's lower mortgage rates, and insurance premiums, oh-la-la. An empty house costs money and prices fall.

You can't lose money on real estate is the greatest propaganda BS line of all time, as even the smartest institutional investors and commercial real estate lenders have relearned over the past two years.

But Whoever panics first panics best was forgotten. Mr. Holmes has already missed this train. And now there's another hurricane that he wouldn't have had to contend with if he had priced the house aggressively in February, undercutting everyone else and selling it quickly and for the lowest possible loss.

And inventory – competition for Mr. Holmes – is piling up and being put on the market by similarly nervous home sellers.

Active entries are increasing.

Active listings (total inventory minus listings with pending sales) rose 35% year over year in Florida to 185,696 listings, the highest since September in data since 2016, as demand has declined and inventory is outdated and prices are way too high (Data from Realtor.com).

The average days on market are lengthening.

The average number of days a property for sale sat on the market before being sold or taken off the market rose to 74 days in September, matching September 2019, and both are the highest since 2017.

This metric is a mix of:

• How aggressively sellers withdrew offers from the market when they didn't sell;
• And how quickly real estate sold it did sell.

As sellers become more desperate, they will leave the property on the market rather than sell it quickly and may try to lower the price until it sells. In this dynamic, the days on the market are lengthening.

So we wish Mr. Holmes good luck.

But he doesn't need our desires or our happiness; He needs to drop the price boldly and immediately, understanding that buying the house during the craziest real estate bubble ever was just a high-risk bet that didn't work out, and this is what's happening and he could lose some money. But he would have lost a lot less money, including nine months of running costs, if he had priced the house in February to undercut everyone else, and he had sold it quickly, making himself at the lowest possible loss (if at all) would have washed my hands of it. .

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