Key Points:
• Orlando’s housing market has reached record-high inventory, with active listings up 58% year-over-year to nearly 9,000 units. Despite interest rates falling to around 6.5%, many homes remain unsold, especially in the $300,000 to $600,000 range.
• Buyer demand is low due to ongoing affordability issues, with August pending sales down 4% from last year. Many potential buyers are opting to rent due to high ownership costs.
• New listings have remained unusually high into the fall, suggesting that sellers are motivated to act quickly, fearing further market softening.
• Migration trends show fewer out-of-state buyers relocating to Orlando, as recent data indicates demand is increasingly reliant on local buyers rather than high-income workers from other states.
• Sellers may benefit from listing sooner due to softening prices, while buyers have more inventory to choose from, offering potential negotiation advantages in lower and mid-price tiers.
Why Are Homes Sitting Unsold Despite Lower Interest Rates?
Orlando’s housing market is facing a pivotal moment as active inventory in this city is reaching levels not seen since 2016. And this is far from usual as we have seen inventory climb unabated month after month. Houses in the $300,000 to $600,000 price point, which is a trusted go-to high demand purchase for this particular area, are now sitting at 80% to 90% higher months of supply over last year, even as interest rates slammed down nearly 1% lower than last year.
None of it makes sense. If all we needed was a 6% interest rate, then how come homes aren’t selling? Today, we peel all the layers back on new data that was just released on our housing market for the greater Orlando area from the Florida Association of Realtors. Today, we’re going to dive into the data.
And if you’re looking to buy here, you’ve been planning to sell here, you’re going to know exactly what you need to do here in the fall of 2024 and going into 2025. As we get into that update, do me a huge favor for the research that I provided for you. Dive down below, smash the thumbs up and let’s get going.
All right, my friends, we are going over the Orlando Metro Statistical Area, the MSA. This is a government enacted area where all the major metros in the country are divided by really the main city. And I’ll give you an overview.
This is actually going to be Seminole County, Orange County, South Lake County, and Osceola County. There’s not really a lot of Polk County in this particular market update, so that’s going to be for another video. But what are we seeing? As I told you in the opener, we are seeing active inventory surge to a level.
You can see it here. We’re nearly 9,000 homes in August. That’s 58% over last year.
And that is 14 out of the last 15 months. Except for right here, you see in November, it took a little breath and there was a little bit of a sell-off. And ultimately, that’s holidays.
People just pulled back. But you’ve seen really for 15 months straight an unabated volume increase. Now, why are homes going unsold? Well, we’re going to uncover that in this video.
Is it a surge in people and desperation? I got to sell now. Life has changed. Is it a big uptick in active inventory or is it on the demand side with the buyers? Are the buyers just out of the market? But one of the things I will tell you behind the scenes as we look at active inventory is active inventory is burgeoning in the low and mid-range housing markets.
So, from 300,000 all the way up to 600,000 is growing big time. And I’m talking 70%, 80% in those particular categories. Well, why is that happening? Well, I think ultimately, you’re having price categories growing down.
Okay? So, somebody that was in the $400,000 to $600,000 price point, you’re seeing some of that roll backwards. And ultimately, right now, you’re going to see what’s going on with price here in a moment. So, I won’t let the cat out of the bag as just how much price is decelerating or if it’s climbing.
You’re seeing a massive uptick in available options for those in the low and mid-range price points than you have in many years. But ultimately, is it helping? We’re going to see in a second. All right, my friends, look at this weak low range compared to this entire chart, which is way up here, pushing close to 4,000 units per month, 3,500 units.
This is pending sales. This is the leading indicator that buyers are in the market looking to buy something. And look where we are in August.
2,423 houses pended represents 4% less than last year. Now, my friends, why is this a problem? Listen, you have to understand that in May, just three months ago, prior to this graph, you had interest rates at 7.5%. Those interest rates fell to around 6.5%. So, if you’re on social media, you see your friends in the mortgage business and the realtors and all this saying, oh, interest rates are falling. And they did.
What’s Causing the Housing Inventory Build-Up in Orlando?
They came down to 6.5% in August, 6.4%, 6.3%. You could be locking in at those rates with good credit. Did it help? I mean, you’re talking three quarters to 1% cheaper interest rate. I mean, it was a huge plummet overnight.
And here we are. We still cannot turn over more homes than last year. This buyer right here, 2,400 were pended way less than most August in history.
You go back in August, there’s, you know, 7,800, 1,000 more homes sold on these same months, yet you have big time anemic sell off. If you look back to 2020 and you’re in Orlando, it now costs you, if you’re putting 5% down your mortgage, 115% more per month to buy a house while your rent might be 25, 30% more per month to rent a house. So ultimately what’s happening is you’re having people debate shelter costs.
And if you don’t already own a home and you’re looking to buy another one, you’re going to sell one in the market in order to get that equity out. Possibly you shield yourself from the high cost of which is buying a house right now. But ultimately what you’re obviously seeing is that the affordability gap is taking its toll that even with a mid 6% interest rate, it is absolutely icing the buyers out of the marketplace still because the pendings have not responded to these low interest rates.
Now, my friends next up, we have closed sales. You can see most of this year. We’ve barely kept pace with the year prior last month of data we have right here.
