Home afforability remains a problem for some

When you step back and take a look at the real estate market in Orange and Seminole counties everything seems to be going well, right now. People are purchasing existing homes at a brisk pace as reflected by the growing number of transactions, and prices for single-family homes and condominiums have taken a steep climb north of where they were just a year ago.

The problem: affordability has become an issue once again for some buyers as rapidly rising home prices have priced some families right out of the market. The median price for a home in the Orlando area in July was up over 20 percent from July 2012 which was the largest annual increase in seven years, and condo prices were up a lofty 29.5 percent in the past year.

Couple rising prices with rising mortgage interest rates (an average of 4.58 percent on a 30-year fixed loan and 3.6 percent for a 15-year fixed loan as of August 23) and it’s a potentially dangerous mix for first-time buyers trying to find a home with an affordable price point. While mortgage rates are still relatively low by historic standards, even the slightest increase can make a huge difference in affordability for many families. Mix in a thinning inventory of existing homes, especially those in the lower prices ranges, and it creates an even greater affordability dilemma for some buyers. Affordability becomes an even greater problem when you consider that 67.5 percent of the pending sales in Orange and Seminole counties on August 23 were lower priced distressed properties, while 25 percent of the active listings in the two-county area were distressed properties mostly in lower price ranges.

The old adage ‘There’s never been a better time to buy’ still holds true. Many economists expect mortgage rates to keep climbing and in markets like Orange and Seminole counties where inventory levels are well below the 4-6-month supply that typically defines a market balanced between buyers and sellers, home values will likely continue to increase at a rapid pace due to demand. The uptick in rising home prices and mortgage interest rates, coupled with a dwindling inventory of homes, especially those in lower price ranges, has created a sense of urgency amongst many buyers trying to lock in a deal before prices and interest rates climb too far out of reach. On the one hand, rising prices means more homeowner equity which could lead to more available inventory if more folks jump off the fence and list their homes for sale. It also could lead to more buyers, especially first-timers, being priced out of the market.

While there remain a number of issues to be resolved in the local housing market, namely reducing the number of distressed properties and increasing inventory in all price ranges, now seems like the obvious time for Orange and Seminole county homebuyers to say “Carpe diem”, especially for those who have been waiting to buy their first home. Just be ready to act fast and make sure you are pre-approved for a loan which will make your offer even more viable.

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].