In a global scenario of uncertainties and high domestic interest rates, the US real estate market begins to “cool”. The city of Orlando, Florida, considered one of the five largest markets in the US, is currently experiencing a considerably different situation than that seen in 2021. Homes are remaining on the market twice as long to sell. However, even different from the reality of a year ago, the average time spent in the market is still very low.
According to data from the Orlando Regional Realtor Association, 2022 inventory (homes available for sale on the market) is 100% higher year-over-year. This situation reflects the increase in interest rates by more than 130% in the same period.
These indicators are important, as the average time a property remains on the market reflects the supply X demand ratio.
The good news is that this is a good situation for buyers, especially the so-called “first-time-home-buyers”, who were practically excluded from the market a year ago, where a single home received up to 6 “cash” offers in a real bidding war.
Even with higher interest rates, which makes it difficult to access credit, the situation today is more comfortable, as buyers have greater bargaining power in a less heated market. It is possible to negotiate prices and even Closing Costs.
Market is still considered “Seller” (favorable for sellers)
However, anyone who thinks that the market is not heated is wrong. It just “cooled down”, but it remains favorable for sellers (seller market).
Homes in metropolitan Orlando now take an average of 45 days to sell. It is still a very low period of time, but considerably higher than the low reached by the market (20 days).
The drastic increase in interest rates (more than double compared to last year) directly and immediately impact the buying end, while the selling end (owners) is impacted indirectly. Many landlords simply do not reduce the prices of their properties and are slow to perceive the new reality of the market.
In fact, Florida home prices have seen a modest average decline in recent months.
This situation tends to change gradually, since, as a result of the non-rapid reduction of prices, properties tend to spend more time on the market to be sold. With fewer properties being sold, inventory increases.
Is the market returning to normal (equilibrium)?
It is difficult to say if the market is returning to normal or if it is just responding to a one-off monetary policy tightening adopted by the Fed.
In order to control inflation, the American Central Bank (FED) has been aggressively raising interest rates, which ends up discouraging sectors of the economy. One of the most affected sectors is precisely real estate.
It is a consensus that the Fed will not be able to maintain this rate of increase in interest rates and it is possible that, in the near future, it will adopt a downward bias. In this hypothesis, the real estate market would be stimulated again.
Opportunity for investors
If this downturn in the real estate market in Florida is a one-off, due to rising interest rates, this could be an opportune moment for investors. It is possible to take advantage now to better negotiate the purchase and wait for appreciation in a market that, even returning to normal, offers unique characteristics that demonstrate great potential for appreciation.
About AMG International Realty
AMG International Realty is a global real estate company specialized in Florida. If you want to find out about investment opportunities in Florida, get in touch right now and chat with me via WhatsApp: +1 305 318 6968 (Heloisa Arazi).