So I just read an article that quotes the Federal Reserve Chair Jerome Powell saying that cutting interest rates will not fix the nations housing affordability problems. States that there is a shortage of homes because of people with the 3-4 % interest rates are not wanting to lose those rates and so are not listing their homes therefore driving prices up> I dont understand this> I am in south Florida and have been trying to sell for awhile, I see many home in neighborhood also trying to sell and homes are just not moving, sitting longer on the market. Can someone shed some light and clarify this for me because I see the same in Arizona. I want to sell ( I have a low interest rate) but want to get the hell out of here
Thanks
Posted by Prudent-Insurance913
38 Comments
The low rate lock-in effect is real but it’s super regional – Florida and Arizona got hit hard with the investor/cash buyer exodus plus insurance nightmare so you guys are kinda in your own bubble right now. The Fed data is more about overall national inventory but your local market dynamics are totally different than like Ohio or something
Location, location, location
I sold my Fl property at a discount.
It’s always the price.
No regrets.
Plenty of inventory on the market by me. Not so many buyers though.
There is an excess of inventory in Florida and parts of Arizona that a lower interest rate won’t fix. The cost of property insurance, and now, the virtual shuttering of FEMA, has driven many people in the southern coastal states to list their properties. The regular flow of non-US buyers has been squelched and and neither state has particularly robust business environments that don’t depend on retirees.
In other parts of the country, there is so little inventory that prices continue to rise and many properties are sold in multiple offers, so it’s not an interest rate problem.
All housing markets are different.
My neighborhood has a glut, but about 10 mikes away, they are building and selling as fast as they can. The difference is the precise location, the builder, the style, etc.
10 miles from that, there are houses moving rapidly but not “as fast”.
YMMV
In my area I have seen homes sit for a few months then go off the market completely. People are still asking higher prices then buyers have money to jump into right now at the current interest rate
The attraction of moving to Florida went away with the orange groves.
Speaking from the perspective of Eastern MA, while the market here was cooled from pandemic levels there is still way more demand than supply. Our house’s assessed value has gone up 35% in 5 years with zero improvements made and I regularly get cold contacts from agents asking if we would be interested in selling. This is definitely about location.
He’s nuts. If the rates were in the 4’s, current homeowners who want to move but have low rates will finally jump into the market, opening up huge levels of resale homes. Lower rates are the one thing that will offset the prices of the homes.
All real estate is local. FL has a ton of inventory that nobody wants (for that price), and San Francisco has bidding wars over even the crappiest condos. Everything will depend on where you live.
In LA there are homes selling within 10 days in a neighborhood versus other neighborhoods of similar quality where the median is 51+. It’s all location dependent.
In coastal Carlsbad (pointsettia) we have zero inventory for SFH
Buyers are broke. Sellers haven’t realized that Covid was a white whale and they missed the ride.
Anything within a 1 hr commute of Midtown Manhattan is still going over asking. The main difference I’ve seen is the unrenovated “grandma specials” have become negotiable. Even those used to get same-week cash offers.
Right now, many markets are at their slowest anyway. Not many people buy or sell around the holidays. I’ll be interested to see if sales pick up as we get into spring. If rates dropped, that would likely cause prices to rise as people sitting on the sidelines will start buying (although it would probably add some inventory, as move-up buyers sell their houses before finding a bigger/better one).
Sellers will hold out for a LONG time waiting for buyers, before they drop the price. Only people in a distress situation (divorce, relocating) will accept less than they want.
So when the traditionally cyclical spring market activity picks up, whether prices change or stay the same, will tell a lot about what the next few years in real estate will be like.
Since AZ was mentioned, Phoenix is sitting at 61 days to sell. Not alarming, but longer than in recent years. I’d expect that number to maybe double, before sellers start to panic and cut prices. Also prices up 3% compared to last year so if you price it right, it will sell.
https://www.redfin.com/city/14240/AZ/Phoenix/housing-market
Tucson is at a similar days on market, but prices are down about 5% compared to last year.
https://www.redfin.com/city/19459/AZ/Tucson/housing-market
I’m in the Philly/North Jersey area. Houses still sell days, if not hours, after being listed. Often for over asking.
They aren’t selling because ther are priced too high.
Almost all of the current buyers are FTHB, and relocations. People who already own a home with a good rate, rarely want to sell for a variety of reasons. So there aren’t a lot of “move-up” buyers in the buyer pool.
FTHB are price limited, so houses that are not entry level (like I’m assuming yours) and very well kept – don’t really have a buyer pool.
Currently this makes more expensive houses lose value, but it means FTHB are competing for a limited number of affordable but well kept houses – which is keeping those houses artificially high.
If interest rates drop significantly, like they did on COVID, every FTHB will be able afford a more expensive house, AND “move-up” buyers will suddenly be able to afford to move. This will quickly raise prices across the board because you have an influx of move-up buyers AND first time homebuyers who can possibly compete with them.
Lowered interest rates (especially quickly lowered) will raise the cost of housing, much like happened during COVID, which will then make entry level housing even less affordable to FTHB, especially since that rapid price inflation will not keep up with wages.
> I am in south florida
That’s like one of the worst real estate markets in the country right now
People are not selling their homes because to buy the same home it would greatly increase their cost. A lot of people have sub 3% loans. Those people would like a different house but that means getting a new loan at a much higher cost. It is not like other times were you more or less could get a loan of roughly the same payment pretty easily.
For example I had a loan at 2.3% even with 40% if it paid off and I get a new loan of the same value but for 30 years my payments would go up by nearly 20% for a smaller loan.
Powell is speaking at a national level. Real estate markets are local and although you mentioned two different states, those states have similarities. High level of vacation buyers, investor buyers and local residents. Those markets will perform very differently than suburban Chicago, rural Nebraska or New York City.
Low interest rates from a few years ago have locked some inventory. It’s not just the people who bought when rates were low it’s the millions of homeowners that refinanced the pre-existing mortgages into 3% type loans.
To learn more about your market you need to consult local experts.
The Northeast and Great Lakes regions still have a strong sellers market in most areas because they didn’t overbuild or have more barriers to building.
People would like to move and buy your property. But when they look at the financials and paying 3-4% MORE interest (total of 6-7% vs 3-4%) than they have now, deal’s off.
And your low interest rate is very likely not assumable by a buyer. And you’re going to pay the 6-7% if you do sell and buy another home.
I love when people use their local market against people that talk about the entire country.
“Did you know the average sales price went up about 1% last year?”
But my home in fLoRIda went dOwN 20%!!!!!!11!!!!
Real estate is local. How fast homes are selling is going to depend on your location. Houses in my area (South of Boston) are still flying off the market. We have a major shortage here. We’re looking at houses in Southern Maine and they’re sitting and seeing a price drop or two before they sell.
If only I could easily get a job in the area or work fully remote, I would buy your house from you.
Different markets have different conditions. Every home in your neighborhood could be listed for sale and the entire country, on average, still be inventory poor.
If you are trying to sell and the house is not selling, your priced too high. There is less demand in FL than a decade or two ago.
Listed my second home in Schuylkill County, PA in November and had a full price offer within 48 hours. Closed a couple weeks later in early December.
Florida was the leading indicator of the two biggest real estate crashes in history. Just throwing that out there.
It is local market dependent. Parts of Florida and Austin, TX are dropping in price due to large inventory. The northeast has a severe shortage of inventory, e.g., northern NJ, MA, NH, etc. People are bidding above asking price.
Mortgage rates are complicated. Think base on 10 year treasury. Issue is America has 39.5 Trillion in debt. The tax cuts made it worse.Buyers demand higher rates because its too risky, so think Mortgage rates may go higher still.
NJ is a sellers market now, there are plenty of buyers. Lower interest rates will only bring more buyers to the market and prices will go even higher.
Sure, people with super low interest rates aren’t selling, but they also aren’t buying. Isn’t that a wash?
Florida panhandle is still building like crazy. Inventory is up, because they just keep building and building.. Housing is sitting a bit longer.
>So I just read an article that quotes the Federal Reserve Chair Jerome Powell saying that cutting interest rates will not fix the nations housing affordability problems.
Cutting interest rates will make houses shoot straight up in price. How would it possibly make houses more affordable?
Florida is a unique set of issues. Deregulating insurance three years ago caused insurance to spike up and become the nations highest. Deferred maintenance led to a building collapse and special assessments. Families are repelled by the education policies…like, Desantis made it a felony to have a book about black sports figures, so rather than be arrested, teachers quit and it led to such a lack of teachers that they cut all the standards for teachers, so no criminals with no education can be teachers…and on and on
It’s the price in Florida