Florida Housing Market Forecast: 5 Cities at High Risk of Price Crash

If you're thinking about buying or selling a home in Florida, it’s wise to pay close attention to recent housing market reports. Based on the latest insights, several Florida housing markets are showing signs of a high risk of price decline.

Florida Housing Market Forecast: 5 Cities at High Risk of Price Crash

According to Cotality's August 2025 US Home Price Insights report, the national housing market is experiencing a slowdown in price growth. While the spring homebuyer season ended softly, with price growth decelerating and prices becoming slightly more affordable, this trend isn't uniform across the country.

In fact, Florida, Texas, Montana, and Washington D.C. reported negative home price growth. For Florida, this signals a continued adjustment in home values in certain areas. Specifically, Cape Coral, Lakeland, North Port, St. Petersburg, and West Palm Beach are highlighted as markets to watch, indicating a high risk of price decline.

As someone who follows the real estate world closely, I’ve seen these patterns before. When a market heats up too quickly, it can often lead to an eventual cooling-off period. Florida, with its strong appeal for many buyers, has certainly experienced periods of rapid appreciation. However, the current economic climate and rising costs, like insurance premiums, are starting to put pressure on home values in some of its most popular areas.

Understanding the National Picture

Before we dive deeper into Florida, let's understand the broader economic context. In June 2025, the year-over-year home price growth across the U.S. dipped to 1.7%. This is a significant slowdown compared to previous periods and is now below the rate of inflation. This is good news for buyers, as it suggests real prices may be becoming slightly more affordable. The monthly increase was also minimal, just 0.1% in June, the slowest in over a decade.

Dr. Selma Hepp, the Chief Economist at Cotality, notes that the housing market is in a “period of transition.” She points out that 20% of metropolitan areas recorded price reductions in June 2025, the highest percentage since 2012. This softness, she says, is “primarily concentrated in southern and southeastern markets, including major metropolitan areas in Florida, Texas, and the San Francisco Bay Area.”

Florida's Housing Market at Risk: A Closer Look

While the national trend is a slowdown, Florida's situation is particularly noteworthy because of how swiftly some of its markets have grown. The state has always been a magnet for buyers, especially those seeking a warmer climate or a vacation home. However, the recent data from Cotality indicates that several Florida cities are now on a list of markets with a very high risk of price decline.

The specific markets flagged are:

• Cape Coral, FL
• Lakeland, FL
• North Port, FL
• St. Petersburg, FL
• West Palm Beach, FL

This is a critical piece of information for anyone who owns property in these areas or is considering buying there. It's not about predicting a housing crash, but rather a realistic expectation of potential price adjustments.

Why Are These Florida Markets at Risk?

Several factors contribute to this outlook. One major concern is the increase in insurance premiums which has been steadily eroding the promise of long-term affordability. Dr. Hepp highlights that rising variable costs, such as insurance and property taxes, have jumped 70% since 2020. Florida, with its susceptibility to weather events, is particularly feeling this squeeze. When insurance becomes prohibitively expensive, it can deter buyers and put downward pressure on home prices.

Another factor is the overall affordability crisis. While the national market is seeing some improvement in affordability due to slower price growth, for many years, home prices in Florida have outpaced income growth. The data shows the national median home price at $403,000, with an income of $89,600 required to afford a median-priced home. In markets where prices have already climbed significantly, even a slight economic shift can lead to larger price corrections.

Furthermore, the report mentions that markets demonstrating strong fundamentals, like those with attractive affordability and in-migration, are likely to see continued growth. Conversely, markets that don’t have these strong fundamentals, or where prices have risen significantly, may be more vulnerable.

What Does “High Risk of Price Decline” Mean?

It’s important to clarify what this designation implies. It doesn’t necessarily mean that home prices will plummet overnight. Instead, it suggests that these markets are more likely to experience a reduction in home values over the next year or so compared to other areas. This could manifest as:

• Slower appreciation: Prices might not increase as much as they have historically.
• Price stagnation: Values could remain relatively flat.
• Moderate price decreases: A gradual downward trend in prices.

The Cotality report is based on sophisticated modeling that considers a range of economic indicators, local market conditions, and historical data. It’s informed by expertise in forecasting and understanding market dynamics.

Florida's Affordability Challenges

Looking at the affordability meter, the report shows that while some areas are becoming more affordable nationally, Florida's specific markets are in a different category. The data highlights that some Florida markets, like Cape Coral, FL, have seen a significant negative home price growth (-7.4%). Similarly, North Port, FL (-5.3%), Naples, FL (-4.7%), and Punta Gorda, FL (-3.8%) are also on the list of markets with negative price trends, even if not explicitly called out as “high risk.” This provides additional context to the outlook for these areas.

