Real Estate Update
We are looking at a recipe for a very strong market this fall for both sellers and buyers. Here’s why:
Inventory is incredibly low. If you have spent any time at all looking for a place to buy here at the beach you will see that there is very little to choose from and as long as the factors listed below are present, I expect the inventory to continue to be very tight.
Interest rates are incredibly low creating tremendous purchasing power. Frankly, it’s amazing how low the mortgage rates are, and the result of these rates is tremendous purchasing power for buyers. In other words, buyers can afford to pay significantly more now than they could just a couple years ago and still have the same mortgage payment.
You bought 2 years ago: If you bought a property for S400,000 in 2018 when the average interest rate was 4.54%, and you put 20% down, your monthly mortgage would be $1,912.34
Buy Today: If you buy a $400,000 property today at a rate of 3.5% and put the same 20% down, your monthly mortgage would be $1,720.28 OR if you are comfortable with the $1,912 mortgage payment then (because of the low interest rates) you could afford to spend $453,500 and still have the same monthly payment. That gives you an additional $53,500 of purchasing power! Note: mortgage rates can and do change so be sure to consult a mortgage lender to confirm your rate.
Rental income is very strong. Because the cruise industry and foreign vacation travel is all but stopped for the foreseeable future the folk who would have booked those trips are now booking vacation rental properties at the beach. And because the Emerald Coast has the nicest beaches in the United States, I expect the demand for rentals in our area to be very strong over the next 5 years.
Example how this is a huge benefit for investors: Say you invest in a property at $400,000 and your mortgage outlay is $22,971 a year. The rental income is $40,000 per year less a 20% management fee of $8,000 leaving you $32,000. Subtract that $22,971 it costs you to own it and you have a $9,029 positive annual cash flow on top of the benefit of the renters paying down your principle and interest for the year. These low interest rates are a huge benefit for folks that can take advantage of them. Note: There are some other miscellaneous costs associated with owning but they are often canceled out by tax benefits. Be sure to talk to your financial planner or accountant before buying any investment property.
Buyer demand is very strong. In addition to the low inventory, the high rents, big purchasing power we are also seeing a lot of migration of folks coming from urban areas to the beach. More people can work remotely now so when given the choice to stay where they are or move to the beach … they are moving to the beach. Simple as that.
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What this all means is Sellers are able to demand and capture very good sales prices. It also means that Buyers can afford to jump up a level to perhaps buy a bigger place, closer to… with more…. and so on. The added benefit is … at least for now … real estate prices in Florida are expected to continue to appreciate for the foreseeable future. And that is terrific news for both buyers and sellers.
What to do?
Our role is to help you maximize your position as a seller or a buyer based on the current market conditions and your goals for owning real estate at the beach. With this in mind, we recommend the following:
Short Time: if you are planning on owning only for a short time – perhaps selling this year or in the next couple of years – you should strongly consider protecting the equity you have built up and sell now while we know the market is hot.
Long Haul: If you are in it for the long haul – markets come and go so we recommend that you stay the course. Perhaps look at maximizing your rental income by updating or upgrading your property. Otherwise, settle in and enjoy your investment.
Buying: If you are considering buying a place – go for it. Interest rates are low, and it looks like demand is likely to stay high for a while so prices will likely continue to go up. Again, if you are planning on owning for longer than 5 -7 years you are sitting good and will likely be able to capture a very, good sales price in the future.
Always Know: Our goal (whether you are buying or selling) is to get you the best deal possible so call us today at 850-654-3325 and let's talk about how you can get a max deal here at the beach.