A Blog by Jonathan Low


Jan 22, 2022

How Florida Real Estate Went From Most Affordable To Most Expensive

Housing prices have surged across the US, but nowhere more than in Florida. 

In what used to be considered an affordable real estate market, a 30% price increase is driving some middle and lower income residents out while it may become a disincentive even to wealthy buyers from elsewhere. Lack of affordable homes and a surge in demand from outsiders is causing the bubble. JL 

Tim Craig and colleagues report in the Washington Post:

Over the past six months, Florida’s home prices have risen faster than those of any other state. Florida’s prices are quickly catching up to higher-cost states such as New York and Virginia. Amid a surge of demand from out-of-state buyers, limited inventory and booming neighborhood redevelopment, the Sunshine State is quickly becoming one of the least affordable places to live in the US. Florida’s wages, meanwhile, have grown at a slower rate than the national average.

Down on his luck in New York City, Herman “Masu” Phillips decided last fall to move to northwest Florida, a place he’d always thought of as “quiet, affordable.”

But three months after arriving in Pensacola with $3,000 in his pocket, Phillips and his children — ages 10, 8 and 6 — still haven’t found a place to live. They spend their days cuddled in a small tent, waiting for a homeless shelter to open at sunset.

“I got the money to pay for a place. I got money to pay for my electric. But I just can’t find a place,” Phillips, 53, said earlier this month, as his children nibbled on sandwiches in an encampment near downtown Pensacola.

Amid a surge of demand from out-of-state buyers, limited inventory and booming neighborhood redevelopment, the Sunshine State is quickly becoming one of the least affordable places to live in the United States, a trend that is straining new home buyers and renters even as longtime homeowners reap a windfall of equity.


Over the past six months, Florida’s home prices have risen faster than those of any other state, according to a Washington Post analysis of Zillow data. As housing markets elsewhere have cooled, home prices in Florida have heated up, overtaking Minnesota, Maine and Connecticut in the national ranking. Florida’s prices are quickly catching up to higher-cost states such as New York and Virginia.

Florida’s wages, meanwhile, have grown at a slower rate than the national average. In the six months ending in November, when home prices in the state rose 16 percent, average hourly earnings in Florida were up 2.1 percent, compared with the national rate of 2.7 percent, according to the Bureau of Labor Statistics.

The lack of affordable housing presents an emerging political challenge for Gov. Ron DeSantis (R), who frequently argues that his hands-off approach to the coronavirus pandemic is bringing as many as 800 new residents per day to the state.

“Florida has become the escape path for that chafing under the authoritarian, arbitrary, and seemingly never-ending mandates and restrictions,” DeSantis said during his State of the State address on Jan. 11. “Florida is a free state.”

'Everything is just blowing up'

But the surge in demand for housing in Florida — including a doubling in the number of houses that sold for $1 million or more last year, compared with 2020 — has some economists warning that the state could be headed for a housing affordability crisis similar to the one gripping California and other Western states.

“The trajectory right now doesn’t look great,” said Brad O’Connor, chief economist for Florida Realtors. “We are building more and more homes each year than the last, but it’s not at the pace we need to see.”

Phillips said he assumed his monthly $1,500 in disability payments would cover a rental in one of Florida’s cheapest housing markets. But he and his three children became homeless after Phillips could no longer afford the $89-a-night stay in a budget motel.

Now, when they are not in school, Phillips’s children play video games from their tent. To keep up morale, Phillips has been telling his kids he will one day take them to Disney World.

“I am from New York, and New York is like one of the most expensive places,” said Phillips, a former mechanic. “I’ve been to California, and that is expensive, and I knew I couldn’t make it, so I didn’t go. But Pensacola?”

Although Florida has long been associated with pockets of extreme wealth, local leaders say they are most unsettled by how quickly home prices are rising at the bottom of the market. Those trends now threaten to drive away scores of working-class residents, who remain the backbone of the state’s tourism-driven economy.

In December 2020, for example, 36,000 houses were worth less than $100,000 in Tampa. By November 2021, there were 14,000 houses worth that amount, a 60 percent decline, according to the national real estate brokerage Redfin.