The contrast between the “Most Affordable” and “Least Affordable” lists in the report is also telling. While places like Parkersburg, WV, and Charleston, WV, show very high affordability, many of the Florida markets flagged for potential price decline are also areas that have experienced rapid price growth, pushing them further up the “Least Affordable” spectrum. This rapid run-up often creates a greater risk of correction.

Impact on Buyers and Sellers

For potential buyers in these Florida markets, this situation could present opportunities. If prices do adjust downwards, it might become more feasible to enter the market with a lower initial investment. However, it's crucial to remain cautious. With the current economic uncertainty and the rising cost of ownership (especially insurance), it’s vital to ensure a purchase is affordable for the long term, not just based on a temporary dip in price. Building a solid financial cushion and understanding the true cost of ownership, including insurance and potential maintenance, is more important than ever.

For homeowners in these areas, this information is a call to reassess their financial strategies. If you’re planning to sell, you might want to consider doing so sooner rather than later to capitalize on current home values, especially if you’ve seen significant appreciation. However, if you plan to stay in your home for the long term, these price fluctuations might be less of an immediate concern, though the increasing cost of insurance remains a factor to manage.

Looking Beyond the Numbers: My Perspective

As someone who has observed market cycles for years, I believe the current situation in some Florida markets is a natural consequence of sustained demand and rapid price increases. The factors driving this shift are not just economic but also tied to the increasing cost of living, particularly insurance. Insurance premiums in flood-prone or hurricane-prone areas, like many parts of Florida, have always been a concern, but the recent sharp increases are a significant disruptor.

The data from Cotality is a valuable tool, but it’s also important to remember that real estate is local. While these five cities are flagged, there could be variations within those metropolitan areas. Some neighborhoods might hold their value better than others depending on local amenities, school districts, and demand drivers.

My advice to anyone involved in these markets is to stay informed, conduct thorough due diligence, and make decisions based on a long-term financial plan rather than short-term market predictions alone. Understand your personal financial situation, the ongoing costs of homeownership, and your long-term goals in the property.

Markets to Watch: A Deeper Dive

Let's take a quick look at what the data says about these specific Florida markets:

• Cape Coral, FL: This Southwest Florida city has seen substantial growth in recent years. However, it’s also been impacted by insurance cost increases and potential oversupply of new construction in the past. The report flags it with a very high risk of price decline.
• Lakeland, FL: Located between Tampa and Orlando, Lakeland has benefited from its central position and relative affordability compared to its larger neighbors. However, it's not immune to broader market trends that could affect its housing values.
• North Port, FL: Also in Southwest Florida, North Port has experienced rapid development. Like Cape Coral, it’s susceptible to factors affecting regional housing markets, including insurance costs.
• St. Petersburg, FL: Part of the Tampa Bay metropolitan area, St. Pete has seen significant appreciation. As a more established market, it may be more resilient, but it also faces the same affordability pressures and insurance concerns as its neighbors.
• West Palm Beach, FL: This South Florida market has attracted a lot of attention and investment. However, its high cost of entry and susceptibility to the broader economic shifts impacting Florida could lead to price adjustments.

The grouping of these cities highlights a regional trend within Florida. The state’s appeal is undeniable, but sustainability is key. When affordability becomes a major hurdle and external costs like insurance continue to rise sharply, markets tend to recalibrate.

The Future Outlook

The Cotality report forecasts that U.S. home price growth could reach 3.7% from June 2025 to June 2026. This is a national average, and as we’ve seen, specific markets will diverge from this trend. Dr. Hepp’s comment about “subdued demand and downward pressure on home prices is expected to persist, particularly in regions where prices have already decelerated or where recent appreciation has significantly limited local affordability” perfectly encapsulates why these Florida markets are being watched.

For those who are not selling and are comfortable with their current housing situation, these potential price declines might not be a major worry. However, for those looking to buy in these areas, or who are considering selling, it’s a clear signal to exercise caution and due diligence.

Conclusion

The August 2025 Cotality report makes it clear: these Florida housing markets rank again for high risk of price decline. Cape Coral, Lakeland, North Port, St. Petersburg, and West Palm Beach are areas where careful consideration is needed due to factors like rising insurance costs and previous rapid appreciation that have impacted affordability.

It is my sincere belief that a clear understanding of these market dynamics, coupled with personal financial prudence, will help navigate the evolving real estate environment. Staying informed through reliable sources like Cotality is the first step towards making smart decisions in today's complex housing market.