Florida Housing Markets And The Higher Mortgage Rate Threat

July 17, 2025

Time to read [7 minutes]

  • Florida Inventory Entering The Market By Higher Amounts Restraining Price Gains
  • Mortgage Rates Won’t Likely Drop By A Meaningful Amount For About A Year
  • Tariffs Are Starting To Create Inflation, And Chatter About Replacing The Fed Chair Seems To Be Noise 

Today, our second-quarter Florida market research for 14 markets was published by Douglas Elliman. With the humidity set too high in New York City, I’m in the right mood to talk about the lack of falling iguanas. And what about the chatter to replace the Fed chair before his term ends in May 2026? What does that mean for the housing market, and why is the suggestion to replace him now so strange? But first, let’s discuss Florida listing inventory, a hot topic on the internet.

South Florida Seeing More Supply Come In

In the markets we analyze, as illustrated in the table above, supply has expanded by around 20% this year, following several years of record-low levels. However, listing inventory is about 20% below recent highs. In all the markets we track, listing inventory tends to decline from the first to the second quarter as spring market sales burn off the existing listing inventory. That is what we saw in the second quarter, which suggests seasonality remains in place and there are plenty of sales to offset inventory growth.

I’m not sure I can claim normalization of trends as we exit the pandemic era with less market distortion of listing inventory. Many people don’t realize just how low listing inventory was a few years ago, following the pandemic. For example, the Miami Beach market currently has 5,139 listings (single family plus condo), but three years ago, there were only 2,125 listings after reaching a 2019 peak of 6,726. Now that’s some volatility in a short period!

In South Florida Cash Remains King

While it is not a perfect correlation, higher cash markets tend to have higher prices. Coral Gables and Weston are outliers. It’s also interesting to consider how the meaning of cash has undergone several distinct interpretations in recent history.

  • 2023-2025 luxury buyers using cash to bypass tight credit and higher rates
  • 2021-2022 shortage of inventory gave cash buyers a negotiating advantage
  • 2017-2020 used cash due to the limited availability of credit
  • 2010-2016 was used by speculative investors due to a lack of financing

This is one of the key reasons why the higher end of the market, including new development, is better positioned than the remainder of the market over the next several years, as Tariff Tantrums and a new Fed Chair come to the forefront.d center.

Presidential Talk Of Getting Rid Of The Fed Chair

In 2017, Trump nominated Jerome Powell, then a Fed Governor, for Fed Chair after deciding to replace Janet Yellen. The Senate confirmed him, and he began in early 2018. He was the first Chair in years who did not have a PHD in economics and was nominated by Trump for “continuity” of economic policy. Now the President wants to fire Powell. That’s why the presidential chatter about replacing Powell, possibly with himself [gift link], is so strange. Trump really wants a 3% rate cut (300 basis points) and Powell won’t accede to that demand, presumably because it would be wildly inflationary. As a result, here is a list of insults the President of the United States has given the Fed Chair (found using Perplexity.AI):

•   “Not a smart person”
•   “Does a terrible job”
•   “Major loser”
•   “Real dummy”
•   “Very dumb”
•   “Hardheaded”
•   “Numbskull”
•   “Knucklehead”
•   “Total and complete moron”
•   “Stubborn mule”
•   “Stupid guy”
•   “A guy that needed a palace to live in” (in reference to federal building renovations)
•   “A total stiff”
•   “Like a golfer who can’t putt, has no touch”
•   “Terrible” / “Really bad”
•   “Too Late Powell is a fool”

While reading about these threats to the Fed Chair, I learned that the Chairman can influence the Board of Governors, but the position doesn’t possess the power to override their votes. So, when Trump appoints a candidate who will undergo exhaustive vetting in the Senate, and assuming they are confirmed, the new Chair doesn’t have absolute power. The lack of absolute power is probably why the financial markets are not roiling over this issue.

The CEO of Bank of America believes a 1 percent cut will be implemented in the second half of 2026, as inflation is currently threatening to rise and tariffs haven’t yet taken effect. We absolutely need the Fed to stay independent, or we will be subject to much higher mortgage rates, among other things. In a Goldman Sachs research piece behind a paywall (bold my emphasis):

independence is nonetheless vital to produce better economic outcomes, particularly lower inflation, with Cochrane warning that a scenario in which politicians can tell the Fed what to do would risk plunging the US economy back into 1970s-style inflation. Indeed, GS senior global economist Joseph Briggs sifts through the evidence from global central banks to conclude that a shift toward a less independent Fed would likely result in higher inflation, higher long-end rates, lower equity prices, and a weaker currency

Goldman Sachs

Inflation Is Already On Its Way Thanks To Tariffs

Tariffs are just now starting to bring inflation into the economy, which is why a rate cut now would probably cause more inflation and push mortgage rates higher. The housing market doesn’t need that drama if sales are to rise to normal levels.

Here’s a must-read on tariffs and inflation in The Big Picture. Please.

On a personal note, one of my sons works in logistics for a US luxury brand and imports a lot of materials from China – this is what he told me yesterday: “I just paid a quarter million tariff on a $400k shipment from China. still paid it, not slowing down buys, just passing the additional cost elsewhere.”

Most of the tariff costs will be passed on to the consumer. Here’s a terrific piece by Liberty Street Economics. This data is from May, but we won’t even reach “Peak Tariff” for 1-2 months.

Final Thoughts

On the topic of Florida listing inventory, supply increased significantly year over year from relatively low levels but still lower than recent highs. Supply dropped in the second quarter compared to the first quarter, which is a seasonal pattern. The increased supply entering the market is restraining price growth, which is a good thing for affordability.

Regarding key economic conditions, the drama surrounding the Fed Chair replacement and Tariffs, which are finally creating inflationary pressure, won’t go away. Still, the financial markets don’t think it’s anything to worry about. Cutting rates right now seems nuts (economic term for wildly inflationary). Mortgage rates could remain unchanged for at least a year. Sigh.

The Actual Final Thought – This is what AI is really for.

[CRE] Lessons Learned: 5 Years After The Pandemic

I’m looking forward to participating in this one – it should be a great discussion, especially with Jonathan Schein as moderator.

Collateral Risk Network 2.0 Meeting August 6-7, 2025

My friend, colleague, and former director of the Appraisal Subcommittee, Jim Park, is bringing his talents to revitalize the Collateral Risk Network(CRN). For more information on CRN, please visit this link. He asked me to share this event announcement with my readers. The event is being held this summer in Washington, DC, at the NAHB HQ. I hope to attend, schedule permitting.

[Podcast] What It Means With Jonathan Miller

The latest episode [Housing Hype Cycles Come And Go] is just a click away. The podcast feed can be found for all three platforms we use are here:

Apple (within the Douglas Elliman feed)   Soundcloud  Youtube

Did you miss the previous Housing Notes?

July 16, 2025

Housing Hype Cycles Come And Go

Image: Notorious POD

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