For the past few years, the real estate market has become more affordable, and has commonly been referred to as a “buyers’ market”. This has been great for buyers who were previously priced out of the market during the “boom years”, and many first-time homebuyers have taken advantage of the lower prices.
Supply & Demand
The real estate market, like all markets, is greatly affected by the principles of supply and demand. When the supply goes up, the prices go down. Subsequently when the demand increases and supplies shrinks, the prices go up.
Celebration Florida Real Estate Market
We have seen a large shift in the inventory over the last 18 months here in Central Florida. To use Celebration Real Estate as an example, we have less than half of the inventory on the market as we did last year. This is huge for consumer confidence. It shows that people have so much faith in the housing market that they are buying again!
The Future of the Real Estate Market
Every now and then, when I take clients out or when I am discussing the market with someone at an event, they will say that they think the prices are going to go down again. They heard someone, somewhere predict that there will be another glut of bank owned properties come on the market.
As someone who spends almost all of my time entrenched in this market, I have never seen any evidence to support this prediction. If banks had foreclosed properties that they needed to sell, you bet your bottom dollar they would get them on the market ASAP. They don’t want to be property owners or pay carrying costs. With that being said, I don’t think we will see prices take another dive.
Some people have missed out on fabulous deals, because they have been waiting for the “bottom”. So, I would like to make a radical statement here that most people will disagree with at first, but here goes‐ Price is not the most important factor! Some people may think that sounds crazy, but hear me out.
The most important thing to a buyer is the cost of purchasing a property. Cost is not the same thing as price. One of the major factors in determining a person’s financial ability to buy a home is the interest rate, or the cost of the money borrowed. Right now the interest rate is the lowest is has been all year; the average 30-year fixed-rate is 4.60%.
Here is an example of what I mean:
A buyer is looking to purchase a home for $200,000 now while the average interest rate is 4.60%. If he puts 20% down and borrows $160,000, his monthly payment would be $820.23. If he owned the home for the entire life of the loan, he would pay 360 payments totaling $295,283.16.
The interest rate is not constant and it always changes, so let’s assume that it goes up in a couple of months.
That same buyer decided to wait and see if prices would come down, and maybe he got the home for $190,000. During the time he waited though, the interest rate when up 1%. He is now getting a loan for $152,000 at 5.6%. This puts his monthly payment at $872.60 and he will pay $314,136.02 for the home over the course of the 30 year term.
Initially it looked liked my buyer saved himself $10,000, but he actually cost himself over $50 per month and paid almost $18,000 more for the home over time!
What I am trying to say is that buying a property is about more than price. All costs should be taken into consideration when deciding when is the right time for you. If you have any questions about this example or would like me to help you assess if now is the time to buy, please feel free to contact me any time.