For the past two years we’ve been talking about lower interest rates fuel home sales and their impact on pricing.  Today we have some data to illustrate how lower interest rates fuel increased pending sales.  And we all know pending sales lead to closings.

Last year the Fed made a mistake and began raising interest rates, which led to higher 30-year mortgage rates as well.  These two are not always tied together, but in this case that was the effect.  As you can see from the interest rate chart, rates began rising in 2018, especially in the latter half when the Fed did what they did.

Lower Interest Rates Fuel Increased Pending Sales

As rates shot up to 5% at the end of 2018, home sales lagged.  Beginning in November 2018 new pending sales fell off about 20% and continued its slide until April of 2019.  March 28th is when we saw our first real dip in rates, which led the turnaround in new pending sales immediately.  Beginning in April new pending sales turned around, and they’ve continued since.  In fact, this September we saw the largest increase of 19.6% This is a function of lower rates now combined with rates that were rising at that time last year.

Lower Interest Rates Fuel Increased Sales

Last September new pending sales were falling and this year they’re rising.  These two charts illustrate perfectly well the effect lower interest rates can have on home buyer’s motivation.  Lower rates open more opportunities for buyers as well, as they can afford more home for the same payment.

Lower Interest Rates Fuel Increased New Pending Home Sales

The interesting thing will be what happens moving forward.  Interest rates are moving up while the Fed is lowering rates now.  The Fed is in pause mode now to see how monetary policy shakes out both here in the US and globally.  Like I said earlier, these two rates are not always tied together.

When word gets out that rates are going back up, it will have one of two effects.  It may spur some buyers who were on the fence to act, which could increase new pending sales.  It could also have a chilling effect, because as rates go up, sales can go down.  Fewer buyers qualify at various price points, so it essentially takes some buyers out of the market.

We can’t say moving forward where mortgage rates will be next year.  There are plenty of variables, not the least of which are trade deals.  Secondly, the sad reality is the world is broke.  Nobody really has any money, it’s all borrowed.  We see countries in Europe with negative interest rates because their economy is in trouble.  The United States is still the strongest economy on the planet, so we don’t have the need to go negative like these other broke countries.  However, we owe a lot too, so we must be careful with spending programs to avoid the fate of some of these countries.

The good news is our economy is booming and could be better once these trade deals are worked out.  Ironically, certainty in the market may spill over and help these other countries too, if they pay attention and rein in spending.

So how does all this affect real estate here in Southwest Florida?  Lee County prices have been very stable the last few years.  We haven’t seen big price run-ups.  We should be in good shape no matter what happens globally.  While the Fed made a mistake last year, they’ve been doing a reasonably good job reading the financial tea leaves and keeping the US steady.

30-year rates today are at 3.78% on average.  That’s really good, and if we keep rates below 4% we should continue to see excellent sales numbers moving forward.  It’s when rates hit 5% last year that we saw slowdown.

We’ve helped buyers save big on closings costs through a lender we work with.  If you’re thinking of buying, you should call the Ellis Team at Keller Williams Realty.  239-489-4042 and speak with one of our buyer agents.  If you’re thinking of selling ask for Sande or Brett at Ext 4, or visit www.SWFLhomevalues.com

Good luck and Happy Home Buying!

We have 7 open houses this weekend.  Call our office for complete schedule 239-489-4042

We get this question often, and it’s come up several times in the last two weeks.  When is the best time to sell my Southwest Florida home?

Several clients have said they want to wait until season because they believe that is the best time to sell and get top dollar for their home.  There is a perception that homes sell for more in season than out.  The reality is the numbers are skewed in season.  Homes don’t sell for more money in season.  It’s just that more higher end homes sell in season because we have more affluent buyers visiting in season.  When higher end homes sale in a given month, it pulls up the averages, making it appear that home prices go up in season.

Best Time to Sell Southwest Florida Home

Best Time to Sell Southwest Florida Home

Here’s another reality.  Listing inventory surges in season, as sellers are conditioned to believe that’s when they should sell.  We’ve helped many sellers in the past beat that listing surge by listing before season.  Many sellers have their home sold before all the others hit the market.  When a bunch of homes hit the market, buyers have more choices.

These buyers typically wait until February or March before offering.  This means many sellers don’t have a closing until March or April, and that’s if it sells.  If it doesn’t sell, they’re sitting there with a bunch of other listings that listed in January and didn’t sell either.  Now it’s out of season and they’re still holding their property.

There is no harm in listing before January.  You just might get your property sold, and worst case it’s still on the market in January.  Sellers have been afraid that it may look bad if their homes have been on the market and haven’t sold.  That’s not true.  In the old days people wondered what was wrong with a home if it sat so long.

Price it Correctly

Today, if a home is priced over the market it’s just invisible to the market.  The minute it drops onto the buyers’ radar it becomes visible.  They don’t usually question why it’s been on market.  They can see the price drop and they instantly know that’s the reason.  Now the home is on the radar and available.  Before it was off-radar and invisible, so it might as well have an unavailable sign on it.

Interest rates have been rising in recent weeks.  People ask how this can be when the Fed has been lowering rates.  It’s because they are two different rates.  Mortgage rates are more closely tied to the 10-year note, not the Fed funds rate.

With rates near historic lows but rising, and lower inventory now, it may be the perfect time to beat the market and list your home now.  Pending sales were up in September as were home sales.  When buyers catch on that rates are rising there could be an uptick in offers.  Rates can rise quickly, so this could all be over by season.

The smart money is selling your home when it’s right for you.  Artificially holding it until season when prices are higher may be a mistake, because sales prices aren’t higher in season.  There may be more eyeballs looking at homes in season, but they don’t necessarily pay more for the same home in season.  They also have more homes to compare as well.

If you’re unsure what to do and want to discuss your options, call Brett or Sande Ellis 239-489-4042 Ext 4.  If you’d like a Free computer value of your home, go to www.SWFLhomevalues.com and get an instant value.  They’re fairly accurate in many cases.

Neighborhood Data

Additionally, we’ve got some neighborhood reports we can send out that will help you see what’s going on in your neighborhood at a deeper level.  To get that, just email me at Brett@topagent.com with your property address and phone number and we’ll send that out to you.  This report will make you smarter about what’s going on in your area.

Remember to set your clocks back one hour this weekend.  Let us know if we can help you with your real estate questions.

See last week’s article “September Home Sales Rose 14.8%