Southwest Florida is now seeing properties languishing on the market for months — what’s behind this trend
Treasury yields, which influence consumer borrowing costs, have risen. Fixed 30-year mortgage rates in the U.S. are close to 6.9%. Rising mortgage rates reduce prospective homebuyers’ purchasing power. For those thinking about buying a home, an increase in mortgage payments, by potentially hundreds of dollars per month, can mean the difference between deciding to buy a home or not.
Insurance costs have also skyrocketed in Florida, where natural disasters like hurricanes and flooding have sharply driven up premiums. In fact, climate-driven disasters are driving up insurance premiums across the U.S. For example, in midwestern states, hail storms have caused premiums to rise rapidly and some insurers are even refusing to cover homes in vulnerable areas.
According to the Wall Street Journal, severe storms cost insurers $58 billion in 2024. The Consumer Federation of America says U.S. homeowners have faced a 24% increase in home insurance premiums in the past three years. Additional insurance costs are another factor further deterring potential buyers from entering the market.
Added to all of this are the inflated home prices still lingering from the housing boom during the pandemic. This combination of factors is creating a challenging environment for both buyers and sellers.
Potential long-term impact
The good news is that the housing slowdown in Florida seems to reflect a market correction rather than a crash. Yes, home prices in the state have fallen over the past year, but only around 3%, and they are stabilizing.
The slowdown has triggered an inventory buildup in cities like Fort Myers in the southwestern part of the state, which could prolong the market correction in these areas.
The more worrying long-term impact may be related to the rising cost of insurance. If premiums continue to rise at the current rate, it could put home ownership beyond the reach of first-time buyers.
According to the Bipartisan Policy Center, some homeowners are choosing to forgo insurance altogether, potentially putting their No. 1 asset at huge risk. What’s more, as insurers exit some markets due to climate risks, it could also affect the equity of existing homeowners.
So, while the housing market in Florida does not appear to be collapsing, there does appear to be an affordability crisis created by rising mortgage and insurance costs. This could transform who can afford to buy a home, in what areas they can do so and what degree of risk they incur.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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