August shows that we were barely dead even with last year with closings, 2,500 units. And remember, how many did we pend? Remember, I just showed you a second ago, we’re only putting 24, 2,500 homes in our contract. That is a leading indicator that a couple months down the road, some of those homes are going to fall out and some of them are going to close.
So if you’re already pending 2,500 homes in the future, you might be closing what? 2,200 of them, you know, cause in Orlando we lose 15, 20% of those pended properties. So essentially we’re not going to get much help from where we are now, but let’s see how many are hitting the market because ultimately, Hey, it’s not a big deal. If you’re only pending 2,300, 2,400, you’re only closing 2,400, 2,500, how much more new sellers are bringing more inventory and stacking them on top of what’s already in the marketplace.
Look at this 3,500 units listed in August, 3,500 units listed in July, 3,600 listed in June. Listen to this folks. These are big, big numbers.
This is interesting because one thing you have to understand is the natural flow of the market and what we’re seeing with sellers in Orlando right now is not normal. Here’s what I See this peak in 2019, the highest new listing month, highest amount of homes coming to the market. When was it? May.
What happened after May? It plummets every year. Look at this, the prior year, 2018. Whoa.
You can set a watch to it. It did the exact same thing. It plummets.
So ultimately middle of the year, you have a peak like here in June, but by the time you get to August, the numbers fall way off, but look what’s happening now. We’ve clustered these big numbers month after month, but look at the averages. Notice how there’s really been no dropping.
We’ve averaged around 3,500 to 3,600 new listings for several months straight. And as I look at this picture, you know what it tells me? It tells me that home sellers in Florida for whatever reason, they’re either leaving the area. There’s reverse relocation.
You have some forced sell-off. There’s something pushing the natural numbers because for us to peak around 3,700 homes, that is the highest amount of homes that we listed all year. And we’re still within 100, 200 units of that several months later.
To me, as we head into the fall, that is an interesting thing. Are we going to see a backoff of the new listings? And I would contend that we will not. I seriously think that for whatever reason in the marketplace, home sellers in Florida have got it in their heads.
And particularly in Orlando, they’re saying to themselves, time is no longer on my side. If I wait longer, it will be worse. And ultimately look at this, see how high this is four or five months straight up here.
Look at how many months you have to go back before you saw volume anywhere remotely near this. And we were in much different interest rate and a much different aggressive environment. So all these trades up here, when you see we’re pushing close to 4,000 units, that’s because there was huge amounts of loan applications, huge amounts of people in the market buying.
We have new data. Now we just got data for September that says we have some of the lowest amount of loan application for last month of any month on record for, for September. Okay.
Now think about that. You have a massive transition, a favorable interest rate environment compared to the last two years. So when you’ve been hovering around seven and a quarter, 7.3%, and now you have interest rates at 6.2, 6.3 with people with excellent credit and the marketplace still has record low loan apps.
You have a massive amount of buyers that just aren’t there. And for whatever reason, again, I’m not calling for anything. I’m not calling a market crash.
I’m not calling anything. I’m just reading the tea leaves. I’m just looking at data and expressing what I’m hearing in the market and seeing with my eyes is happening in the market.
The Risks of Waiting to Sell in 2024
You determine what you think is going to happen. As I said a second ago, there is a clear signal that on the seller side, home sellers are saying, if I wait, it’ll be detrimental. That’s the only thing you can validate unless you think there’s also recessionary issues or there’s financial pressure.
People have these homes, their second homes or their investment properties, and they cannot stomach the tax and insurance and the cost. Same reason the buyers can’t buy them. It’s just an affordability issue.
And another idea that’s being floated right now is that there is a reverse migration going on. So many of the people that floated here from California, New Jersey, New York, they’re moving back. They’re not staying.
The savings for living here for what you get for your money, just isn’t interesting anymore. And so they’re going home. And I will tell you this in my early research, I will tell you that I’ve been watching tax migration data.
So you can actually tell where people are coming into your County from by looking at where the tax revenues are going. So the IRS tracks this, it can all be loaded in a chart. And I did that.
I can tell you that looking at the data from 2018 to 2020, there was a huge influx of buyers from the Northeast, from Chicago, from California. And I can tell you from my early look at some of the most recent years of data that is shifting dramatically that most of the in and outbound revenue is largely from other Florida counties. So people are coming into a County, but they were next County over the data suggests that that just might be true.
That if you don’t have all this high income, remote workers residing here from other States, pushing up and sustaining our economy, that what you’re left to trade your housing stock in is the local income levels. And what we’re seeing is that the price ranges that which the local should be shopping in is stacking up horrendously. Well, Jared, thanks for the update.
You’re Mr. Sunshine. What should we do about it? Well, I’ll tell you this. The data to me is most glaringly directed at home sellers.
If you have a house in this marketplace and you know, you are going to have to sell it. And this is not investment advice. This is just my sheer opinion.
And it should be taken at a grain of salt and you should do your own planning and your own research based on your situation. But in my professional opinion, the chances are much higher that the longer a seller waits in this market, the worse it will eventually be. Prices are already tipping across some of the indexes in the Orlando marketplace.
And for the rest, if you’re looking to buy seller investors, always opportunities if you find the right seller. So if you need help with any of these things in the Orlando market, please put my team’s 25 years of experience and nearly 4,000 satisfied home sales to work for you. I can’t cover everything in one video, but I’ve got some great updates to give you some insight on what’s going on in Orlando.
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