Dear Valued Client:
2024 Market Recap and 2025 Outlook
As 2024 comes to a close, I want to thank you for your continued trust. It has been a year of challenges and adjustments, but also resilience and opportunity in Florida’s real estate market.
2024 in Review
Lakewood Ranch endured 3 hurricanes this past season and faced its first direct hit since 1921. This resulted in challenges in the insurance and lending markets that have influenced real estate pricing:
- An overall decline in home prices, trending back towards historical inflation-adjusted averages.
- An exodus of residents relocating to other States, an exodus of property insurance companies winding down operations in Florida.
- Diverging rental trends, with annual unfurnished rates softening, and luxury furnished vacation rental demand holding, albeit tentatively.
Big Picture Challenges
For home sellers, the almost unlimited supply of new home options, (homes built to the latest hurricane codes which insurers prefer), will have a further dampening effect on demand for older resale (used) homes, and will continue to put downward pressure on prices of resale homes. New home builders have already started aggressively cutting their asking prices, and this action reinforces this trend.
For landlords, the glut of rental units, built by large corporate landlords, in anticipation of the significant influx of new residents from out of State, which has now abated, has led to relaxed underwriting guidelines, (for example lowering the coverage ratio from 3 to 2.5 times), and move-in incentives, (such as offering first month free, so the prospective tenant needs only 2 months rent to obtain the key, instead of the traditional 3 months), ultimately will lead to an increase in default rates, which is highly undesirable, and something we counsel small independent landlords to avoid at all costs.
2025 Outlook
Looking ahead, I anticipate further market adjustments:
- Lakewood Ranch pricing will hopefully stabilize soon for both single-family homes and for multi-family units.
- However there remains significant downward market pressure, so the risk remains to the downside.
For landlords:
- Luxury Vacation Homes: Stable rental rates will not offset increasing operating expenses, making this segment an average performing investment at best.
- Unfurnished Rentals: Falling rents and rising operating costs will compress capitalization rates further, making this segment a poor performing category, and a good time to evaluate selling options.
Although 2024 was a year of great challenges, I remain optimistic about 2025, hoping markets stabilize and new insurance and financing options emerge.
On 9/7/2023 I published a blog post titled: Florida’s Collapsing Insurance Markets, that highlighted the significant insurance challenges facing the Florida real estate market.
At the time I was accused of being alarmist. Unfortunately all of my predictions have come to pass. The one constructive criticism I received, was that although you have done a good job of outlining the problem, you have not proposed a solution, and in retrospect, this was a valid point. So below you will find my proposed solution, which might be a good starting point for us to tackle this problem.
https://www.srqlifestylehomes.
Here is my proposal: if FL adopted the 185mph Miami-Dade (HVHZ-high-velocity hurricane zone) building code (FBC) state wide, and the 100 year floodplain plus freeboard rule, for Florida Insurance Rate Maps, the net result would be a large pool of new housing stock that insurance companies would probably be quite comfortable insuring.
It is worth noting, the catastrophic losses over the past few years, have all occurred in older coastal areas with older homes.
Conversely, Lakewood Ranch had a major hurricane pass directly overhead this fall, and the ensuing damage was hardly noticeable. (We are built for this exact scenario.)
On a personal note, the hurricane passed directly over my home, and I only suffered 2 torn screen panels in my pool cage enclosure, which cost a few hundred dollars to replace.
One major caveat. At the time of writing this email, wildfires are consuming the Los Angeles metro area, and although many of the insurance companies that operate in California have already excluded “wild fire” coverage from their policies, the most significant knock on effect will be in the global and opaque reinsurance markets, (that the public are mostly unaware of), and that are an essential mechanism, that allows insurers to “lay off” risk from their books.
These global reinsurance markets are becoming more difficult, if not impossible to access, for US home insurance providers, and this challenge will only exacerbate, and accelerate, the current insurance crisis that America is facing. This is no longer a localized problem facing only Florida and California. The negative financial impacts will be felt nation wide, as US insurers are forced to recoup these massive and unprecedented underwriting losses.
In Conclusion
Lakewood Ranch remains one of the most desirable areas in FL to call home.
As always, I am here to provide guidance tailored to your unique goals.
Wishing you a happy, healthy, and prosperous 2025.
Brent Leathwood, MBA
Licensed Real Estate Broker / Luxury Property Sales & Management
