Citigroup's downgrade of homebuilders Lennar and DR Horton prompted a warning from Raymond James, one of the nation's largest investment banks, about Florida's sluggish real estate market.

Shares of the two homebuilders have fallen since Citi downgraded its rating on both companies to “neutral” from “buy” and lowered its price target for Lennar to $164 from $174 and for DR Horton to $156 from $181. Lennar (LEN) shares were down 1.59 percent early Wednesday, while DR Horton (DHI) shares were down 1.32 percent, according to Google Finance data.

On Wednesday, Raymond James downgraded its forecast for Lennar to “Market Perform” from “Outperform,” saying one of the main reasons for the decision was the construction company's excessive presence in Florida, Yahoo Finance reported. According to Raymond James, Lennar's forecast annual revenue is now $30,164,000, which is 13.95 percent lower than previous expectations for the company.

Newsweek asked Raymond James for comment via email on Wednesday morning.

The difficult situation currently facing the Sunshine State's real estate market, including skyrocketing home insurance premiums, the rise in resale property inventory and relatively high property taxes, has contributed to the slump that both Citi and Raymond James cite as a cause for concern for the coming months.

Florida, along with Texas, is one of the states where the most new homes have been built in recent years. Given the historic shortage in the US, efforts are being made to increase the inventory.

The addition of these newly built homes to the state inventory, as well as the addition of existing homes that owners eventually decided to sell, believing mortgage rates would not rise any further, has driven down prices in parts of Florida and led to a rise in “stale” listings – that is, homes that have been on the market for at least 30 days without a sales contract being signed on them.

According to the latest data from Redfin, there were 200,997 homes for sale in Florida, up 40.1 percent from a year ago. The number of newly listed homes was 48,945, up 12.5 percent from a year ago.

According to the real estate broker, only 11.7 percent of Florida homes sold above list price in May, a 4.0 point decrease from the previous year. Over 32 percent of homes saw price declines, up from 26.0 percent in May 2023.

The expected decline in building permits, housing starts, sales and home prices in Florida and the U.S. is likely to continue in the coming months, contributing to lower revenues for builders like Lennar and DR Horton.