Overview of Florida Housing Market
While some areas of Florida have affordable housing markets, homeownership in Florida comes with some risk. The state has one of the highest foreclosure rates in the country and the highest cost of homeowners insurance in the U.S.
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Factors in Your Florida Mortgage Payment
When you’re calculating the costs of buying a home, you’ll need to think about property taxes in addition to your monthly mortgage principal and interest payments. Luckily, Floridians don’t have it bad, with tax rates near or below the national average. The effective property tax rate in Florida is 1.10%, which equals to about $1,769 per year for the typical homeowner.
Your property tax bill starts with an appraisal by a county official. Your actual tax rate is based on the assessed value, not just the appraised value of the home. This means that account exemptions are taken into consideration. Your assessed value can decrease if you claim the homestead exemption (for owner-occupied properties), or the Save Our Homes assessment increase limitation. Wondering what your property taxes pay for? In Florida, counties, municipalities, school districts and special districts can all levy taxes to pay for services, improvement projects and ongoing operating costs. Your total bill will depend on where your property is located and what taxes apply to that exact area.
Another cost you’ll need to consider is homeowners insurance. This is where you’ll be hit hardest with prices in Florida. It has the highest cost of homeowners insurance in the nation. SmartAsset’s Most Affordable Places to Live in 2017 study found the average insurance premium in the Sunshine State is $2,394.30, which is almost double the national average. This is due to a number of factors, but mainly the level of hurricane and coastal risk. With over 98% of Florida’s population living in a coastal county as of 2015, the risk is high for property losses. Out of the 10 costliest hurricanes in U.S. history, seven have impacted Florida. According to the Insurance Information Institute, Florida accounted for 13% of all U.S. insured catastrophic losses from 1986 to 2015, which equates to $68.6 billion out of a national total of $515.4 billion. Florida law requires property insurance. Policies include coverage for “windstorm damage,” which means hurricane damage. Usually, you can qualify for discounts if you install wind-resistant features.
You also have to consider flood insurance, which you can purchase through a private insurer or through the National Flood Insurance Program (NFIP). Not only do you have to worry about hurricane and flood insurance, but you’ll also have to consider sinkhole insurance. Believe it or not, sinkhole insurance claims totaled approximately $1.4 billion from 2006 to 2010. According to RiskMeter.com, the top five counties for sinkhole risk are Pasco, Hernando, Hillsborough, Marion and Pinellas.
If you can’t secure property insurance coverage on the private market, you can turn to Citizens Property Insurance Corporation. The not-for-profit, tax-exempt entity was created by Florida Legislature as a market of last resort. You can only get a policy through Citizens if no other Florida-authorized insurance company will offer you coverage or if the prices offered by private companies are more than 15% higher than Citizens.
Costs to Expect When Buying a Home in Florida
One of the costs that you’ll likely incur during the home-buying process is paying for a home inspection. While technically not mandatory, it’s a crucial step before the final OK on a real estate contract. The burden of discovering any home defects usually lies on the homebuyer, even with an extensive seller’s disclosure. It makes sense: You’ll be living in the home, so it’s your responsibility to ensure that you know as much as you can prior to buying the home.
Inspections range from $350 to $500 in Florida, depending on the company you choose and the size of the home to be inspected. If you wish to add popular additions such as termite, mold, radon or wind mitigation, you can usually arrange it through your primary home inspector, if he or she offers the service. While not usually required, it’s helpful for any homeowners with allergies or other concerns to know the full scope of the property prior to closing on the home.
Some of the largest upfront fees in the home-buying process are during the closing process. Closing costs account for a number of mortgage lender fees (also known as origination charges), title company fees, and a number of other administrative charges that are collected by various entities. These fees will vary depending on lender and the location of the property you’ve purchased.
