Returning To Normal
Pinellas County is re-opening! Slowly but surely things are returning to normal. As you all know, it’s been an abnormal month for everyone. We’ve been inundated with information and it’s impossible to decipher which is practical advice and which is alarmist. Since I’m not a medical expert in contagious diseases, I can only provide you insight into how it’s affected our local real estate market here in Tampa Bay.
The first two weeks of this situation were uncertain for everyone. In person home showings slowed down, FaceTime and remote showings increased and some listings were taken off market mostly by owner occupants that wanted to limit their exposure to this unpredictable virus. I had one client back out of a contract and put her search on hold since her family lost their jobs. I had another client attempt to over leverage a situation and unfortunately that didn’t work out for him and we had to cancel the contract. Traffic on our listings slowed down dramatically, especially in 55+ communities.
With that said, I think this situation will be short lived. As the hysteria has started to fade in the past week, we are starting to see things pick back up. Mortgage rates are extremely low and there is still a large pool of qualified buyers. Some buyers with lower credit scores are being edged out with more restrictive lending standards. Some lenders have enacted other more restrictive lending standards – for example we had a client approved for a 0% down Doctor loan be told that he now needs 5%. We found a different lender that was still able to do it with 0 down so that ended up being a non-issue.
The alarmists were saying that this would be worse than the 2008 recession for housing. That recession however had massive amounts of faulty adjustable rate loans built in which of course directly affected the housing market. Now we’re seeing many people out of work but it seems to be temporary.
With that said, it is possible that this will still have an economic impact on our housing market. It’s possible that anyone who is slightly uncomfortable with their current mortgage payment will end up selling to downsize. Mortgage rates will eventually go up and that will most likely ease up buyer demand and allow the seller market to cool down a bit. I think it’s safe to say that no one really knows what’s going to happen at this point though.
Many realtors get criticized for sharing the sentiment that “It’s always a good time to buy” however let’s do some critical thinking and examine why this may or may not be the case. We’ve seen in the past that Florida’s market is cyclical with vacation homes being the first to go during a recession. Yes this can increase the volatility of our housing market but at the same time it’s smart to keep in mind the long term situation of owning a home.
Here’s a hypothetical situation. Let’s say you buy a $500,000 home today at 3.5% interest. Not including taxes, insurance or potential HOA payments, your principal and interest payment would be about $2,245 per month. Let’s say a year or two from now you wait to buy the same home and your interest rate is now 5% – your P&I payment would get bumped up to about $2,685 per month. That’s an additional $440 a month, $5,280 per year and $158,400 over the life of a 30 year loan.
Yes you can try to time the market however borrowing money at these all time lows is going to be to your advantage considering that inflation will continue to affect the US dollar. This is especially true now that we’re seeing the federal reserve print more money out of thin air. Disclaimer – I’m not an economist but inflation is a fact of life with money that’s not backed by anything. The dollar will continue to be worth less over time which is why I believe it’s smart to park some of your money in a tangible asset like real estate which historically will increase in value since everyone will always need a place to live.
On a local level – if you do decide to buy here and have to relocate, our rental market is strong since it’s continuing to become a more desirable place to live. It’s likely that you’ll be able to rent out your home to at least cover your monthly payments. A fixed interest rate will guarantee you a predictable payment with only property taxes and insurance rates being variable. Also your taxes are only allowed to increase a maximum of 3% a year if you have a homestead exemption, in the past few years it’s actually been less than that.
We don’t have a ton of major tech industries here that are pushing up property values but in the past 5-10 years we are seeing a huge amount of people that are able to now work remotely. I think this will become even more apparent as a result of this virus since many companies are realizing that they don’t actually need the commercial space for their employees. Instead they may opt to save money by allowing their work to be done remotely with all the new technology at our disposal.
It’s entirely possible that people living in higher cost of living areas will start to migrate here instead if they have the opportunity to work remotely as a result of this situation. We’ve already seen this trend and it might just continue to accelerate considering our lack of state income tax and of course the fact that this is the best place to live in Florida! I’m of the opinion that this area will continue to appreciate over the long term even if we see temporary dips with the cyclical Florida real estate market.
Thanks for reading and as always feel free to reach out to us whenever with any questions. Do you have any friends or family that would enjoy our monthly updates? Feel free to send them this link to sign up. You can call or text me (Chris) at 727-307-1111 or email us at email@example.com.
Recommended Articles Of The Month:
For this update, we’ll highlight some must-reads we’ve written:
Top 5 Nicest Neighborhoods In Seminole, Florida – Looking for a suburban family friendly city? Here’s the Top 5 Neighborhoods you should check out in Seminole.
Here are some news stories you may love!
Phase 1 – Florida Reopening – Learn about which businesses are allowed to reopen this week.
Date Night At The New St. Pete Pier – The New St. Pete Pier finally opens at the end of this month and will be a great spot for a date night!
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