Speaker Intro:
Welcome to the Southwest Florida Realty show with Billee Silva and here’s your host Billee Silva!
Billee Silva:
Hello, it’s Billee Silva with the SW Florida Realty show, I remember back in May of 2020 it seemed like we became a seller’s market overnight and we have been on a crazy roller coaster ride ever since. During the pandemic it seemed like everyone was relocating here and everything was a bidding war and it was not uncommon for people to bid 50 thousand or more over asking price in order for their offer to be accepted. Now, I think buyers are getting more data conscience and looking at what things are really worth, rather than being so desperate to get into anything. Although, we still have a long ways to go before we’re considered a buyer’s market, we are finally starting to see indications of a stabilizing market.
In just a few short weeks, I’ve observed a significant turnaround in the number of homes available for sale, going from essentially flat two weeks ago, to up 5% last week, to 9% this week. As we start seeing inventory go up, it means more competition for sellers, and possibly a silver lining for buyers. If you’ve been scrolling the internet looking at real estate recently, you may have actually even noticed some price reductions and seen homes staying on the market longer than 48 hours. However, you need to understand this in context. Although the market is adjusting rapidly, the number of homes for sale still remains limited compared to pre-pandemic conditions and as long as inventory remains tight, prices will remain competitive.
As of this morning, the active listings count is still 60 percent below its level right at the onset of the pandemic. This means that buyers have just 2 homes to consider for every 5 homes that were available for sale just before the pandemic. We’re still very depleted as far as the number of houses available for people out there. So, I think even if prices might begin to plateau out a little bit, the demand is going to be there for a little while. Especially for moderately priced homes. We’re going to see prices continue to grow and move pretty quickly under that 350 thousand dollar price point. But for the more expensive homes, I’m already seeing sales slow down in recent weeks.
With the price of mortgages climbing, and now expected to jump even higher with the feds raising interest rates, consumers will have to pay even more for their dream home. Every percent increase in interest rate decreases your purchasing power by 10%. The escalating mortgage rates have bumped up the cost of purchasing a home by more than 25% from a year ago, while steeper home prices are adding another 15% to that figure. In some cases, these higher rates increase mortgage payments by as much as $500 per month. That’s a significant difference and becomes even more problematic to a family on a budget contending with rapid inflation, and rising fuel and food costs.
Almost daily, I hear someone say they are going to wait until the real estate bubble bursts before they purchase a home. I’m afraid they’re going to be waiting for a very long time. It’s nothing like the last housing bubble. The vast majority of homeowners are enjoying huge wealth gains and are not under financial stress with their home as a result of having locked into historically low interest rates, or because they are not carrying a mortgage. There is an ongoing housing shortage, and properly listed homes are still selling swiftly, generally seeing a contract signed within a month or less and multiple offer situations still happen frequently, but aren’t necessarily the norm like they had been.
Yes, higher interest rates will be felt across the board, from stocks, to buying a car to the housing market. As rates increase people will be able to afford less house. That slows down demand for houses and increases the cost for a mortgage, which will have an impact on the housing market, but how many times when talking real estate do you hear location, location, location? And right now Florida is the location to be. So, although the market is shifting, we definitely will not get hit if there is some kind of slow down in the real estate market like other areas of the country might experience.
The problem I think in our area, especially at the lower price point which is affecting first time home buyers, is builders buying and tearing down the older, more affordable homes and building back larger houses which then become out of the budget for first time home buyers, or a lot of investors that are buying them for rental properties or Airbnb’s which is making it difficult for the first time home buyers because they can’t compete against these cash offers.
Our Governor just announced the launch of the Florida Hometown Heroes Housing Program which is designed to help Floridians in over 50 different professions purchase their first home which will be the topic of my next podcast. So, make sure to tune in in two weeks to learn more about this amazing new program and if you qualify. Until then, stay healthy, enjoy the dog days of summer and we’ll talk soon.
Speaker’s closing remarks:
Thank you for listening to the Southwest Florida Realty Show with Billee Silva. To learn more about Billee Silva go to www.sw-floridarealtor.com. That’s www.sw-floridarealtor.com. Or call 239-247-2490.