Who set out to make 2016 the best year for themselves? By now, most people have probably already ditched their New Year’s resolutions. We all hear and say we want to eat better, make smarter choices and invest in our future. Honestly, I’m going to work on the first two closer to swimsuit season, but for now I’m going to start looking into ways to invest in my future.
Real estate news seems like it can be complicated or out of our personal reach, so we usually tune it out. Renting just seems like the easy solution to living, so let’s envision Cher saying, “Snap out of it,” and pay attention. Here we go: Snap out of it!
Last year the housing market was the best year in almost a decade with the number of houses sold. Even in 2014, nearly five million existing homes were sold, with an additional 437,000 new builds leaving the marketplace, according to realtor.org. Experts predict that 2016 will bring an increase in sales due to housing demands, low mortgage interest rates, sustained job growth and positive economic conditions. The housing inventory is still considered low; more people are making the smart choice to become buyers. Homeowners are realizing this need and deciding to upgrade/downgrade for their personal future while the current mortgage rates are still very low. Thirty-two percent of homebuyers are making the leap for the first time, even with a slight median household income of $69,400.
In late November of 2012, interest rates on a 30-year mortgage hit a record low of 3.31 percent. Let’s take into consideration that in the early 1980s, it was common for the rates to start at 18 percent. During the 1990s, a normal interest rate vacillated between seven and nine percent. It wasn’t until 2003 that rates started to range between five and six percent. The current, average interest rates for a 30-year mortgage are in the mid-four percent range, depending on credit, money down, type of loan, etc. As our economy begins to strengthen, so starts the rise of interest rates.
Knowing where the interest rates currently range, what does that mean for affordability? The National Associations of Realtors had the average single family home priced at $225,000 last quarter. Let’s take that purchase price of $225,000 with a five percent down payment and an interest rate of 4.5 percent. If we do a guesstimate of the property taxes, mortgage insurance and property insurance, that would make your monthly mortgage payment around $1,500. Again, everyone’s scenario will be different, but at least it offers perspective with all the information.
Economists are predicting that 2016 will see an increase in home prices around the four percent range from 2015. With a strong market around us, home sales will continue at a healthy, steady pace. This is the market’s way of returning to “normal.” The past 10 years have fluctuated with abnormal trends resulting in severe effects from the housing bust. Foreclosure rates remain an issue – according to realtytrac.com, one in every 965 Orange County homes were in foreclosure compared to one in one in every 633 homes in Hillsborough County as of February. Florida consistently hovers toward the top of the foreclosure list. However, last year’s overall market ended strong and has shined a light toward what is ahead.
So what do all these numbers mean to me, you ask? To start, it’s a great time to begin looking into buying or selling your house. With the current market’s rates where they are, you could be paying less for a mortgage than you are paying for rent. Take a moment to let that sink in. A $1,200 monthly rent can translate to an $800 monthly mortgage payment, easily, given some savvy negotiation. Investing in real estate is a smart option for your future. That swimsuit can wait. At least for now.
The Mills-O’Brien Real Estate Team is Bobby Mills and Paul O’Brien, both licensed Realtors® with Metro City Realty in Orlando. Combined, they have over a decade of experience in residential real estate in the Central Florida Real Estate Market. Paul also holds the designations of ABR® (Accredited Buyer’s Representative), GRI (Graduate Realtor Institute) and is also a Broker-Associate.
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