Background

During our regular office meetings at Pfeifer Realty Group, our experienced real estate advisors frequently share that clients are asking if now is the ideal time to buy. They wonder if they should act now or keep sitting on the sidelines, hoping for a lowering of the interest rates. I often tell clients that the best time to buy or sell depends on their financial circumstances and whether the move aligns with their real estate goals. Remember - everyone needs a roof over their heads, and predicting future interest rate changes remains a challenge. 

However, as trusted advisors, we're dedicated to offering informed advice. This week, I'd like to look at the relationship between mortgage rates and property prices. On the surface, if we anticipate a drop in mortgage rates, advising clients to wait seems obvious. Yet, mortgage rates represent just one piece of the home buying puzzle. Consider this: acquiring a property now at its current value with an 8% mortgage might be more financially advantageous than doing so later at a heightened price, even if rates fall to 6%. 

Other Considerations: 

Locked-in Home Price

Purchasing a property now ensures you secure it at its current price. Should market values increase, your “purchase price” is safeguarded. Holding out for a minor rate decrease might mean confronting escalated property prices, erasing any gains from the rate drop. 

Fort Myers Mortgage Rate Illustration (30-year fixed): 

• $500,000 property at 8% equates to approximately $3,244 monthly. 
• $600,000 property at 6% is roughly $3228 monthly. 

Note: If the exact same house was purchased, you would need to reduce the mortgage rate by 2% to have the same monthly payment. However, you would have paid $100,000 more overall.

Refinancing Opportunities

I am sure mortgage rates will change and we hope they do go down. However, they could go up in the short term before lowering in the future. Regardless, you have the option of refinancing down the road. Unlike your original purchase price being locked in, if mortgage rates go down, refinancing can lower your monthly payments. 

Building Equity

Consistent mortgage payments increase your home equity. By sitting on the sidelines, you risk losing out on this equity, particularly if home values go up.  

Spotlight on Southwest Florida

Given the likelihood of property values surging, our vision stands firm: Southwest Florida property values are poised for growth. The allure of Florida — with its amazing climate, beautiful coastlines, and recreational activities — persistently draws residents and investors. Couple this with the state's advantageous tax structure, and it's evident why Florida is the preferred choice for many. 

Overshadowed by locations such as Ft. Lauderdale and Miami, Southwest Florida has recently garnered significant attention. The pandemic put areas like Sanibel, Captiva, Cape Coral, and Naples into the spotlight. With more competitive prices than other Floridian regions, many took advantage of this opportunity. The reasoning? Equally captivating waters and weather but at a lower cost. 

The Buyer Dilemma

I started this article off with the question of timing. With many buyers awaiting the "perfect moment," any dip in interest rates might offer some short-lived deals. However, as more buyers enter the market, we anticipate an increase in competitive offers, escalating property values and potentially offsetting any savings from lowered rates. 

Coastal and Barrier Island Expertise

Our deep-rooted knowledge of Southwest Florida's coastal and barrier island markets positions us uniquely. We understand the unique value and advantages of properties here, and our experience indicates that hesitation might mean missed opportunities in areas like Sanibel, Captiva and Fort Myers Beach. Even inland areas are likely to see increased growth and home values as more homes, restaurants, and resorts are built.

Summary

Wrapping this up, the decision to purchase a property hinges on your individual financial goals and resources. Reiterating my initial sentiment: the best time to buy is when it makes financial sense. If our clients need more guidance, we can recommend mortgage brokers and financial advisors to assist further. 

Please do not hesitate to reach out to one of our real estate advisors or me directly. We truly want to assist you in making the best real estate related decisions.  

Regards,

Mark Pfeifer

Director of Operations

Pfeifer Realty Group