Average Closing Costs by County
|County||Avg. Closing Costs||Median Home Value||Closing Costs as % of Home Value|
Our Closing Costs Study assumed a 30-year fixed-rate mortgage with a 20% down payment on each county’s median home value. We considered all applicable closing costs, including the mortgage tax, transfer tax and both fixed and variable fees. Once we calculated the typical closing costs in each county we divided that figure by the county’s median home value to find the closing costs as a percentage of home value figure. Sources: US Census Bureau 2015 5-Year American Community Survey, Bankrate and government websites.
Rule of thumb is to plan for 2% to 5% of home price as your estimated closing costs. Within that blanket number, you’ll portion out money to various entities. The first is your mortgage lender. The various fees the bank charges are called origination fees and include services such as underwriting, document preparation, processing, broker services fee, origination points and commitment fees. These charges depend on the mortgage lender and will vary. In addition to origination fees, you’re responsible for paying for a credit report, appraisal (if you choose or if it’s necessary for the lender), attorney, flood certification and possible survey.
Further costs to factor in, include title insurance, funding fees for VA loans and mortgage and transfer tax. Unfortunately, Florida is one of a handful of states that charges mortgage tax, which is also known as documentary stamp tax. Usually the buyer will pay this charge of $0.35 per $100 of the purchase price. For example, if the home you buy is $200,000, you’ll pay $700 in mortgage tax (divide 200,000 by 100 and multiply by 0.35).
The transfer tax is usually paid for by the seller, but that will depend on what terms you negotiate when you put an offer on the property. The state transfer tax is $0.70 per $100. You can calculate the cost using the same method for mortgage tax. If the home you buy is located in Miami-Dade County, the tax rate is $0.60 per $100. There is an additional surtax of $0.45/$100 but only for multi-family or larger dwellings. In addition to documentary stamp tax and transfer fees, there is an intangible tax of 0.02%. When it’s time for closing, you’ll see a breakdown of each fee.
Title insurance is one of the final things to consider. Florida’s Department of Financial Services has an eight-page document that explains the requirements of title insurance. Usually your lender will require a policy, which you can purchase through the lender. However, many buyers will opt to purchase an owner’s policy to insure against specific claims on the property. In Florida, title insurance premiums are set by the state, but the agent’s portion of the total as well as agency fees are variable.
Details of Florida Housing Market
Florida is known to many as a vacation destination thanks to Disney World, miles of beaches and a plethora of resort towns catering to tourists. However, a large number of residents live year-round in the Sunshine State. The total population is an estimated 20.6 million, making it the third-largest state by population in the U.S. It’s also one of the fastest-growing states. Between 2015 and 2016, Florida increased by 1.8%, making it the fourth-fastest growing state in the nation. By pure numbers, Florida was number two for population increase. All numbers point to Florida as one of America’s most popular places to live.
The state has over 8,400 miles of shoreline, and over 98% of its residents live in coastal counties. Florida cities have seen some of the fastest growth in the U.S. The Cape Coral-Fort Myers area, Orlando-Kissimmee, Jacksonville and Deltona-Daytona Beach areas in Florida regularly hit the top of lists for fastest-growing U.S. cities.
If you take the Florida housing market as a whole, you’ll see that the state is recovering from the recession that led to many foreclosed homes. As of June 2017, Florida had the fifth-highest foreclosure rate. The state was in the bottom-half of the pack in SmartAsset’s Healthiest Housing Markets study, ranking at 36. The study looked at stability, affordability, fluidity and risk of loss factors.
Florida’s largest urban areas by population are Jacksonville, Miami, Tampa, Orlando and St. Petersburg, according to the U.S. Census Bureau’s 2016 estimates. Each of this large state’s cities is diverse and distinct in its own way and has its own housing market dynamics. Take for example, Miami. The median home value as of August 2017 was $303,000, according to Zillow data. Compare that with the largest city, Jacksonville, at only $154,700 or Orlando at $171,000 (both as of August 2017).
