Every month, the Orlando Regional REALTOR Association releases a snapshot of local housing market activity. The report tracks several key metrics for measuring the the market’s overall health, including sales volume, interest rates, and average and median home sale prices. Bungalower began tracking these reports in April, when the median home sale price in Orlando reached a then-record high of $388,500. As of June, that record has risen to $395,000.
While the final data from July is not yet available, all indicators point to a new median home price of well over $400,000.
According to Rose Kemp, President of ORRA, this unprecedented price rise can be attributed to the most basic of economic principles: supply and demand. Without a suitable number of active listings to keep pace with interested buyers, Orlando’s home market became significantly more competitive, driving prices up. Less obvious, though, is why prices continue to rise despite housing supply trending upward over the last 12 months.
Industry experts turn to two market indicators to measure housing supply: inventory and months’ supply. ORRA calculates inventory by the number of active listings available each month. In June, the inventory of Orlando homes was recorded at 10,796.
Months’ supply measures the amount of time it would take for the available inventory of homes to sell based on the current sales pace. According to industry experts, a six-month home supply is ideal for creating a balanced market.
Orlando last enjoyed that level of supply in February 2011.
Kemp did note that a lack of inventory is not an issue exclusive to Orlando: “We have seen this on a national level, but it has been exacerbated in the Orlando market due to the high demand for homes.”
According to sales data, the demand for Orlando real estate began heating up during the COVID-19 pandemic. The combination of low interest rates and remote work gave many potential buyers the incentive they needed to enter the market.
“With the rise of remote work due to the COVID-19 pandemic, we have seen an influx of out-of-state buyers, making our market even more competitive,” Kemp told us. “High competition, partnered with low inventory, caused home prices to rise.”
The numbers support this. At peak demand, from March 2021 to May 2022, the months’ supply of homes in Orlando was less than one. During that same period, the median home price rose more than 33% from $285,000 to $379,950. Local real estate agent Beth Hobart of Mainframe Real Estate remembers this period well: “Homes would have multiple offers seemingly within minutes of listing. Lots of these offers were cash offers well above asking price, and lots of these offers were made without people even seeing the homes in person. It was hard to get buyers into homes.”
Since then, the months’ supply of housing inventory has steadily increased and, as of the most recent reporting, stood at 4.15 months. Likewise, pending and closed sales has steadily decreased, suggesting, at least on paper, that the Orlando real estate market might be returning to pre-pandemic normalcy. So why, then, are home sale prices setting new record highs month-over-month?
Several other social and economic factors appear to be to blame. Specifically, inflation, high interest rates, and the unfaltering competition from out-of-state buyers, who, according to Kemp, are lured to Central Florida because of the lack of a state income tax and “exciting attractions, warm weather and a diverse population.”
Also conflating these issues is the relatively slow growth in the area’s median household income. As home prices have risen, local wages have failed to keep pace, leaving many residents we spoke to feeling as if they've been priced out of the market.
Determining how much house an individual can afford depends on a variety of factors, but many industry advisors recommend that would-be buyers spend at most 28% of their gross monthly income on monthly mortgage costs. Using this model, someone would need an annual income of around $115,000 to afford a home in Orlando at the current median price.
According to the most recent Quarterly Census of Employment and Wages from the Bureau of Labor Statistics, the average annual income in Orange County is $64,817.
“That discrepancy is pricing some local buyers out of the market, especially single income, first time home buyers,” says Beth Hobart, adding that “with inflation and higher interest rates, we have been seeing more sellers staying in their homes and not giving up their low interest rate mortgages, so home prices have been continuing to rise due to limited inventory with a lot of demand.”
currently sits at 7.5%). However, realtors we spoke to were quick to point out that potential buyers shouldn’t be scared away by high
rates. “It is important to note that while interest rates are higher now than in the last few years, these are still considered average,” says Rose Kemp, President of the Orlando Regional REALTOR Association. "We always say to ‘marry the home and date the rate. Now is the time for buyers to get into a home they love – they can refinance later if rates drop.”
Bungalower spoke to more than 20 local residents who had recently gone through the home-buying process to see how these factors were affecting their ability to afford a home. Many we spoke to were so consistently dismayed by the rapid rise in area prices and last-minute offers from out-of-town buyers that they opted to purchase property in outlying areas.
“We wanted to buy a home in Orlando but the prices for current inventory and new builds were so outrageous and over our budget,” said one resident. “We decided to do a new build in Lake County because it was more affordable. A house by the same builder for approximately the same size was $100,000 more over our budget.”
“I have a close friend that also grew up in Colonialtown and rents,” another resident told us.
"Her and her fiancé make almost $100,000 together. She works remotely for a national company. He works locally. They cannot afford to buy a house in Colonialtown. They’re almost priced out for rentals as well but were lucky enough to find a crackerjack box that’s falling apart with affordable rent.”
