Inventory decreasing for homes in lower price ranges

While Orange and Seminole counties’ existing home inventory was much more manageable at the end of July than it was just a year or two ago, there is some cause for concern about the availability of homes priced under $500,000. Many of those are priced below $300,000, which is especially troubling for first-time buyers who commonly seek homes in lower price ranges.

As of July 29, there was only a 2.3-month overall supply of existing homes in the two counties, while monthly inventory for homes priced under $500,000 was just 2. By area, overall inventories in Winter Park (zip codes 32789 and 32792), Maitland (32751), Colonial Town (32803), College Park (32804), and Baldwin Park (32814) ranged from a 2.1-month supply (32792) to just a 3.7-month supply (32789). Those levels are well below the 4- to 6- month supply that typically defines a market balanced between buyers and sellers. Overall inventory was even tighter for homes priced under $500,000 in those areas, ranging from a meager 1.8-month supply (32792) to only a 3-month supply (32804), an average of just 2. On the other hand, overall monthly inventory for homes priced over $500,000 was comparatively high at 7.7, ranging from a 3.75-month supply (32804) to a 10-month supply (32803).

There are several factors contributing to decreasing inventories in the lower price ranges, not the least of which was a recent rise in mortgage rates to over 4 percent for a 30-year fixed. The rate hike created some urgency to purchase among some prospective buyers, many of them first-timers. Rising home prices, investors who scooped up lower-priced homes by making cash purchases before the recent rise in interest rates, underwater owners who’ve kept their homes off the market because they owe more on their mortgages than their homes are worth, and the fewer number of new affordable homes built in the past five years have all contributed to the decline in inventory, especially homes priced under $500,000.

Although we may see a decline in demand from buyers, especially first-timers, due to the decreasing supply of homes in lower price ranges and higher mortgage interest rates, it shouldn’t be significant. It’s still a good time to buy a home. While mortgage interest rates probably won’t return to levels below 4 percent anytime soon, as long as they stay south of 5 percent we’ll still be in a very healthy environment for home buyers. The key is for buyers, especially first-timers, to be prepared to act fast. That means putting themselves in a much more competitive position in a supply-constrained market by working with an experienced and knowledgeable real estate agent, and getting pre-approved for a loan, not just pre-qualified. This speeds up the offer process and shows sellers that yours is a viable offer.

If you’re currently in the market to buy an existing home, keep looking. There’s bound to be the home you’re looking for, even in a lower price range.

Scott Hillman is president of Fannie Hillman + Associates, a 32-year-old Winter Park-based real estate company specializing in residential real estate sales. He can be reached at 407-644- 1234 or at [email protected]