Homes sold after about 99 days in Florida during 2016. Miami actually was a bit above the state average at 107 days during the same timeframe. As for how many homes sold in Florida for a gain rather than a loss, in 2016 it was around 82%. If you’re curious about the area you’re planning to buy property in, you can look at the specific city data to find out the local numbers.
Local Economic Factors in Florida
One of the biggest draws of this Southeastern state is its tax-friendliness. Residents don’t have to worry about income tax at the state or local level, which can mean hefty savings for those moving from tax-burden heavy states, such as New York, Minnesota or California. Retirees favor Florida for more than just warm weather. The low tax burden is one of the main factors that helps this state’s reputation as a favored retirement location. There also isn’t estate tax, which means inherited property which includes cash, securities, real estate, trusts and more aren’t taxed. Additionally, Florida’s sales tax is relatively low at 6% to 7.5%.
As for the state’s biggest industry, you may have guessed – it’s tourism. With over $67 billion of impact on Florida’s economy, tourism is also one of the state’s largest employment categories. The state is host to Disney World, over 8,400 miles of shoreline, Daytona Beach, the nightlife hotspot of Miami and more.
According to Visit Florida research, over 112.3 million tourists visited the Sunshine State in 2016. Tourism isn’t the only business in Florida, however. Agriculture, international trade and the space industry are the other top-grossing industries in the state. Florida is also host to 17 companies on the Fortune 500 list, including Publix Super Markets, World Fuel Services, Office Depot and Hertz.
As for unemployment, in June 2017, Florida’s rate was 4.1% compared to the national rate of 4.4%, according to the U.S. Bureau of Labor Statistics. Curious about income levels? In 2016, Florida had a per capita personal income of $45,819, which is below the national average of $49,571. Overall, Florida ranks 27th in the nation for per capita personal income.
Thinking of making the move to the Sunshine State? You can always crunch number to help inform your decision. First off, you’ll want to compare the cost of living to see if you’ll need to adjust your budget.
Let’s take a look at a few examples. If you’re a single person with a household income of $65,000 moving from Brooklyn, NY to Miami, FL, your cost of living should be 20% lower on average. Thanks to a 27% decrease in tax costs and housing, and a 15% decrease in food costs, your dollar goes much further in this Southeastern city. For a person making $70,000 a year and switching coasts from Portland, OR to Orlando, FL, the cost of living is 5% lower on average. While the tax difference is 25%, the cost of housing in Orlando is actually 5% higher. And for a Midwesterner moving from Saint Louis, MO to Tampa, FL with a $55,000 income, the cost of living is 1% higher on average in the Sunshine State due to housing and food costs. Overall tax difference is about 20% lower, however. While there are more metrics to look at than simply tax, housing and food, it is important to take a look at the basics before making a decision that will have a large impact on your finances.
Mortgage Legal Issues in Florida
Florida used to be known as a caveat emptor state, meaning “buyer beware.” However, in the last 10 to 20 years, more and more lawsuits have sided in favor of the homebuyer, rather than the seller, resulting in a more homebuyer-friendly state.
Sellers are required to disclose “facts materially affecting the value of the property which are not readily observable and are not known to the buyer,” according to Johnson vs. Davis, a Florida Supreme Court case quoted by the Florida Realtors association. In addition to court precedents, Florida law requires coastal erosion disclosures, radon gas, mandatory membership in a homeowner’s association and condo disclosures. While there isn’t a specific disclosure form set by law, many Florida realtors will use this five page Florida Realtors® seller’s disclosure. As always, it’s essential to arrange a home inspection yourself to get the best picture you can for a property. While Florida does have laws in place, you’ll have to go through a lawsuit to collect any damages if you do, in fact, find issues with a property after purchase.
Worried about foreclosures in Florida? The state has the fifth-highest foreclosure rate as of June 2017, and in past years ranked closer to number one on the list. Florida also has a large number of “zombie homes,” which are abandoned, unsold foreclosed homes. This generally drives down the overall property value in neighborhoods with high concentrations of these empty homes.
