Florida home prices remain close to peak levels following rapid gains during the pandemic of approximately 60% that exceeded most other states, Fitch Ratings says in a new report.
If recent trends hold through year-end 2023, home prices will likely increase year-over-year by about 6% in Florida and the rest of the U.S. Fitch is forecasting an increase in U.S. home prices of 0%-3% in 2024.
Residential property Taxable Assessed Value (TAV) in Florida, which was 78% of aggregate TAV in 2022, has been more volatile compared with commercial property values, which are 15% of total TAV. Residential property value YoY growth of around 15% in 2022 powered TAV increases, while commercial values rose much more modestly at just under 5%.
Recent weakness in commercial real estate, particularly office properties, may weigh on assessed values, but Florida counties’ limited exposure to office property values will moderate the impact of declines on overall TAV.
Since 2001, home prices in Florida have been more cyclical relative to the U.S., characterized by higher price increases during upcycles and steeper declines during downturns. Florida has the strongest relationship of any state between property tax collections and home prices, largely due to the annual assessment of taxable values, which are not subject to multi-year smoothing.
This means localities are well positioned to capture market value increases in tax revenues but also quickly see the negative impact of home price declines on TAVs, which can lead to increases in property tax rates to offset declines. Florida’s levying practices and millage rate mechanism help stabilize tax revenues from year to year.
In the longer term, rising premiums and reduced availability of homeowners’ property insurance could affect market activity and home prices in certain areas. Insurance plays a key role in securing mortgages and enabling rebuilding following natural disasters.
For Funds Society, Madrid