Today the Fed is announcing whether or not they will raise interest rates. This affects us in the real estate business quite a bit and affects our clients even more. If interest rates go up from the 4% range into the 5% range, buyers will lose 10% of their purchasing power. In other words, a person who can afford to purchase a $250,000 home at a 4% interest rate can only afford a $225,000 home if interest rates go up to 5%.
My wife, Gina, and I sold our home this summer because I thought it was the right time to be selling. The environment is very friendly for selling right now. Values are up and interest rates are low. This means your home is worth more than it has been worth in 7-8 years AND low interest rates enable buyers to afford your home (at least for now). If interest rates go up, fewer buyers will be able to afford to buy your home and that, of course, will affect the home's value.
I'm happy to talk to you about this if you would like some clarification. Give me a call at 407-267-2312.
Matt Mobley the REALTOR®
Today I was asked for my opinion regarding the prediction going around that our real estate market is going to crumble because we are in another real estate bubble. I have been asked about this 3 times in the last 2 weeks and I think this prediction is totally unfounded. Let me share with you why.
In the real estate bubble of the past, renting was far cheaper than owning. A $300,000 home could be rented for $1,000/month. Today, this is not the case. The values and appreciation we have enjoyed the past 3 years are tied to rental values. To rent an average - not special - 3 bedroom 2 bathroom home in Clermont, you will have to pay $1200-$1400 per month. This rent payment is equal to the the mortgage payment, if not higher, for a home of similar size and quality. Renters are choosing to become owners again because they are already paying high monthly rental amounts and it just makes sense for them to own the house. This means buyer demand is greater than seller supply and thus our 40-50% increase from the bottom of our market over the past 4 years.
If our home values were to begin to crumble again, renters will be diving into ownership faster than ever and investors will re-engage the market because owning will be much cheaper than renting. If owning became cheaper than renting again, values would go back up because the demand would end up being greater than the supply. As I see it, the values we are enjoying are more permanent because rent is so high and that is not going to change for a while. I actually think we have room to appreciate just a little bit more next spring, but interest rates will determine whether or not that happens. After that, I think we are in for a long steady time of flat to modest appreciation.
I would love to tell you more if you are interested. Call me. We'll talk it up! 407-267-2312
Matt Mobley the REALTOR®
The Hancock Real Estate Team
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