While the numbers seem bad, it can be beneficial for homeowners undergoing foreclosure. Struggling homeowners aren’t out on the curb as quickly as in other states. In fact, according to RealtyTrac’s midyear 2017 report, Florida had the fourth-longest foreclosure timeline, with an average of 1,203 days.
One of the main reasons for slow foreclosures is Florida’s process. The state uses judicial foreclosures rather than the speedier option, non-judicial foreclosures. This means the court is involved and the minimum timeline is about six months. If the homeowner disputes anything and/or hires an attorney, the process can stretch to four years or more. In 2013, Florida passed House Bill 87, known as the Florida Fair Foreclosure Act, in an attempt to speed up foreclosures, but as of yet, the impact remains to be seen.
If you fail to pay your mortgage in Florida, the foreclosure process will begin when your lender files court action and records a notice of a pending lawsuit against you. You’ll be notified by mail with a specified timeline that you’re required to respond by. If you don’t respond within the timeframe, the foreclosure process continues. If you pay the amount owed, the process will stop, but if you cannot pay, it will continue. Florida has a number of resources for those facing foreclosure, including not-for-profit counselors who can help you understand your options as a distressed homeowner.
In Florida, there is a deficiency decree, which means you’re responsible for the difference between the sold price of your foreclosed home and the balance on the home loan. Lenders had a number of years to pursue collecting the balance. Vacation homeowners who live in states that don’t allow deficiency judgements aren’t exactly safe. Lenders have pursued collecting deficiencies from out-of-state homeowners, which is something to keep in mind.
Florida Mortgage Resources
|Resource||Problem or Issue||Who Qualifies||Website|
|Florida Housing Finance Corporation||Offers down payment assistance, closing cost assistance and low-interest rate mortgage loans.||Low-to-moderate-income homebuyers.||https://www.floridahousing.org|
|Florida Hardest-Hit Fund||Offers unemployment mortgage assistance and a mortgage loan resinstatement payment program.||Florida residents with a total household income that's below 140% area median income (adjusted for household size at time of financial hardship).||https://www.flhardesthithelp.org/|
|Home Affordable Refinance Program||Refinancing.||Single family homes and condos that fit within lending loan limits.||http://www.harp.gov/|
You can find homeownership programs under Florida Housing. This state-created corporation offers homeownership programs including first-time homebuyer programs, education and mortgage credit certificate programs. If you already own a home, you can find information about foreclosure counseling and relief. To find out if you qualify for an offered program, navigate to Florida Housing’s website where you can learn more about the requirements.
For those buying in one of the following counties: Brevard, Clay, Duval, Hillsborough, Orange, Osceola, Pasco, Pinellas, Polk, St. Lucie or Volusia, you can apply for the Florida Hardest Hit Fund Down Payment Assistance Program.
If you’re struggling to pay your mortgage and out of work, you might benefit from the Unemployment Mortgage Assistance Program (UMAP). This program can provide up to 12 months of payments (with a cap of $24,000) to help unemployed or underemployed borrowers with their first mortgages. There’s also the Mortgage Loan Reinstatement Payment (MLRP) program that can pay up to $25,000 in past due payments.
Another program is the Principal Reduction Program that can help homeowners with up to $50,000 to reduce the loan-to-value ratio. Qualified homeowners receive the money as a zero percent interest forgivable loan that comes with certain guidelines if you qualify.
If you’re seeking rural property, you may benefit from the resources on Florida’s USDA website. You can see if your property qualifies for a USDA mortgage and learn more about your options with farm and rural land.
Almost ready to make the move southeast to Florida? You may want to read our article on 15 things to know before moving to Florida. There’s much more to the state than warm weather and retirees.
Focused on money matters? The Florida paycheck calculator help you determine your take home pay. One of the best parts of living in the Sunshine State is no income tax.
Lastly, if you’re ready to put money down on a house, take a look at Florida’s mortgage rates.