There was also a 41 percent year-over-year decline in the number of properties worth between $100,000 and $250,000, a trend that also played out in Orlando, Cape Coral and in suburban Sarasota, according to Redfin.

In Pensacola, the jump in home values has been especially stark in several historically African American neighborhoods. In Brownsville, west of downtown, home values have risen by 33 percent in the past six months, according to a Post analysis of Zillow data. The neighborhood has seen the second-fastest price growth in the state over that time.

The price spike comes as wealthy retirees and young professionals are flocking to the city, crowding locals out of the rental and housing market. Pensacola is also attracting growing numbers of real estate investors, and downtown streets that were once known for rowdy punk rock bars are now lined with wine bars, cheese shops and Pilates studios.

In Tanyard, a historically Black neighborhood where the city’s segregated beach was once located, developers are quickly buying up one-story shotgun-style houses and replacing them with three-story homes in vibrant Caribbean hues.

Kevin Fox, a local Realtor overseeing some of the redevelopment, said the new homes can sell for $250 to $500 per square foot, and 80 percent of those properties are being sold even before construction is completed.

“Sometimes, before we even lay the slab, it’s sold,” said Fox, adding transplants from California, Texas and the Midwest see it as “no-brainer” to invest in Pensacola because of the region’s milky-white beaches and the growing “vibrancy” of downtown.

The surge in home values in Pensacola has been good for many homeowners, including residents of color who in some cases are sitting on mortgage-free houses that have been passed down through their family for generations.

As he sipped his beer at Emerald Republic Brewing, one of a dozen new breweries to open in Pensacola in recent years, Antonio Rodriquez said that 14 years ago he bought his 1,500-square-foot house for $85,000, just before the 2008 financial crisis. If he sold it today, the 34-year-old auto mechanic estimates he could list it for $240,000.

“Everything is just blowing up right now, and with the way the market is, people are just going crazy for houses,” Rodriquez said.

But the price spike is also making it difficult for scores of Pensacola residents to secure affordable housing. Sherri Myers, a member of the Pensacola City Council, said the city is now facing a “dire” crisis, with a growing homeless population and limited availability of rental housing.

“If I did not have my house, I could not rent right now in Pensacola on my income,” said Myers, 79, who earns about $40,000 in annual salary from her council job and Social Security. “I would be living in my car.”

Michael Kimberl, director of the Alfred-Washburn Center in Pensacola, said “hundreds” of Escambia County residents are sleeping in their vehicles each night.

Even many Pensacola residents who consider themselves middle class can no longer afford “the cheapest rent in town,” Kimberl said. He pointed to an ad for a two-bedroom trailer on the outskirts of town that was on the market last week for $875 a month.


“To live comfortably in that, you would want to have an income of at least $1,600” a month, Kimberl said as he scrolled through the listing on his phone. “But a lot of people here, if they are on Social Security, are only making $675 to $700 a month.”

Thomas Myles, 65, has been living in his tent since October, when he became homeless after he moved to Pensacola from Rhode Island about a year ago to take care of his late mother. A former jewelry salesman, Myles receives $713 a month in Social Security.

“I could go as high as $500 a month [in rent], and that would leave me with $213 to pay bills,” Myles said. “But I’ve been looking all around these neighborhoods and can’t even find a room in a house. People are just buying up all of these houses and rebuilding them.”

'Nothing is affordable'

Pensacola Housing Director Marcie Whitaker said 62 percent of people are now able to find housing even with a Section 8 voucher because of a “tighter rental market,” which she blames on the “great migration” of Northerners to Florida.

“People are moving here, embracing working remotely and living at the beach,” Whitaker said.

After Hurricane Sally damaged her apartment in 2020, 29-year-old Natasha Fields spent most of last year “couch bouncing” until just before Christmas, when she moved into a homeless shelter with her husband and two children.

Fields is a cashier at a grocery store who earns $11 an hour, and her husband works as a truck driver. The couple relied on federal housing assistance and local charities to move into a two-bedroom earlier this month. The $1,350 rent is nearly double what the family used to pay.

“This has been mentally brutal, and it’s draining on the adults, and it’s draining on the kids,” Fields said. “They can put all of this new shiny stuff in [Pensacola], but it doesn’t help anything if nothing is affordable.”

