California and Florida are among the three most populous states in the US. It comes as no surprise since both Americans and immigrants prefer locations with a well-developed labour market, a warm climate, and beaches. The number of people who want to buy real estate in Florida has increased significantly over the past three years. Today about 22 million people live in the Sunshine State. California’s population is approaching 40 million, almost 700,000 of which are millionaires and about 80 are billionaires.
Content:
- Home prices in Florida and California
- Projected sales volumes in 2023
- Rental prices
- Which state is better to live in?
- Florida and California Real Estate Market Trends
- Return on property
Home prices in Florida and California
The median price of a house in Florida nowadays is half of that in California. This makes the Sunshine State’s real estate market much more affordable for the buyer. A report on sales and home prices in California, released in April by the local association of realtors, stated that despite soaring mortgage interest rates and the housing shortage, the median price of a single-family home in the state exceeded $800,000 for the first time in six months. The only state that surpasses California in home prices is Hawaii. However, the Hawaiian market is much smaller, with just 452,030 households recorded, compared to California’s 12.8 million.
In Florida, the median home value has hovered around $400,000 since the beginning of 2023. It will be recalled that the median price is the point relative to which half of the homes in the state are sold at higher prices, while the other half, at lower. The average price is usually higher due to super-expensive properties that affect the result. However, it is the median price that gives the correct picture of the market. This figure in Florida is at the same level as that in the whole country.
For reference, the average home price in the US was $761,540 in March 2023 (including existing homes, new builds, single-family homes, condominiums, and townhouses). The median price increased by 6.3% over the year and amounted to $424,495.
Projected sales volumes in 2023
In 2023, both real estate markets are expected to see a decrease in the number of sales transactions compared to the “overheated” 2022. In California, annual single-family home sales are predicted to drop by 18.2% to 279,900 units, down from 342,000 sold in 2022. The market has already noticeably slowed down, especially in the northern part of the state. Florida is also seeing a decline in both homes for sale and the transaction volume. The chief economist for the local association of realtors, Brad O’Connor, said that houses and apartments in Florida in 2023 will be sold at a slower pace than in previous years. The biggest drop in supply and transaction volumes is also expected in the north of the peninsula.
“Now we expect the state’s residential real estate market to return to a more typical pace,” O’Connor said at the 2023 Florida Real Estate Trends summit, “I believe 2023 will look more like the ‘traditional’ housing market years of 2018–2019 in Florida as supply and demand become more balanced.”
The California Association of Realtors has updated its 2023 housing market outlook to be more pessimistic. Overall, the statistics point to a challenging market environment in the state with declining home sales and a projected decline in median home prices year-over-year to around $758,600. Price decline over the year can reach 9%.
For the Florida real estate market, local realtors give a more optimistic outlook, suggesting that by December 2023, market prices will either remain the same as in January or increase by 2 to 5%. According to the Council for Community and Economic Research’s Cost of Living Index, the three most expensive markets in Florida to buy a home in 2023 are Sarasota, Miami, and Fort Lauderdale.
Rental prices
When home prices rise above their already high levels, how can homebuyers keep up? It is not easy. In recent years, the increase in home prices in California has outpaced the increase in the income of residents. According to the 2022 National Rental Report, three of the top five most expensive single-family rental markets in the US are in California. They are the cities of San Francisco, San Jose, and Oakland. In these same locations, realtors expect the biggest downturn in the real estate market in 2023.
The median rent price per unit in Los Angeles today is $2,828 per month. However, the median monthly wage in Los Angeles—based on a median gross household income of $51,538 after taxes—is approximately $3,316. When earning this much, the rent eats up most of the income. From January 2022 to January 2023, the rent in the metropolis increased as follows:
- Studio – $1,698 (+10% per year)
- One bedroom – $2,395 (+7%)
- Two bedrooms – $3,190 (+7%)
- Three bedrooms – $4,378 (+4%)
- Four bedrooms– $5,925 (no change)
In Florida, the median rent price per unit is $1,300 per month, with a median disposable income of $2,523 per month.
The average rent for a residential unit in Los Angeles is 53% higher than in Miami, Florida’s main metropolis, at $3,885.92 per month.
Which state is better to live in?
Both states have stunning beaches, a relaxed lifestyle, and beautiful architecture, but one question comes up over and over again. Which state is better to live in? Let’s start with the fact that California beaches, albeit beautiful, are very cold. Water off the coast of California rarely warms up above 20 °C. Unlike the coast of the Atlantic Ocean in the Miami area or the beaches along the Gulf of Mexico, where you can have fun in the water all year round.
If you enjoy listening to gentle surf and admiring serene ocean views, Florida is probably the best home for you. Its white sandy beaches are more suitable for families.
California is a paradise for outdoor enthusiasts. Beaches, especially in the area of San Diego and La Jolla, have strong surf and winds. Surfers love to ride big waves and put their skills to the test during the tides.
Florida is much cheaper than California: the average cost of living here is only 1% higher than the national average, and in some cities, even 10% lower.
In California, the cost of living in 2022 was 38% higher than the average for other cities in the country.
Both states offer unique career opportunities. California leads the way in technology and entertainment, while Florida excels in tourism and healthcare. The choice between them depends on the area of interest, the desired lifestyle, and career aspirations.
Florida and California Real Estate Market Trends
Companies are moving their offices to Texas and Florida, and some people are starting to relocate from California to other states. This trend has intensified since the start of the pandemic due to the growing number of remote workers. People are leaving California due to high local taxes and unaffordable home prices.
In contrast, during the pandemic, Florida has experienced an unprecedented influx of people moving to the state seeking a cheaper and more comfortable life. Such a dynamic is beneficial for potential investors in apartments and villas in Florida as the demand for rental housing here will continue to grow in the next five years.
While Florida real estate sales are declining, the listing time is increasing, but the cost of units sold is increasing. The decrease in the volume of transactions was caused by both insufficient supply and an increase in mortgage rates, which led to some buyers reassessing their financial capabilities.
Here’s a look at Florida’s housing market performance in Q4 2022 (October to December) compared to Q4 2021:
| Q4 2022 | Q4 2021 | Percent Change |
|---|---|---|
| Single-Family Home Median Sale Price | ||
| $400,000 | $365,000 | +9.6% |
| Closed Sales | ||
| 57,004 | 85,157 | -33.1% |
| Median Time to Sale | ||
| 76 days | 54 days | +40.7% |
| Average Mortgage Rate (15-Year Fixed) | ||
| 5.68% | 2.33% | +143.78% |
Return on property
Given the high cost of California housing, the annual return on investment, that is, the ratio of the property value to the total rent received during the year, is relatively low here and varies across the state within 4 to 6%. In absolute terms, i.e., in terms of the amounts received from tenants during the year, the income of homeowners in California has increased by 8 to 18% annually in the last two years.
Florida saw an 85.4% increase in average statewide ROI in 2022 alone. The return in Miami today is between 4 and 9%, depending on the specific neighbourhood and type of residential property. Affordable Florida villas, built in beautiful locations in the 1930s, are showing above-average returns after some renovation. Those who are willing to wait may consider off-plan projects in Florida on the islands in the southern part of the peninsula.