Happy September! We hope everyone had a good summer. Back-to-school activities kept many of us busy during the month of August. Our youngest started his freshman year of college! As we adjusted to new routines, we also dodged the first hurricane of the 2023 Atlantic hurricane season! I think we all breathed a collective sigh of relief as Idalia passed us by. Keep up with your insurance policies!
We recently helped a family close on their new home just before the school year started. This is an example of the major reason behind the typical seasonality in our residential real estate market. Families tend to buy and sell homes when they are less preoccupied with other activities and have time to focus on the move. The buying and selling activity peaks in June and July, levels off in August, takes a breather in September and October, then ramps up again towards the end of the year.
Another major factor affecting the current market is still the mortgage interest rate. We’ve grown accustomed to the low-inflation, low-interest-rate environment since the Great Recession of 2008. That era has ended. The interest rate has now risen to the highest level in over 20 years, currently sitting above 7%. This affects both the supply and demand in the housing market. It affects supply because many homeowners feel “locked in” to the low rate they got when they purchased or refinanced the home a few years ago. They don’t want to give up their current interest rate in the 3’s and into a new one in the 6’s or 7’s. So a lot of would-be sellers have postponed moving for now.
Buyers are also facing headwinds. Rising interest rates reduce their purchasing power. In a slower market, buyers are hoping to find better deals, only to realize rising rates mean they can afford less.
We’ve always advised our clients to buy and sell when they need to. Timing the market is difficult because the market is always influenced by external factors that are hard to predict. These factors can be regional, national, or even global.
Some of you have asked what I think about the bigger picture. I believe we are in a supply-constrained market in Orlando. This may persist for foreseeable years ahead. Nationally, we have an all-time low demand for homes right now due to the high rates and prices. This is despite the fact that we have an all-time high number of people at peak household formation age. So, there is a lot of pent-up demand that’s building. When the interest rate eventually decreases in the future, we may very well witness a market boom as all the buyers and sellers waiting on the sideline re-engage.
If you are waiting for rates to come down before you buy, think about how many people are planning on exactly the same thing. So if you want to avoid future competition, now may be a good time to buy. Remember, you “marry the home and date the rate.” You can refinance your current high rates when more favorable rates become available in the future.
I will stop here. Keep your questions coming. Until next month, take care!
~Yien and Alysa Yao
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