Our broker with over 25 years of Real Estate experience and a Masters in Economics gives us some insight into the real estate market in Florida.
Here is an update for you on where we've been, where we are now, and where we're going in 2023. If you thought being a buyer was rough six months ago-you haven't seen anything yet. Hold on-it's about to get really bumpy.
MAJOR INDUSTRY ENTERPRISE FORECASTS FOR 2023:
Fannie Mae & Freddie Mac are the defacto lenders of 78% of ALL residential loans across the nation. What they think is VERY important. They forecast a price increase across the nation of 4.2% average. Every major entity in the real estate industry is forecasting average U.S. home prices to rise in 2023 but one. These are NATIONWIDE averages.
NOT ALL METROPOLITAN AREAS ARE THE SAME:
Of 875 metropolitan areas-30 are estimated to have price drops of 3-5% vs 200 8 or 7x more that will have price increases of 3-5%. Expect rents to do the same (or go higher as demand exceeds supply). People are leaving from states like CA, NY, IL, etc as FAST as they can to states like Florida & TX. Florida-across the state, will continue to see a huge influx of buyers coming from these states, plus immigration from S. America, C. America, and the Islands (looking for a safe place to store their money from currency devaluations in their nations-to-South Florida real estate). Prices in Florida WILL continue to rise, but very slowly.
HOMEOWNER EQUITY:
*People that bought at the Peak of 2006 can sell their homes today at an enormous profit *Homeowners have 40x more net worth than renters... want to create wealth-buy a home
*Homeowners have record high average net worth in their homes: over $300,000 average
*This means that they have enormous assets to weather an economic downturn
*It also means that they can tap into their assets if they need money
*It also means that they can walk away from their homes-rent them-and make more money
*There are NO pressures on homeowners to sell their homes-that means low inventory-stable prices
*In addition-these homeowners don't want to sell and lose their 3.5% interest and buy a home at 7% interest...
INFLATION:
*Expect inflation to remain high in 2023-likely double digit by the end of Q-1/Q-2 2023
*Expect USG policies to continue to fuel the flames of inflation as $1T of new money will make it worse soon
*Expect gas prices to spike back to $4/gallon, $5/gallon in early 2023
*Expect the Fed to continue to raise interest rates (announced another 0.75% in November)
*Expect Mortgage Rates to continue to rise as inflation rises and Fed rates rise
*3.05% nationwide avg 12.23.21 vs 6.899% today 10.19.22
*Expect a high likelihood of double-digit rates by this time 2023
*In October 1981 mortgage rates peaked at 18.2%
*Even with back-to-back recessions in 1980-81-home values continued to rise
*Expect more investors buying homes to hedge against inflation losses
*They won't make money, just lose less as inflation eats into their assets
Mortgage Rate Impacts on Mortgages:
*The definition of a mortgage is Principal + Interest
*A $400,000 home at 3.05% (12.23.21) = $1,697/mo
*A $400,000 home at 6.899% (10.19.22) = $2,634/mo
*That's a mortgage increase of: 55.2% in less than 10 months-for the same home
*A $400,000 home at 10% = $3,510/mo
*That's an additional increase from today of: 33.2% - for the same home
*Price is no longer what you need to focus on: RATES are.
SUMMARY:
*Do not break out your lucky rabbit's foot wishing this was 2008: It isn't. Buying later will only mean paying more money for less home for the next 30 years
*As fewer people buy-the demand for rent increases-rents will continue to rise
*There are areas in the U.S. (CA, NY, IL, et el) where home values will decline. Some. Florida is NOT one of them.
There is not enough honey out there to sweeten this bitter pill. If you do want-or plan to buy- a home in the near term: sooner will be better than later.
