Just wanted to give you another update market report because as crazy as it is for me to believe, we are more than halfway through the year and see no signs of prices dropping for buyers while sellers are still in firm control.
Some good news for buyers though is that according to Jerome Powell, the chairman of the Federal reserve, interest rates will not change in 2021 or 2022.
They will, however, increase in 2023 twice and twice in 2024. So this year and next are a great time to try to make a purchase.
Federal reserve now forsees first rate hikes in 2023 across the board which obviously affects the housing market.
Current Market Conditions
One of the biggest issues we’ve seen in real estate has been the lack of inventory. While we did see a few more houses on the market in June and July, that’s nothing compared to the amount of buyers still looking for homes.
Inventory has also been in a slump because development of new construction has been slowed tremendously due to the cost of construction.
Lumber went up 275% last year. Peaked in May and now down 40%.
We won’t see the trickle effect in our housing market for several months or possibly until next year but it is starting to stabilize which is good news.
Private Equity Funds
Not so great news is that private equity firms like Black Rock are spending billions to buy property to become one of the largest landlords. More than 1/2 of the countries properties are owned by institutional investors.
We want to always try to give homeowners and families a chance to purchase because investors are constantly coming up as cash offers outbidding many would be homeowners.
The next two years are a great time to buy as far as interest rates but it’s all about getting your foot in the door.
Then a few days ago in a CNBC article, the CEO of Taylor Morrison, thinks the housing shortage that began before the pandemic will stick around for a long time as market demand soars.
As I mentioned before, the new construction has slowed down so it’s going to be difficult for builders to make up the shortage, the deficit that been building up for more than a decade now.
In Oviedo, I went to 4 new communities and they were all but sold out. Two had no more lots and one had 5 lots left and over two dozen approved buyers in waiting. There’s such desperation for homes that these new communities weren’t even giving buyers options or design center consultations like in times past. They are literally paying over half a million for a brand new home they don’t get to customize until after the move in on their own dime.
Mortgage Demand Dropping
So even though interest rates will increase, the overwhelming demand and lack of supply will be with us for years to come. We’ve been seeing the decline in inventory since 2012 and no increase in sight.
The Mortgage Bankers Association’s seasonally adjusted index showed that mortgage demand decreased for the second week in a row this week, dropping by 1.8% to their lowest level since the beginning of 2020. Home purchase applications and mortgage applications to refinance a home both dropped for the week, even though mortgage rates dipped.
Refinancing now has penalties so homeowners are considering if it’s worth it when many had already refinanced at a low rate in the last few years anyways. New purchase applications are low because there is a low inventory and many are cash buyers out there.
Housing Inventory Issue
Growth in housing inventory has slowed over the past decade in the aftermath of the 2008 housing crisis, creating an “underbuilding gap” of 5.5 million to 6.8 million housing units across the country since 2001, according a recent report from the National Association of Realtors.
Right now, we need new inventory. People either love where they live or they don’t want to sell because they have no where to move. New construction is where we will see some resolve but it has to start sprawling outside of the cities people want to live in due to space and land costs.
Home Price Inflation
Home prices have risen sharply during the coronavirus pandemic across the U.S. but Orlando has moved up to becoming one of the most expensive per median income when we used to be considered affordable.
This hike has sparked affordability concerns especially for first-time buyers being priced out.
We have clients that were taking their time looking for a home for the last two years and have now they found their dream home. They’re paying $200K more than when they started. We’ve seen that time and time again.
If you see something you can afford now, don’t hesitate because when interest rates go up, it will cost you more and there’s no guarantee pricing is going to go down until we get more inventory pumped into the market for which there is no plan in sight to keep up with the demand.
If you have any market questions or concerns, please reach out to us: