Why are home prices so high and will they decline?

Friends and Clients —

As we all can come to agree upon, today's world is not what we're used to. There is that unsettling feeling that things may change both left and right, up or down.
In order to combat this, what we can do is to stay grounded and decipher the information that we do have to make the best predictions moving forward.

Here are our tips for regular home buyers and sellers, investors, and renters:

Understanding the high demand for houses right now. We first need to familiarize ourselves with interest rates.
Low-interest rates allow the borrower to afford more as one of the key qualifiers for getting a loan is your debt-to-income ratio. With less interest being charged, then the buyer has more room to borrow as fewer fees are applicable. Houses then become more affordable. 

The primary issue, however, is that the price of homes has inversely gone up as rates have come down. Overall, this means that you are not in a much better place than you once were, prior to the decrease in rates. 

As an investor seller, today may be an opportune time to liquidate part of the portfolio. Three vital reasons exist: prices have increased over 15% since the same month last year in Orlando, with the new administration we are seeing impactful changes to the capital gains tax and also the possibility that 1031-Exchange is due to change for the worse. 

As a regular home seller who does not immediately have anywhere else to go after a sale and is just looking to take advantage of today's market. There is still the opportunity of making that lateral move to a nicer neighborhood and taking advantage of the low rates for the long-term. There is not much risk of selling high and buying high.

As an investor buyer, if you can find something that matches your debt-to-income ratio and borrow cheaply (putting as little money down as possible decreasing your exposure), then there are still plenty of properties out there to match your desired rate of return. The key is to invest with the long-term in mind. Short-term deals are harder to come by in today's market. 

Regarding current renters that are looking to buy a house, now is an okay time. I can’t give somebody the advice to keep renting; especially with today's exorbitant rental rates. A home doesn't just save you money. It is a place that we get to be proud of, take care of, and have the liberty to do with as we please. We advise that you get in contact with us so that we can advise you on what you need to look out for when it comes to rates, PMI, loan options, and also take advantage of our Renting vs. Buying Calculator that can provide you a fair estimate of savings, disadvantages, and advantages.


Joseph Luczaj, Managing Broker Care Network Realty

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