Rising rates and prices: What does it mean?

2013 has been an exciting time for real estate, especially in Central Florida. RealtyTrac named Orlando the No. 1 destination for flipping homes for profit. The median sales price of existing homes sold in May 2013 was up more than 23 percent from May 2012, and the number of homes sold was also up over 8 percent in comparison to this time last year. Until very recently, interest rates hovered in the historically low 3 percent range. As rates rise and inventory remains low, what does this mean for the home buyers and home sellers of Central Florida? Only 7,272 homes were listed for sale the Central Florida Multiple listing system as of May. That number is a decrease of 12 percent from last year, and equates to a mere 2.55-month supply of homes that are not new construction available for purchase.

Whether you are pondering the perfect time to sell your home or timing your entry into the market as a buyer, there are many things to consider – now more than ever.

Let’s talk about rates first. We have experienced some of the lowest mortgage rates in American history for a while now. In speaking with many mortgage lenders as well as keeping a watchful eye on the jobs report and press releases from Fed Chairman Ben Bernanke, the consensus is that the market will remain somewhat volatile and rates are expected to creep up over the next year into the 6-percent range.

Disclaimer: there is no mortgage rate crystal ball. Generally speaking, when the economy improves and more jobs are created, interest rates tend to climb. The Fed has been buying into the bond market heavily and recently comments that they may decrease such activities sparked a jump in rates. We’ve seen some fluctuations since then, but one thing is clear: nothing lasts forever.

As more jobs are created and the economy continues to rebound, expect mortgage rates to rebound along with it. If you are under contract, lock your rate sooner than later. A $400,000 home with 20 percent down at today’s average rate of 4.625 percent (at time of press) equates to a loan payment of around $2,056 principal and interest. If the rate were to increase a point, that payment for the same scenario would be around $2,302 principal and interest. If you’re a buyer and have the ability to act now, do it. That dream home will cost you more in six months to a year due to rising rates and improving home values.

Home values are up, and chief economist for the National Association of Realtors Lawrence Yun is projecting a 10 percent increase nationally in the median sales price of existing homes by year’s end. Not only that, pending contracts are up 12 percent from May 2012 and are at their highest levels since 2006. So prices are expected to continue their rise. This is good news for home sellers as they can recoup funds and keep more money in their pockets for the next move. The flipside is that not only will they make more when they sell their home, their next abode will likely cost more too. Again, if you need to sell your home to buy a new one, sooner than later is the best course of action if you want to save money overall.

Last but not least, let’s talk about those low, low levels of available inventory for existing homes. New home starts are up and many buyers wary of the distressed property market are opting to build new. If you are looking to buy or sell in an area that is already built out, however, new homes aren’t likely a factor for you. Fewer homes to choose from means fewer options, and it also means a seller’s market.

Sellers have the ability to pick and choose from multiple offers in most scenarios now. But just because it’s a seller’s market doesn’t mean that sellers shouldn’t put effort into marketing and getting their homes the most exposure. Professional quality photos and good SEO marketing (Google, blogging, website exposure) are especially important in todays world, and even more so if you can’t place yard signs in your neighborhood. A clean and well-staged home will often make a huge difference in a sellers net proceeds. As with everything, never discount the power of a first impression.

Some advice for buyers looking in today’s market: know what you want and where, and be ready to act quickly if you find a home you love. Keep your contracts as concession free as possible if you are competing with other offers, and have your proof of funds or pre-approval at the ready. Sellers won’t consider your offer without tangible proof you can perform.

Christina Rordam is a local Realtor. Contact her at 407-928-8294 or ChristinaSellsOrlando.com