• Bank of America economists warn of potential turbulence in the national real estate market for 2024, driven by soaring mortgage interest rates, but not a housing crash.
• Similarities are drawn between current conditions and the inflationary early 1980s when high mortgage rates slowed the housing market but didn’t lead to a crash.
• Florida’s real estate market shows mixed signs, with rising home values but a dip in total home sales, despite being ranked as the second hottest housing market in the U.S. by Zillow.

As if the national real estate market wasn’t already shaky enough, a new national real estate report warns of “potential turbulence ahead” for 2024. But turbulence doesn’t mean a violent crash. Instead, economists at Bank of America say the housing market today is more reflective of the sky-high inflationary early 1980s than the financial house of cards collapse of 2008, with soaring mortgage interest rates expected to cool economic activity, but not necessarily lead to a housing crash.

Bank of America economists Jeseo Park and Michael Gapen noted in the report that the similarities are striking between conditions today and the early 1980s when soaring inflation led the U.S. Federal Reserve to hike mortgage interest rates, hitting a peak of 18.6 percent in 1981. This significantly slowed the housing market but didn’t lead to a crash. Similarly, mortgage interest rates in Florida are the highest in 23 years, standing at 7.8 percent for a 30-year fixed mortgage.

Despite concerns at the national level, the Florida real estate market has been showing mixed signs, with sluggish sales at least partially offset by skyrocketing home values. The most recent data from the Florida Realtors Association indicates that average home sale prices in the state were up 3.7 percent year-over-year in August 2023, reaching $576,000 compared to $555,000 in August 2022. However, total home sales have dipped by 7.8 percent over the same period, leading to a $600 million decline in the total dollar volume of Florida real estate sales from $13.8 billion in 2022 to $13.2 billion this year—or a drop of 4.4 percent.

Local market experts in Florida have also observed a similar trend. The Orlando Regional Realtor Association (ORRA) reported a minor slowdown in sales and a slight decrease in median home prices in its State of the Market reports for July and August. Despite the seasonal lull typically expected in the fall and winter months, Kemp, an analyst at ORRA, stated that those holding out for a crash are likely to be disappointed.

Adding to Florida’s market complexity, the state was recently reported by Zillow as the second hottest housing market in the U.S., unseating New York from its former position. This, combined with a housing shortage and persistently high interest rates, is expected to keep the market tight for the foreseeable future.

However, there is a silver lining. According to Bank of America’s report, the entry of millennials into their prime home-buying years and steady single-family building permits could offer some support to the market.

As analysts predict a quarter-point rate increase by the Federal Reserve in November and a subsequent rate cut in June of next year, the consensus remains that the housing market could be in for a bumpy ride ahead, but it’s not anticipated to crash and burn.