Is Now the Right Time to Buy a Home in Broward County, FL
Anticipating the Drop the Fed's Interest Rate Strategy
The Fed has announced that they might lower interest rates soon, there is a pent-up demand for homes waiting until interest rates come down, remember that during the COVID Pandemic when interests came down home prices almost doubled in under three years.
I think home prices will go up in Broward County, FL when interest rates come down, maybe not as much as during the pandemic but nonetheless by a substantial amount.
The same holds true for Commercial Properties, the appreciation rate surpasses that of most of the other Counties in the US.
Why is now the right time to buy my home in south Florida.
Buying a home can be a significant decision, especially when interest rates are high. However, there are several reasons why it might still be a good idea to buy a home now:
Locking in a Rate: Interest rates fluctuate, and while they might be high now, they could go even higher in the future. By buying now, you can lock in a relatively lower rate compared to what might be available later.
Investment Potential: Real estate can be a good long-term investment. Even with high interest rates, if property values are expected to appreciate over time, buying now could still result in a profitable investment.
Hedge Against Inflation: Real estate is often considered a hedge against inflation. As the cost of goods and services rises, so does the value of real estate, potentially offering protection against the eroding effects of inflation.
Stability and Security: Owning a home provides stability and security. You have control over your living space and don't have to worry about rent increases or eviction notices.
Tax Benefits: Homeownership often comes with tax advantages, such as deductions for mortgage interest and property taxes, which can help offset some of the costs associated with buying a home.
Building Equity: Each mortgage payment you make helps to build equity in your home, which can be tapped into through refinancing or selling in the future.
Personal Satisfaction: Owning your own home can bring a sense of pride and accomplishment. It's a place that you can customize and make your own, which can be immensely satisfying.
While high interest rates can make buying a home more expensive in the short term, it's essential to consider the long-term benefits and weigh them against the current financial landscape.
Interest rates are high now although they are expected to come down in 2024 you can always refinance when interest rates come down, as a rule of thumb it will be worth it to refinance if interest rates drop 2% or more from your current interest rate, talk to your bank or mortgage broker about this, maybe you are buying Cash and as the old saying goes "Cash is King" you don't have to worry about financing which is a big plus when you present your offer!
When interest rates were low homes in South Florida and in most of the country homes went up in price considerably, it’s easy to see why:
For a $250,000 Home every 1% drop-in interest rate will save approximately $40,000 over the duration of your 30-year mortgage, and that is what just happened!
Let's extrapolate the numbers for a higher Price Range, the savings on a 1% interest drop in $500,000 30-year home loan will be approximately $80,000 over the 30-year life of the loan.
What do you think will happen to home prices once interest rates drop? I personally think that they will go up just like they did in recent history!
But why prices don't come down proportionally when interest rates go up.
The consensus is that it is due to inflation and the low housing inventory on the market. But now we're definitely in a Buyer's Market and we're seeing some home prices being adjusted lower.
Buyers' Market Vs. Sellers' Market: These market conditions can fluctuate over time due to various factors such as economic conditions, interest rates, housing supply, and demographic trends.
A Buyer's Market whether due to somewhat high interest rates or other reasons has advantages to the buyer one of them is that you usually don't have 10 other offers competing with yours where you might have to pay $50,000 or more over the appraised value to be able to win over the competition!
What do people that bought during High Interest time periods think?
In the 1990's interest rates were around 10%, when you ask those people that bought during those high interest rates times if they did the right thing most of them say yes because home prices kept going up and as added plus they were able refinance at a lower rate sometime later.
For those buying cash you're likely to get a better deal during high interest times, sellers know that they can count on the house to close when you are buying with cash while sometimes financing falls through at the last minute.
Some Reasons for The High Prices in Homes in South Florida
There could be several reasons why homes in South Florida are not coming down in price. Here are a few:
High demand: South Florida is a desirable location for many people due to its warm climate, beaches, and recreational opportunities. The demand for homes in the area may be consistently high, which can keep prices stable or even drive them up.
Limited supply: If the supply of homes for sale in South Florida is not keeping up with the demand, it can lead to higher prices. Factors such as land scarcity, zoning restrictions, or a lack of new construction can contribute to a limited housing supply.
Retirement destination: South Florida is known for being a popular retirement destination, with many retirees seeking to enjoy their golden years in a warm climate. This demographic trend can sustain demand for housing and keep prices relatively stable.
Foreign investment: South Florida has attracted significant foreign investment in real estate, particularly from Latin American and European buyers. These international investors may view South Florida as a haven for their money or an attractive place to own a vacation home, which can contribute to price stability.
Economic factors: The overall economic conditions in the region, such as job growth, income levels, and business opportunities, can also influence home prices. If the local economy is strong and thriving, it can support higher home prices.
It seems like the whole world wants to live in the Fort Lauderdale area!
How Much will my Fort Lauderdale Home be worth in 10 years?
In the period from 2018 to 2023 Residential Real Estate Prices increased by a whopping 20 % per year or close to 100% by 2023.
Is as though the world has taken notice and everyone wants to move to Fort Lauderdale and nearby cities!
Going with a very conservative appreciation rate for Homes of 3.5% per year you can expect a $500K Home to appreciate to:
5 years $594K
10 years $706K
20 years $1 Million
Due to low interest rates and other issues home values in Broward County FL increased by at least 20% in 2021, now it's running around 10+ %, so as you can see this is a conservative estimate of future value, we might get another interest rate decrease soon, we’ll have to wait to see how the home market will react, it is impossible to predict the future, we can only look back.
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Antonio Ortega LLC
Real Estate Professional with Global Luxury Realty, LLC
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