Putting off that home purchase? Perhaps you’re saving up for the down payment, or you’re waiting on sellers to reduce prices? That might cost you in the long run. Let’s explore the cost of waiting to purchase SW Florida real estate.
In October median prices were up 6.7% and average prices were up 8.6%. These numbers are indicative of how we’ve been running all year, so we’ll say they’re legit for conversation purposes.
Cost of Waiting to Purchase SW Florida Real Estate
Let’s assume home prices increase 5% going forward. That’s reasonable compared to this past year. The Federal Reserve is expected to hike rates this week and the consensus is 3 times again next year. Right now, as of time of this article the Fed Funds rate is 2.1%. It’s expected to climb to 2.7% in the next year and 2.9% into 2020. That’s almost a 1% incline in rates.
If rates go up 1% and home prices go up 5%, it will cost a buyer about $12,500 in price which translates to an increase of $190.38/Mo in payment. Over the life of the loan that’s an additional $68,537.
When people see it broken out like that they realize the true cost of waiting. This doesn’t even factor in the equity gains over 15 or 30 years. If someone were to rent and never purchase, they would never end up with a paid off home for retirement. Buying real estate is the single best option for people to build wealth.
Sure, perhaps you could have been lucky and bought Bitcoin 8 years ago. You’d be wealthy today. However, you could have lost everything, and you still could as the jury is still out on its long-term value.
Real Estate a Hedge Against Inflation
Tangible assets are a hedge against inflation. Therefore, people buy real estate, gold, silver, etc. in inflationary times. The difference is if the price of gold or silver goes down, you can’t live in it. Gold or silver can’t be rented out and you can’t draw income from them either. You can live in real estate whether it’s up, down, or sideways. You can usually rent it out too and have someone else pay your costs of ownership.
At present we don’t know what’s in the final tax bill. We don’t know if it will even pass, although we believe something will. There are some provisions that may not be as friendly to real estate. Hopefully this will be offset by provisions that should jump-start the economy.
Florida stands to gain versus other tax heavy states which could lead employers and people up North seeking more tax favorable states. We could envision a scenario where companies decide to relocate to tax friendly states like Florida, Texas, and other low tax states. This could offset possible mortgage interest deductions and deductions for state and local income taxes.
Nothing we’ve seen in the bills so far would hurt Florida. Whatever they do to real estate, Florida will be less impacted than most. Florida stands to gain if other states are hit hard.
No Benefit Waiting
The bottom line is we don’t see any benefit in waiting to buy. It will only get costlier both in terms of rate and prices. And if sellers are waiting to sell their properties up North, right now might be the time. Imagine an exodus out of high tax states. That’s not a fun time to sell when everybody else is selling, all the while buyers are high tailing it down to Florida.
We’re already seeing net migrations out of NY, NJ, IL, and CA. This could heat up in a few months if tax policy plays out like they’re talking. Florida stands to gain, and you can too if you beat the rush.
www.LeeCountyOnline.com has all the listings, and it’s updated instantly. Finding properties on the Internet that sold months ago or have incorrect pricing is frustrating. It’s difficult to beat out other buyers to hot new listings with bad information. Our website fixes all that for you. When time and expertise advice matters, Always call the Ellis Team at Keller Williams, 239-489-44042, your one-stop shop for great real estate success. If you’re thinking of selling, ask for Sande or Brett Ext 4.