Most people do not know that last year’s sales prices have recently been revised down, so when this year’s numbers are reported the gain looks better than it would have been had they been left alone. This means the reported real estate numbers not what they seem. For example, the official median price reported back in January 2015 was $190,000. 2016 median price was reported at $227,000, which was a 19.47% increase. Not too shabby. However, January 2015 numbers were revised down earlier year to $185,748. This now makes the gain 22.21% instead of 19.47%
That’s all well and good when the numbers are spectacular, but what happens when the market begins to tighten? We reported back in February that the market was in a Shift. Few people realized it at the time as we were still reporting 20%+ gains.
Real Estate Numbers Not What They Seem
In May the gains were down to 4.65% and that’s with the benefit of revisions. If they went with original numbers, the median single family home price was only up 3.57%.
Earlier this year I questioned the numbers. Back in March the local Board of Realtors received information about the changes. Most of the changes affected listing counts and under-reported listing inventory in previous years due to date errors in their database. We’re all for cleaning up errors, however we haven’t seen any rationale as to why prices have been adjusted. We’re not saying there is anything nefarious with the changes, it’s just that by doing so they’re making the market this year look better than it is.
July numbers are due to be released at any time. We believe average prices may level out while median prices may still advance, albeit at a slower pace than years past. The reason we see median prices holding steady is because currently the median price is $230,500 in June. Homes in that price range usually attract multiple offers and quick sales. It’s the homes priced over $300,000 that are taking longer to sell. It would take quite a decline in homes over $300,000 to filter down to that $230,000 range.
Buyers and sellers probably need to pay attention to interest rates. When we get close to an election the Fed’s usually hold off on making big changes. This year they’ve indicated they’d like to raise rates and recently they signaled next month may be the month. In other words, they may not wait until after the election. This is the time of year we watch the tropics. It also may be the time of year to watch rates, because rates may affect people’s personal lives.
For every 1% rise in rates it eats away a buyer’s purchasing power by 11%. A buyer that qualifies to buy a $300,000 home today may only qualify for a $267,000 home tomorrow. It can happen fast. When rates move the markets can move even faster. 30 year mortgage rates are best associated with the 10 year note, and that can move faster than whatever the Fed’s set the discount rate at.
This is a problem for buyers. It also becomes a problem for sellers when the buy pool shrinks. Instead of receiving 4 offers on a home the seller may only receive one because the other three just went down a price bracket. This halts upward pricing pressure, which affects sellers. Many $250,000 sellers are move-up buyers, and if they can’t sell their $250,000 home for as much or quickly, they may not be able to move up to the $400,000 home they were looking at, which puts further pressure on homes priced above $300,000.
It starts a domino effect. If you’re on the fence, right now is a good time to buy or sell. Through no fault of your own, you will pay more to buy a home once rates change. You’ll either buy less home for the same money or you’ll pay more each month for the same loan you could get today. Most sellers buy another home somewhere when they sell, so waiting for a few extra dollars can cost you tens of thousands on the buying end.
If you’d like to search the MLS, or get an idea of what your home is worth, check out www.LeeCountyOnline.com If you’d like to talk to us about options, call us at 239-489-4042.
Good luck and Happy House Hunting!
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September SW Florida Real Estate Market Report