Orlando Real Estate Podcast with Kwaku Mitchell

There are some important economic changes and recent news items from our housing market that you need to be aware of. First, the minutes from the Federal Reserve’s last meeting showed concerns over sluggish inflation. Lack of inflation in the past has helped keep interest rates low. The labor market continues to show strength. The private sector added 250,000 jobs this past December of 2017, which is our biggest increase since March of 2017. In housing news, home prices continue to soar. The Federal Housing Finance Agency is considering using the VantageScore model over the FICO model for mortgage lending. This could result in more qualified buyers. “It’s a great time to buy or sell your home.” The federal tax reform plan just reduced the mortgage cap from $1 million to $750,000. Previously, homeowners were able to itemize and deduct interest on a new loan for up to $1 million, and now that’s down to $750,000. This affects buyers who are purchasing in excess of $750,000 by possibly shifting their purchasing habits—instead of purchasing in those high-priced areas, they’ll be looking to purchase in more rural or suburban areas. The president just passed an executive order to improve high-speed internet for homes in rural areas, which should make those homes more competitive. More people are working and making money, the stock market is good, interest rates are low, buyers are purchasing, and inventory is still very low. It’s a great time to buy or sell your home. If you have any questions about these latest changes or you’re thinking about buying or selling a home in our market, don’t hesitate to reach out to me. I’d be happy to help you.

Today, I’d like to cover three trends that will likely cause home prices to increase in 2018. I wanted to speak about this because thus far in 2017, we’ve experienced, on average, a 6.8% increase in home prices. The first trend to note is the low supply. Supply has been historically low, and when supply is low, sellers typically have more negotiating power than buyers. When there are more buyers than there are homes to purchase, that creates a seller’s market. That means that sellers can ask for higher prices for their homes, and they can expect those higher prices when they close. “Supply has been historically low, and when supply is low, sellers typically have more negotiating power than buyers.” Second, there will be high demand. There are a few reasons for the increase in demand: There has been an increase in the number of 18- to 24-year-old first-time homebuyers that will actually go through with a purchase. The interest rate has remained below the historic average of 6% to 8%, which encourages buyers to purchase. Inclement weather. We experienced a devastating hurricane season in 2017. As a result, a lot of people have relocated to central Florida. As they get situated in their new locale, they will eventually become buyers, thereby increasing demand. The last trend to pay attention to is affordability. This will vary from one individual situation to the next, but recent statistics show that it’s more affordable to purchase a home than it is to rent that same home. While the sales price and mortgage may be higher than what homeowners are accustomed to and are happy with, it’s still on par, if not below, what they would be renting that same home for. If you have any questions about this or other real estate-related topics, feel free to reach out to me. I’d love to help you out any way I can.