Orlando Housing Market Forecast (USN)
The latest headlines about Disney and Florida Gov. Ron DeSantis may paint a picture of a city facing serious headwinds, but in Orlando’s housing market, things are looking as stable as ever.
Unlike in other cities, home prices aren’t dropping in Orlando; they’re leveling out. Meanwhile, housing supply remains low, employment is high and consumer sentiment keeps improving. In short: Things are holding strong – and will likely stay that way for some time.
As Orlando real estate broker Blake Blahut puts it, “The Orlando market is returning to what I call a steady market.”
How long will that steady market last, though, and what can you expect if you buy or sell a home in Orlando this year? Using information from the U.S. News Housing Market Index, we’ve compiled the data you need to understand the current state of the Orlando-Kissimmee-Sanford housing market. Here’s what you should know about the market over the past year, its current state and what to expect in the months to come.
How the Orlando Housing Market Changed in 2022
Single-family home permits took a nosedive for much of 2022, falling from a peak of 1,878 in March to just 913 by September, a 51% drop. Since then, though, things have nearly recovered. There were 1,707 permits approved in March 2023, down just 9% year over year.
In the first three months of 2023, 4,000 single-family home permits were approved in the city. That’s nearly 18% less than the 4,857 approved a year prior but still a marked improvement over previous months.
Despite this, “There is still a shortage of inventory and a surplus of buyers,” says Jessica Edwards, a real estate agent with Southwestern Real Estate in Orlando.
In the multifamily arena, conditions are different. Permitting activity pingponged slightly throughout 2022 and early 2023 but is now trending downward.
From January to March 2023, 2,752 multifamily permits were approved in Orlando. That’s down about 8% from the 2,994 approved a year earlier.
Housing Supply and Demand
Housing supply is incredibly low in Orlando, sitting at just 1.7 months. That’s up almost a full month since a year ago but is still well below historical norms – and the six-month supply that’s generally considered a balanced market. It’s also below the national supply level of 1.9 months. Between January and March of this year alone, home inventory in Orlando dropped more than 50%. Redfin identifies the Orlando market as “somewhat competitive,” noting that homes on average sell after 25 days on the market, compared with seven days last year. There were 587 homes sold in April this year, down from 805 last year, likely a reflection of the low supply.
Mortgage applications decreased 3.7% from one week earlier, according to data from the Mortgage Bankers Association’s weekly survey for the week ending May 26. The seasonally adjusted Purchase Index decreased 3% from one week earlier. The unadjusted Purchase Index decreased 4% compared with the previous week and was 31% lower year over year. The recent jump in mortgage interest rates led to a decrease in mortgage purchase applications, which the MBA pointed out is at its lowest level since 1995. This is typically the time of year when purchase activity gains momentum, but homebuyers are now back on the sidelines, due to high interest rates as well as low inventory.
The weekly average of mortgage rates for conforming, balance 30-year loans was at 6.9% last week, the highest level since November. While refinance demand is almost entirely driven by rate levels, purchase volume continues to be constrained by the lack of homes on the market, the MBA’s senior vice president and chief economist Mike Fratantoni said in the weekly report.
Consumer sentiment is steadily rising, though, so that could change if things keep trending similarly. A survey from the University of Michigan shows national consumer sentiment at 67 out of 100 in February – a 4.2-point bump compared with a year ago.
On the rental side of things, vacancies were holding steady at the end of 2022. Only 6.4% of Orlando rental units are vacant. Though this is higher than the national 5.8% rate, it’s the same share locally as a year earlier.
The announcement of the closing of Disney’s Galactic Starcruiser, as well as the ongoing pressure on the company from Florida’s governor, could influence area rental vacancies in the months and years to come. As Blahut explains, “A large percentage of their employees are in the rental sector of our market.”
Median Home Price in Orlando
The median home price in Orlando sits at $390,000, according to Redfin. While that’s up 3.2% over the year, it’s actually been holding steady since last June, vacillating between $380,000 and $400,000 ever since. It’s also below the national median home price of $401,000.
“Despite the higher interest rates, pricing seems to be pretty stable,” says David Dorman, a real estate agent with Century 21 Professional Group in Ocoee, Florida – a suburb of Orlando. “I don’t think we’re seeing the ridiculous over pricing that we were seeing several months ago. I think sellers are a little bit more realistic in trying to get value, and I still see some folks pricing higher just to test the waters out.”
Rising construction costs could put more upward pressure on pricing, but that’s not set in stone. While national construction costs are technically up 7.4% compared with last year, according to the Census Bureau, they’ve been steadily declining since November.
Rents, on the other hand, are soaring. According to the Zillow Observed Rent Index, the typical rent in Orlando is $2,037 per month – a jump of 7.7% from the year prior. The national average rent is slightly lower at $1,996.
Rising rents could be an aftereffect of increasing interest rates. With mortgage rates now significantly higher than a year ago, they could be pushing many potential homebuyers back to renting – and pushing rent prices up with that.
If the inward migration Orlando has seen in recent years continues, the impact could be even bigger. According to U.S. Census Bureau estimates, the city gained almost 9,000 residents between April 2020 and July 2022. Since 2010, nearly 78,000 people have moved to the area.
Unemployment Trends in Orlando
The job market is strong in Orlando, and the total number of employed residents has now surpassed pre-pandemic numbers. The city has gained nearly 91,000 jobs in the last year – and more are already in the pipeline. Universal, for example, is in the midst of building Epic Universe, a new theme park that will bring 14,000 new jobs to the region by 2025.
“The job market in Orlando has always been tourism and hospitality heavy and still is,” Blahut says. “It has shifted in multiple directions in recent years, trending in industries like health care, tech, engineering and aerospace. Various developments of large hospitals, an airport that sees over 42 million passengers annually, along with large aerospace and defense companies coming to town will contribute to the diversifying job market.”
Blahut is right. Many new developments are coming to the area, which may be why construction jobs in Orlando have increased 5.7% since a year ago. There are now nearly 86,000 employed in the local construction sector alone.
Meanwhile, overall unemployment remains low. Orlando’s unemployment rate is just 2.6%, down almost a full percent since a year ago. It’s also well below the national unemployment rate of 3.6%
With such low unemployment, it’s no wonder foreclosures are rare statewide. Florida’s foreclosure rate is just 0.5%, reports Black Knight. While that’s 0.1% higher than a year ago, it’s still right on par with national numbers.
Builder Confidence in Orlando Takes a Turn
Contractor confidence in the Southern U.S. tanked in 2022, according to the National Association of Home Builders/Wells Fargo Housing Market Index. Sentiment fell from a peak of 89 in December 2021 to just 35 a year later.
Fortunately, it has since turned a corner. The index now sits at 50 – up 15 points since the start of the year.
Nonresidential construction has declined quite a bit in the South, falling almost 10% year-over-year, according to the Architecture Billings Index.
Orlando Real Estate Market: Predictions
There’s no way to know for certain, but with a strong job market, improving consumer and builder sentiment, and lots of inward migration, Orlando’s housing market seems poised for strength in the coming months.
The fallout from the Disney-DeSantis drama could throw a kink in demand, but with supply low – and no big infusion of new inventory expected – demand would have to fall significantly to leave a real mark. The U.S. Housing Market Index projects that both single-family and multifamily permits in Orlando will decline at least through the summer.