This year, 1,257 students in Escambia County public schools are considered to be homeless, according to school records. Melissa Johnson, a Pensacola social worker who works in homeless encampments, estimates the real number is much higher.

“In the tree lines, there are a lot, but everybody is too scared to come forward,” said Johnson, referring to encampments in remote parts of Escambia County. “They are scared they are going to lose their kids, and that is how devastating our affordable-housing crisis is now.”

In Tampa, another traditionally affordable locale, City Council Chairman Orlando Gudes predicts more residents are “going to be homeless soon.” Gudes said that he has been receiving calls from constituents who say their landlord is “upping their rent by $500, $600 or $700 a month.”

Gudes blames Republican state lawmakers for the crisis, noting that market-rate rent control laws are prohibited here. In 2019, the GOP-controlled Florida legislature voted to allow local governments to require developers to build affordable units in new projects. But counties and municipalities must “provide incentives to fully offset” the cost to developers, which has tempered such agreements, Gudes said.

“We have been a Republican state for a long time, and legislators now need to get off their high horse and figure out what they can do to help people,” said Gudes, who is exploring whether Tampa can get around some of the state regulations by declaring an “emergency housing situation” to temporarily cap rent increases.

Since 1992, Florida has also had a robust funding mechanism to pay for affordable housing, the Sadowski Trust Fund, which is funded through real estate transfer taxes. But Florida legislators have consistently diverted the money to other things, including a decision last year to shift $200 million to fight sea level rise.

Jaimie Ross, chief executive of the Florida Housing Coalition, a Tallahassee-based group, said advocates are relieved that DeSantis has proposed spending all of the projected Sadowski Trust Fund’s receipts for the upcoming year — about $355 million — on affordable housing.

But Ross said state legislators need to spend even more to avoid an even broader crisis.

“I think people look at places like San Francisco and think, ‘Oh, that will never be us,’ ” Ross said. “I think they are making a mistake, because I think that will be us, and there is additional reckoning coming to state of Florida.”


Real estate boom or bust?

The question that now dominates discussions among homeowners, real estate professionals and economists is whether the recent surge in home values is sustainable, especially considering the state’s history of boom-bust real estate cycles.

One model created by real estate economist Ken H. Johnson, a business professor at Florida Atlantic University, and two other professors concludes that home prices in Orlando, Sarasota, Jacksonville, Tampa, Melbourne and Lakeland are currently overvalued by at least 30 percent.

Although Johnson expects the market to eventually cool, he does not expect the drop to be as steep as it was during the 2008 mortgage crisis, when home values in some parts of the state plunged by more than 50 percent.

“People are moving in at a more rapid rate than they were 15 years ago, so all the ingredients are not there for another crash in Florida,” Johnson said.

So at least for now, residents in neighborhoods such as Tampa’s Seminole Heights are divided between the haves and the have-nots.

A racially diverse neighborhood about 10 minutes north of downtown, Seminole Heights has seen an influx of home buyers and commercial investment over the past decade, including new organic pet food stores and hipster breweries.

Rick Silva and his wife, Katherine, bought their bungalow-style house for $60,000 a decade ago, after retiring from their jobs in Detroit. The couple made about $50,000 in upgrades to the house over the years but estimate the property is now worth $350,000.

“When I first came here, I was like, ‘what did I get myself into?’ because there were still a lot of robberies and break-ins,” said Rick Silva, 70. “But now I see it definitely worked out well for us.”

Yet for many residents who are renting in the neighborhood, Tampa’s surging home values have left them feeling pushed out of the middle class.

Reginald McClendon, 61, spent 23 years working for the Hillsborough County Department of Public Works. He now lives off his $692-a-month pension and $1,360 a month in disability payments, and his wife earns about $2,400 a month.

Four years ago, McClendon and his wife, were abruptly forced to move from his $1,000-a-month rental property after his landlord sold the property.

Now, McClendon pays about $1,560 each month in rent. He said he dreads phone calls from his landlord, worried that he’s either going to raise the rent or tell him he’s selling the property.

“The rent is due on the first of the month,” McClendon said in late December, as he opened the online banking app on his phone and saw he had $3.97 in his account. “My greatest fear is being uprooted and looking for a place to go.”


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