This past week I had the distinct honor of speaking in Fort Lauderdale with some of the brightest minds in the business. Throughout the 3 day conference we heard from the CEO’s of Better Homes & Gardens and Coldwell Banker, the #1 real estate team in the Coldwell Banker system, HUD Secretary Julian Castro, Freddie Mac chief economist Sean Becketti, top designers, and top agents from all over the country.
2016 Housing Projections Released
Today I’m going to focus on projections made by Freddie Mac as they control a large part of the financing in the US.
Mr. Becketti projected mortgage rates to increase somewhat which will decrease home affordability. In fact, he said home affordability can disappear on a dime when interest rates increase.
The Fed may have a difficult time raising rates as much as they’d like because unemployment is so high. Basically, our government hasn’t been completely honest with us. Unemployment is about as high now as it ever was. Statistically the government is stating lower numbers around 5% but when you factor in labor participation they’re around 10%.
In other words, our economy isn’t as strong as some would have you believe. When rates rise, it will pinch home buyers. When buyers get pinched, large price gains begin to abate. We’ve seen a nice run-up in prices the past several years, and we needed to. The question is how long will that last?
Much of the country is back to previous peaks in prices while Florida is about 24% below the peak. This feels about right here in SW Florida too. Economists are projecting higher prices for us this next year, but a lowering in the growth projections. We may not see 15% price gains going forward, which in my opinions is a good thing. That is not sustainable and a recipe for disaster were it to continue too long. It was good to catch up as we were hit too hard, but now that we’re getting closer to a normal market, normal growth it perfect.
Many sellers are trying to time the market and get out at the top. If this thing goes swimmingly, there will be no top. There would be normal positive growth for years to come. We see large ups and downs when the market gets out of balance or there are external economic factors placing undue pressure on the housing market.
We know rising rates are coming. This will inhibit buyer’s purchasing power. We don’t know who will become president or how the economy will react, so in a vacuum we’d say our market should do fairly well with rising but stabilizing prices and growing inventory levels as sellers wouldn’t be able to name their price like today.
To all sellers I would say, you’re in the driver’s seat today. Rev the motor and smell that crisp clean air rushing by. It may not last forever. We will still have a good market, you just may have to switch over to a safer, slower lane. More sellers may place their home on the market as competition to yours. Add more housing inventory to rising rates and you can see more sales but less big price jumps on the horizon. This isn’t a bad thing; in fact it would be considered a great normal market. It just may not fit current sellers’ expectations, which are normally higher than buyers by human nature. The sellers that recognize and plan for the future have the greatest chance of accomplishing their goals. Unrealistic sellers struggle in good times and bad.
If you’re going to buy or sell, it pays to be realistic. There are costs of not paying attention. Give our office a call and we’ll be glad to guide you. 239-489-4042 You can search the MLS for Free at www.LeeCountyOnline.com
Good luck and Happy House Hunting!
Check out last weekend’s open house on Instagram