While there’s no crystal ball, the Bank of England (BOE) economic overview shed some light on our current situation, and there is GOOD NEWS!
THE REAL STORY
The news media is not accurately portraying the current situation in Florida at all. In fact some of what is being told, is the complete opposite to what is really happening. Key takeaways from the BOE Economic Update this week:
- LOW INVENTORY: A healthy market has 4-6 months of inventory. We currently have 2.2 months of inventory. We are nowhere even close to a healthy market. There is no oversupply of homes.
- STILL SELLER’S MARKET: Buyers can ask for more but they do not have the upper hand. Sellers no longer have the absolute control of the market however on average are still getting 97% of list price. Days on market is still relatively low. Sellers should expect more negotiation from buyers. Sellers can consider buying down the interest rate for the buyer instead of reducing list price. This is a far more effective way to reduce the cost of the loan and maintain pricing on comparables, keeping the neighborhood value strong.
- NO BUBBLE: Investors traditionally get out before the market crashes. They are not getting out of this market any time soon. Foreclosures are not going to happen.
- MORE BUYERS: Biggest relocation states continue to be New York, Georgia, California, Virginia and New Jersey. 300,000 people are projected to move in the next five years to Florida.
- CASH: Cash sales are still strong with 30% of homes being cash purchases, mainly investors.
- PENT UP DEMAND. BOE is seeing more credit pulls and loan applications than they have seen in the past 2 years. This is the same pent-up demand we saw in Jan of Feb of 2019. This means more people will be looking and in the market to buy than we have seen in some time.
- MORTGAGE RATES & INFLATION: When Fed raises rates they are raising the bank overnight rate. It has nothing to do with 30-year fixed rate mortgages. While the media will have you believe the Fed rate hikes will increase mortgage rates – the complete opposite is true. When the Fed changes the rate up, the mortgage rates go down and vice versa. What has to do with the 30-year fixed rate is the 10-year US Treasury note. They move together. BOE projects that rates are not going to get back into the 3%s any time soon, we can expect rate fluctuations either by continued rate changes by the Fed, or in response to anticipated ones.