The Honest Broker: Home Prices are Falling
By: Diane Lott, Broker
Paradise Found Realty
In 2020, during the pandemic period, there was a major migration into Florida and home prices began to soar. The wave built and crested about 6 months ago. The market began to stabilize at the end of 2022 when the trajectory of pricing no longer was elevating at the same pace and started to level off. Over the past 6 months, sellers have been adjusting their list prices downward. The adjustment and subsequent “cooling” of the market has taken place for a few reasons; rising mortgage rates, shrinking buyer pool, inflation, and reduction of the mass migration to normal migration levels.
Rising Mortgage Rates:
Ever since the Federal Reserve embarked on its mission to curb inflation in March 2022, mortgage rates have soared at a record-high pace. According to Freddie Mac, the average 30-year fixed rate initiated the previous year at a modest 3.22% in January, only to skyrocket to a staggering 7.08% by October. As we stepped into 2023, the rollercoaster ride of mortgage rates continued, with fluctuations between the low- to mid-6% range.
Shrinking Buyer Pool:
With the combination of rising mortgage rates, inflation and difficulty with buyers qualifying for a loan, the available buyer pool is getting smaller and smaller. With the number of buyers shrinking, sellers are competing for the same qualified buyers. This competition is causing the sellers to drop their prices to entice them to contract with their property.
Inflation: As inflation has skyrocketed, people have had to dip into their savings, charge more on their credit cards and go more into debt compared to 12 months ago. This is an accessory to the shrinking buyer’s pool because they can’t qualify for a mortgage any longer.
Migration: The amount of migration into Florida and our local area has slowed. Primarily since Covid is over and anyone that was moving due to that reason is already here. The influx from the Northeast due to excess taxation has also diminished but continues to trickle into our State.
As migration slowed, the demand for housing has also slowed which has caused pricing to be reduced.
With these four combined events, housing prices are coming down. Although not to the level prior to the pandemic, but still significant enough to shock sellers and benefit buyers.
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