After years of fluctuating between great highs and lows, a new period of modest growth and security seems to be settling in for the residential real estate market in Florida and across the nation. Home prices both in the state and nationally seem to be returning to normal levels and rising at modest, single-digit rates. That fact, coupled with low, stable interest rates, means that more potential buyers are in the market for a home.
Unlike past periods, where buyers overextended themselves or rushed into purchases for fear the price of a home would rise dramatically, buyers now seem content on purchasing within their means. Lenders too appear to be more cautious when providing mortgages and are looking at a potential buyer's financials with more scrutiny. Furthermore, those who are buying homes today seem to be doing so as a place where they will live long-term instead of investing in quickly escalating property to flip for profit.
Be that as it may, just like the boom/bust era a few years ago, the real estate market is influenced by mortgage interest rates. Today's mortgage rates are still low, which does impose some risk. A sharp rise in rates could make homes less affordable and drive prices down. However, according to one financial adviser, one must take into account why interest rates would rise and how quickly. If overall economic growth causes rates to rise, the housing market would most probably be able to manage the increase. Conversely, if rates are driven by factors not related to economic growth, then the overall impact would damage the market again.
Of course, the dynamics of every local market are different, and some markets will naturally see more movement than others. Nevertheless, when taken nationally, residential prices are more in line with other fundamentals such as buyer incomes and rent prices. Overall, this is good news for most potential homeowners and the economy in general. Anyone in the process of purchasing a new home would do well to consult with an experienced real estate attorney throughout the process. Regardless of the market's fluctuations, any real estate transaction can be complex, and an attorney can help a potential homeowner understand the intricacies of real estate agreements and contracts so the process goes more smoothly.
Source: The New York Times, "After an Era of Ups and Downs, Home Prices Return to Sanity," Neil Irwin, June 17, 2015