Thoughts From Realtors: The Current Market

“We received 29 offers on this property and after sorting through all of them the sellers have decided to accept a different offer.”

Home buyers across the United States who are trying to take advantage of record low mortgage rates are often met with the bad news that the home was sold to someone else. Low inventory and an onslaught of new buyers gave rise to the current sellers’ market, which, from the books of ECON 101, means prices are going up, up, up. I'm not looking to explain what’s happening, as many other articles, YouTube videos and think-pieces have done so already, but, rather, I want to discuss what could be coming next. Despite the number of active buyers making this market as competitive as it is, there’s another set of qualified buyers who’ve chosen not to buy, yet. “I think there’s a crash coming,” said one of my out-of-state clients last week. “There’s something weird going on — I don't know what, exactly, so I rather wait and see what happens.” This is a fair and increasingly common assessment of the current situation — after a year of lockdowns and massive unemployment caused by COVID-19, why is everyone suddenly able to buy a home? Buyers, sellers, realtors, and everyone else are asking themselves this same question, ultimately leading to the mother of all questions: what’s the future of this market? I presented this and other questions to two of my coworkers during our last work meeting to get a quick answer for an otherwise difficult situation to evaluate. 

Is this a good time to buy? 

Cristian: This is still a good time to buy because of the low interest rates but I think this will be be short lived and the market will normalize itself in the next 24 months.

Juliette: It depends whose perspective you’re looking at it from. If I sell my house in another state and move to Florida I’m looking at a better lifestyle. So for them it’s probably a good time; If you’re moving from somewhere else in Florida, I would say wait.

What will the market look like afterwards? 

Juliette: I’m not 100% sure but the way it’s looking referencing specs from last year versus this year I project a continual increase. 

Cristian: In the next 12-24 months we will see the interest rates start to go up and prices going down and we will welcome a buyers market.

As expected, my coworkers thoughts were somewhat split through the middle. What the Orlando market (and perhaps others around the United States) will look like a year from now is a question no one has the answer to. But like the saying goes, there are two types of people in this world… those who think the market will crash, and those who think homes will retain their value or even go up more over time. A crash — or correction — is easy to explain and imagine, but a continual increase in home value is a scenario that also enjoys a set of circumstances that back it up. 

It’s no surprise that the influx of new buyers to Orlando are coming mostly from states like California and New York. Those from the latter used to come in search of better weather; now they're escaping failed policies that left their economy in shambles. And it’s not only people who are leaving — large companies are relocating to friendlier states, like Tesla’s recent move to Texas. As companies and people move, their money moves with them. And as that money gets invested into real estate, you start to see the value of the market change. “What decides the value of a home is the market, nothing else,” my broker reminded the team in our last meeting. “If a home in a specific neighborhood sells at a record high, every other home in that neighborhood benefits from it.” So the new money from other states making its way into Orlando is inadvertently reflected in home prices all over, as we’re seeing lately. And those with the buying power to pay a premium price for a home are squeezing out those first-time homebuyers who were hoping to buy a piece of America. This is what eventually leads us to those 29 offers for a single home, only one lucky winner, and 28 sad real estate agents pouring themselves another drink. 

“People are saying Orlando is the new L.A.,” a coworker said as we neared the end of the meeting. If this is the case then what we’re seeing now, despite the rate of change in home values over the last year, can still be considered homes for cheap. Otherwise it’s nothing more than a frenzy. Truth is, many things can influence the market, and at the end of the day buyers and sellers have to decide for themselves whether it makes sense for their family to buy or sell. Decisions should be made according to specific goals beyond the current monetary value of a home, and whether a correction or further spike is something said family can live with or afford.

For any real estate related questions don’t hesitate to call or write to us. We’ll be happy to help!