How do we know if were heading into good economic times or bad times? When is a good time to buy and when is a good time to sell? What are good indicators to watch for? The answer will be different for everyone, and it depends on if you’re planning to live in the home you purchase long term or buy it as an investor.
Let’s look at some of the stages that happen in shifting markets.
Mortgage rates – When you see mortgage rates drop, typically that will push home prices up because people can buy more home with lower interest rates. On the opposite side, when rates move up, it slows housing down and if rates go up enough, it can drastically drop demand, resulting in inventory building and prices dropping. We are in the latter, rates have jumped up at record pace! Inventory is growing, its taking longer to sell a home and each month it seems to be getting longer and longer, price growth has hit a wall and even many price reductions. The Federal Reserve may raise rates again in September resulting in more slowdowns. The trend appears to be heading towards a low to no growth or even decline Cape Coral home prices.
Inflation – when an economy doesn’t have stable prices it effects consumers pocketbook. If prices are falling and wages are rising, people feel rich and spend money, the economy booms, companies hire, all is good. On the contrast, when we have inflation rising, the cost of goods go up, gas, food, utility bills, taxes, insurance, people cut back on their spending. We are seeing people cut back on spending now.
Company layoffs – When an economy is growing, companies are hiring. When consumers feel the strain of high prices from inflation, they cut back spending. As consumers cut back spending, companies feel the squeeze in lost business. After a few months companies will start laying people off. NY Post article about coming layoffs
Foreclosure – When an economy is shrinking, companies laying people off, eventually it leads to mortgage defaults, after all how can someone pay their mortgage with out a job. Then we see foreclosures inventory rise, foreclosures typically pull neighborhood values down. The reason foreclosures bring values down, they’re typically not in the best property condition. Once on sells at a lower price in the neighborhood, this now becomes a comparable an appraiser will use, a few of these in a neighborhood can drastically pull values down.
Let’s tie this all together. Mortgage rates started rising in Spring 2022, housing slowed way down because peoples mortgage payments skyrocketed, now inventory is rising, many purchasers cancelled new construction deals because when they went under contract rates were in the mid 2% range. Now its time to close and rates are well over 5%, almost doubling the monthly mortgage payment. We are now seeing some price declines, longer days on market to sell a home. Inflation started hitting everyone in 2022, gas prices, groceries and most consumers needs jumped in costs, people are cutting back on spending. This is where we’re at, I think, as we move in to second half of 2022, we will start seeing the layoffs come in late 2022 – 2023. Foreclosures will start coming late 2023 because it takes time to process a foreclosure, sometimes a year or longer, if this all unfolds this way, prices could slide through 2023-2026.
If I was considering selling a home, I would get it on the market asap. The longer you wait, the more it could cost you. Price the home to sell quickly to stay ahead of a quickly shifting market.
On a side note. I do have concerns with https://www.vrbo.com/, Vacation rentals in Cape Coral. If you visit the website and look at how much inventory there is to choose from in Cape Coral, it’s a lot!! A big question…. will they fill in 2022-2023 season. If landlords struggle to rent their homes, some will be listing them to sell soon. One of the first expenses consumers cut in a recession is vacations.
If you’re considering buying a home (I’m still investing and buying homes, I bought 2 homes this year and hope to buy more) If you have a home to sell and you’ll then buy, if you’re in the same market it’s a wash. Don’t be afraid to offer lower prices to Sellers, especially if a home has been on the market for a while. I’d be leery of buying a home to offer on VRBO, if I did it would have to be very unique. Make sure to create a budget, it needs to make financial sense before you buy. We are seeing a slight uptick in foreclosures; our firm specializes in selling foreclosures. Sometimes you can get a great buy when buying a foreclosure. Reach out to us if you want to get on our foreclosure list, it’s a free service, we will email you when we list foreclosures. If you’re entering the market, not selling a home but entering the market, you may want to wait 6 months and see how things pan out or don’t be afraid to offer below list price. We need more time to determine what the Cape Coral housing market will do. If you’re investing for rentals, check out this recent news article wink news 21% of SWFL rentals are vacant
In summary, all signs point to a downturn in housing for the next few years, we are at the initial stages of this shifting Cape Coral and SWFL playing out. If you’re a Cape Coral or SWFL Seller, sell sooner than later, price your home to move. If you’re a buyer, be patient, get on our free MLS search watcher, the MLS will update you on the market with the most accurate data, reach out to us to get that set up for you and get on our free foreclosure list. If you’re an investor, I suggest being very patient, only buy deals that make sense and not many do right now.
Thanks for reading