Rob Field has an idea of the house in Orlando he would like to buy. Single and currently renting, he is looking for a two-bedroom, two-bathroom apartment with hardwood floors and a decent kitchen.
“I want him to have character,” Field, 63, said.
Field began his search to buy a home a year ago, but, as a financial planner, he says it’s infuriating to predict what he’ll be able to afford in Orlando’s booming real estate market.
“It’s a bit frustrating for me,” Field, 63, said. “I plan ahead and work on my budget, then a month later the numbers change and I have to start all over again.”
This summer, however, inventory has risen, sellers have slashed prices, and homes have been on the market long enough for Field to review, giving him confidence that his search is coming to an end.
“I’m becoming more aggressive in making offers than I was four months ago,” Field said.
Across the country, homebuyers are gaining more weight than they have in more than a year, according to new research from Knock, a national lender for homebuyers. “From June to July, the top 100 markets moved more in favor of buyers,” Knock CEO Sean Black said.
While Knock rates just three of those metros — all in California — as having become buyers’ markets, Orlando and 15 other major markets have shifted from favoring sellers to neutral, meaning a roughly even market for buyers and sellers.
“Panic buying is over,” Black said.
This will likely be good news for buyers such as Field, who have seen home prices soar since the pandemic began. In Orlando, the median home price rose from $250,000 in February 2020 to $380,000 in July, a 52% increase in just over two years.
A combination of factors led to the meteoric rise, including low inventory as few wanted to sell homes while the pandemic raged, and historically low mortgage interest rates, which fell below 3% the month before. last year.
In January, the Federal Reserve began raising interest rates to fight inflation. In June, the average 30-year mortgage rate reached 5.81%, according to the St. Louis Fed, the highest since the Great Recession of 2007-2008.
As mortgage payments rise due to rising interest, property experts say some buyers have given up the hunt. Los Angeles-based real estate investor Andre Stewart says more of them should think about waiting.
“I really don’t think now is a good time to buy,” said Stewart, creator of the InvestFar app and author of “The Real Estate Investing Diet.”
Stewart says the prices are just too high to sustain.
“Prices are going to have to come down,” he said. “The prices are not the actual values of these homes.”
Stewart points to a property he was monitoring near Clearwater that went from $550,000 in December to $900,000 in July. “Nothing can support that,” he said.
Even with the changing market, Stewart said it will take some time before buyers can negotiate fair prices for homes. “[Sellers] aren’t ready to get a $100,000 haircut yet because they don’t think they have to,” he said.
A Florida Atlantic University study confirms Stewart’s claim that homes are overpriced. In Orlando, the FAU shows home prices are 49.3% higher than historically expected prices in July. At the same time last year, this premium was only 16.7%.
Sellers, however, apparently sensed the market cooling. In July, real estate analysts Redfin reported that 8% of homes for sale in Orlando had reduced prices, the most since 2018.
Stewart said real estate investors are also becoming more cautious as prices have risen above the point where flipping or even renting for profit has become unsustainable.
In Orlando, investment companies accounted for nearly half of all sales in 2021, including 10% to institutional investors in single-family rental properties.
Last month, investment firm Blackstone announced it was suspending single-family home purchases in 38 markets, and Bloomberg reported that other major single-family home rental companies — including American Homes 4 Rent and Amherst Holdings — slowed their purchases by more than 50%.
Stewart said he believed it was the start of a market correction.
Knock’s Black said he thinks things are slowing down, but he doesn’t expect prices to drop.
“We’re slowing down from a 20% annual increase…to a 5% increase,” he said.
The Orlando market isn’t one that Black believes will become a buyers’ market next year, but he doesn’t see the advantage shifting to sellers in the near future either.
“Orlando is still a destination for people looking for value compared to, say, California,” he said.
But even though Stewart advises caution, he’s also looking for a home to return to in his hometown of Orlando.
Field knows he could buy something that will end up being a bit too expensive, but he still thinks securing a house would be worth it.
“It’s never a bad time to invest in yourself,” he said.