When it comes to the market, anyone can tell you that it’s not the same as it was one or two years ago. At its peak, there was a period that felt like forever where the market was on fire and there was such urgency to buy now. Now however, we see a lot of decreases in the market due to the pullback in stocks and bitcoin, and home buyers are essentially disappearing. Let’s discuss some of the facts and why people may not be interested in purchasing a home at this time, and some info if you’re buying or selling a house.
1. Interest Rates
Back in January of this year, the market was very hot, with interest rates as low as 4%. Since then, these interest rates have risen to 5.5%, which is pretty high compared to what we’ve seen over the past couple of years.
So what does this actually mean? Let’s talk numbers. Today, a 5.5% mortgage on a $400,000 home would put you at a $2,271 payment per month. This is over $300 more than what a new homeowner would have paid with a 4% interest rate, which would have been $1,910 per month.
Although $300 a month can be a lot of money over a 12 month period, it’s not a massive amount when you’re looking at what’s going on in the market. When we hear that interest rates have risen, we automatically assume homes are going to be way less affordable. They are a bit more expensive in general for home buyers, but certainly not as unaffordable as it may seem.
2. The Market Pullback
When you hear about a market pullback, you can imagine that the prices are falling exponentially. Looking back over past years, we’ve seen more price decreases on homes than ever before.
Back in January of this year, the average single family home in Central Florida was around $395,000. Just 5 months later, in July, the average price rose to $412,000. Although we’ve been seeing some price decreases, we still see the average price slowly rising with it now at $417,000 in September.
Previously, if a seller wanted to list their home $50,000 over what it was worth, it would still get offers. Now, however, sellers need to consider market conditions and home upgrades to determine the final price point.
3. Less Buyers are Looking, and Sellers are Becoming More Realistic
If prices aren’t actually pulling back, what’s the opportunity for buyers in the market today? Currently, there are significantly less home buyers purchasing now, and are instead waiting to see what happens with the market in the near future. Due to this, sellers are becoming more realistic and accepting offers that are a little less than the listing price.
Just 90 days ago, sellers were getting an average 99.9% list to sale ratio. In today’s market, on average sellers are now getting 97% of what they’re asking. Although prices have gone up, this means that sellers are now getting a little more comfortable with getting a bit less than asking.
4. Builder Incentives
Back in 2008-2009, builders were closing their doors due to the market, leaving around 1.5 Million homes that were never built. Since then, builders have been attempting to recover from this through buying land and trying to solve the supply and labor issue. This caused there to be a lack of supply for the demand that was occurring, with more and more individuals wanting to buy a new home.
In contrast, it seems like builders are finally catching up and now we see a lot more supply when it comes to new construction. Due to the uncertainty of current homeowners, many home buyers seem to feel more comfortable buying resale, not knowing what’s going to happen within the next year. In order to veer new homeowners toward new construction, builders have begun adding incentives.
These include free and discounted lots, financial incentives to lock in the rate, and more. This is one big advantage that buyers should keep in mind when looking to buy in today’s market.
5. More Homes are Pending than Listing
What we’re really watching is, are there more listings that are on the market than actually sell? If there are, then this is a sign that the market is shifting negatively.
However, what we’ve seen over the past three weeks is that there are currently more homes that have gone pending than those that are being listed. This means that we’re still in a seller’s market, so the idea that the market is pulling back really doesn’t make sense when looking at the data. Now is still a good time to sell!
6. The Rental Market is Climbing
For many people currently living and moving to Orlando, they’re on the fence on whether to buy or rent. Because of this, the rent prices keep increasing with the demand for those that don’t want to lock anything down, and there’s no end in sight currently.
If you’re looking to purchase a home now or in the near future, it would be wise to consider a few things. Think about your current rent and how much you’re spending. This price can change every year, but with the purchase of a home you’re guaranteed a locked-in price that is unchanging no matter what’s happening with the market. Although it does take a larger amount all at once to put down on a house, it’s an investment versus just renting a space for a limited period of time.
Overall
The market and other factors are always going to weigh in on the big decision of buying a home. The home buying process is such a special and emotional decision, and it can be hard to know exactly when the right time is. Our team is happy to help in any way that we can to help guide you through the process, whether it’s today or years from now.
Have you been considering buying or selling a home?
The Orlando Real is sponsored by The Pozek Group. If you’re thinking of buying or selling a home in Orlando, reach out and we would love to help!
Posted by The Orlando Real on
Leave A Comment