We don’t have a lot of serious wave activity here on the Gulf coast; most of the big rollers are on the Atlantic Ocean side, especially north of Florida. However, if you’re talking real estate wave activity, we certainly have those, but not nearly as erratic as other states are experiencing.
According to the Core-Logic Case-Shiller National Home Price index for the year ending in June, prices rose 18%, down from 19.9% for the prior month. Most economists are saying the housing market has cooled in recent months and nationally, existing home sales have fallen for six straight months through July.
The blame here rests with higher mortgage interest rates, which is adding additional pressure on buyers when they attempt to qualify for mortgage loans. As of this writing, the fixed-rate mortgage average was 5.99%, looking like it will likely go over 6%. This is pushing 3% more than it was a year earlier, accounting for many buyers to be hitting the pause button on home purchases.
Keep in mind that 6% is not a terrible interest rate and should not in and of itself keep buyers from purchasing a home if they can qualify. Nevertheless, sellers are starting to think they may have missed their best opportunity to sell by waiting too long. The reality is that there is a slight downward movement in sale prices and the days of bidding wars and sellers getting over asking price are likely over. This doesn’t mean that sellers are still not making a lot of profit on homes they have owned for even three years, it’s just a little more competitive and adjustments to their marketing plan need to be addressed.
All of this said, Florida so far seems to be inoculated from any serious price reductions. There is a slight downturn in median selling price, but not as much as other areas of the country. Tampa was ranked ninth overall in July based on data received from Florida Atlantic University. The average home selling in Tampa was 58.5% more than the expected price. Fort Myers came in third and Lakeland was seventh. In addition, every city in Florida increased slightly from June to July.
However, Lei Wedge, a professor of finance at the University of South Florida College of Business, said she believes Tampa real estate prices have already peaked. She points out that statistical models often lag behind what is actually happening in the market. Not every financial guru agrees with this, and points to the large influx of buyers from out of state who will prevent prices from dropping as radically as we’re seeing in other parts of the country.
The other potential problem for buyers looking for mortgages in a changing market are where the appraisals will come in. The appraisers and the lenders who hire them are very careful with their final appraisal, which the mortgage amount may be based on. In an escalating market, it is sometimes hard for appraisers to project what the value of the house is without sales comps to support their numbers. In a declining market, it could work to the buyer’s advantage, depending on how the appraisers view and project the market. Either way, appraising is an art, not a science, and appraisers almost always stand by their appraisal numbers, particularly for buyers who are putting down the minimum amount of cash.
Missing the wave isn’t always a bad thing. It gives you a chance to reposition yourself and get ready for the next one. It’s impossible to predict mother nature or the real estate waves.
