Florida real estate lawyers and agents likely agree, it’s no secret that it’s been a wild and wooly ride in the State’s real estate market. Homes closing and moving briskly off the market fueled by cash and carry customers have cooled; higher interest rates hit us hard, and home insurance has become a seller’s market. No one can argue, however, that homebuyers are now more laser focused than ever on interest rates. The good news… it looks like there may be a welcome change on the horizon.
According to Forbes, the Fed may soon lower the federal funds rate, with declining interest rates sure to follow. “This could be a big win for buyers who missed out on the COVID-era buying spree, since falling fed rates typically herald cheaper mortgages.” Will this equate to more closings for for real estate lawyers and agents?
According to Chicago-based BMO Bank, around 71% of aspiring homeowners say they’re waiting for rate cuts to buy a home. If financial experts are right, their time might be coming very soon.
Florida Homebuyers Wonder “How Low Can They Go?”
Back in January 2020, during the pandemic, real estate professionals and new home owners were enjoying mortgage rates that were at an incredulous 3.5%. That measure bottomed out in January 2021 at 2.65%, before bouncing back. Today, the average 30-year fixed-rate mortgage is 6.28%, 6.23% % for a 20-year fixed-rate, and 5.69% for a 15-year fixed-rate.
As for forecasting what mortgage rates are going to do between now and 2025, it depends on who you talk to. Everyone agrees mortgage rates are due to go down, but there is some disagreement as to how much. The Mortgage Bankers Association predicted rates would fall from 6.4% in January to 5.9% in December. Fannie Mae’s forecast for 2025 shows rates starting out at 6.2% and trending downwards by 0.1% each quarter before bottoming out in the neighborhood of 5.9%. However, everyone agrees that mortgage rates will fall somewhere within the range of 6% to 5.93% by 2025.
The reason it is difficult to predict with any great degree of certainty is because the fed rate isn’t the only factor affecting mortgage rates. Housing supply and demand as well as unemployment all contribute to the metrics that affect the demand for housing, which in turn impacts not only home prices but mortgage rates, as well.
How Lawyers and Realtors are Riding the Wave
The promise of lower interest rates leaves astute real estate agents with a single question: How do I guide my clients through this uncertain housing market? Prospective home buyers and sellers face a number of options. Should they refinance now or wait until next year? Should they wait until 2025 to buy a home? What will happen with home prices? Every choice has its own set of advantages and disadvantages.
To help prospective buyers decide if they should buy now or hold out for a lower rate, spend even more time running the numbers. Often rates decrease no more than a percentage point, which makes little difference to the monthly payment amount. Looking closely at the sale price of the home purchase, where a rate drop is much more dramatic on a $2 million property than on a $500,000 purchase, will help you find your client’s sweet spot.
As you know, when rates drop, more people start house hunting, which can diminish inventory and you may see an increase in the average home price as a result. Additionally, bidding wars can drive up individual prices. When you share the actual inventory and demand scenario with clients, you help pilot their timing and garner buyer confidence.
Waiting on unforeseeable circumstances may not be the best move, unless the prospective buyer needs time to double up on their down payment or build up a low credit score. You can never remind them too often that buying sooner rather than later gives them a chance to start building home equity now that they can use later.
While it’s been a chaotic time in the real estate market, Florida’s experienced real estate lawyers and agents can tell you, we’ve all been here before. Sharing a bit of insight as what to expect over the next year can go a long way toward guiding your clients onto the right path to realizing the home of their dreams.
Getting ready to close? Contact Florida Bar Board-Certified Attorneys David E. Klein, Esq. and Guy Rabideau at Rabideauklein.com. They have the expertise and experience you need to ensure that your interests are protected throughout your real estate transactions across the Palm Beaches and throughout Florida. Contact Rabideau Klein to discuss the legal implications of your next Florida property transaction.