Housing Market Activity — Signs Of Weakness

The housing market has withstood a slowing U.S. economy better than other financial assets, but fissures forming.

Editor’s note: Contributing columnist, Steve Nicklas, expresses his views and insight on various topics in Marketplace.

— Steve’s Marketplace —

For many people, their bedrock of financial stability is forming fissures of strain. We’re talking about home, sweet homes here. 

While the housing market has withstood a slowing U.S. economy better than other financial assets, there are signs of weakness. And they’re hitting close to home, in more ways than one. 

In parts of Florida, pending home sales have tanked. However, much of this decline is occurring along Hurricane Ian’s path of destruction. 

At ground zero for Ian’s arrival, the Cape Coral area has seen pending home sales drop 58 percent. This is twice the national decline. Sharing in the same misery with Cape Coral are the once red-hot Naples and North Point areas. 

Other Florida metropolitan areas felt large declines also, albeit not as severe. Pending home sales have fallen 46 percent in Jacksonville. 

Meanwhile, national home prices are cooling at a record pace, according to the S&P Case-Shiller Home Price Index. The pace is measured by year-over-year gains or declines. National home prices are still 13 percent higher than they were a year ago, however. (But the previous month, the year-over-year price gains were at 15 percent.) 

Sharply higher mortgage rates are a contributing factor. And the Federal Reserve has indicated it will push interest rates higher in trying to stave off rip roaring inflation. These factors are critical in the housing market. 

In comparison, U.S. stocks have fallen about 20 percent this year. This constitutes a dreaded bear market.

In contrast, many homes have appreciated 20 to 30 percent in Nassau County. So any decline in housing activity is only beginning to show. But trends start somewhere, somehow. 

“The forceful deceleration in U.S. housing prices that we noted a month ago continued in August,” wrote Craig Lazzara, managing director at S&P, in the report. “Price gains decelerated in every one of our 20 cities. These data show clearly that the growth rate of housing prices peaked in the spring of 2022 and has been declining ever since.” 

In August, the cities leading the annual price gains included Miami (28.6 percent), Tampa (28 percent), and Charlotte, North Carolina (21.3 percent).  

Overall, Florida has persevered as one of the hottest destinations for homebuyers through the pandemic. Many people moved to Florida from places like New York and New Jersey that were locked down during the virus outbreak. In contrast, Florida was open for business. 

This sentiment may be changing. In a recent survey, nearly two-thirds of homebuyers and sellers say they’re hesitant to move somewhere with so-called “climate risk.” In other words, places frequently subjected to hurricanes, like Florida, or places with low-lying elevations prone to flooding. 

Nevertheless, people have poured into Florida in recent years seeking affordability, lower taxes and warmer weather. The opposite occurs whenever a major hurricane strikes Florida. Some homeowners simply give up and move out of the state.  

In a tragic development, several mobile-home communities around Florida may not rebuild. The homes and the infrastructure are damaged too severely, making it unaffordable and impractical to remain intact.  

These residents are being advised to find somewhere else to live. They are losing more than their home, sweet homes in this case. They are losing their lifestyles. Blissful lifestyles, at that.

_____Steve Nicklas is a financial adviser with a national brokerage firm who lives and works on Amelia Island. He is also an award-winning columnist. His columns also regularly appear in several weekly newspapers in North Florida and in Southeast Georgia, and on his website at SteveNicklasMarketplace.com. He has published a book, “All About Money,” of his favorite columns from the past 20 years. The book is available on Amazon. He can be reached at 904-753-0236 or at [email protected].