Is 2018 the year to buy a home in Southwest Florida?
Analyzing the right time to buy a home in Southwest Florida, otherwise known as “Market Timing”, is difficult to calculate. Personal and societal economics are in constant change. Nevertheless, we all need someplace to live and a home is one of our biggest investments. Even if you are considering a second home, it is a large consideration.
During the past several years, especially the last two, prices for homes and condos in Southwest Florida have climbed and the deals that came during the downturn are gone. That is not to say that we’ve rebounded to the peak or that there are no deals to be had. A prudent shopper with the aid of a dedicated real estate agent will always find the best deal in the market to buy a home in Southwest Florida. However, all is relative. A great deal today may be 10 or 20 percent higher than it was only three years ago.
Economists report that home prices increased 5.5% during 2017. That means a home priced at $200,000 in 2016 had increased to $211,000 during 2017. If home price appreciation returns to a more normal and sustainable level in 2018, that is 2.5% – 3% increase, that same home would again cost more. A low end increase of 2.5% would make a $211,000 home cost $216,265 the next year and $221,672 the year after that, more than $21,000 increase in two years.
Perhaps even more important than home price appreciation is an increase in mortgage rates. the cost of a mortgage has been at historic lows through the last decade. However, when the Federal Reserve sets the target level of federal funds rates, banks usually adjust their mortgage rates. Most economists expect that rate to rise in 2018 and hold as long as the economy remains steady.
As of this writing (1/8/2018), mortgage rates are below 4% (one quote I found was 3.875% for a 30 year fixed and 3.375 for a 15 year fixed). Using those numbers, a $200,000 home, 20% down payment, $160,000 mortgage at 3.875% would cost $752.38 per month, principal and interest (This does not include escrows for taxes and insurance). If mortgage rates for the same home and loan amount reach 5% as predicted, the monthly payment would increase to $858.91, an increase of over $100 per month. With taxes and insurance, that total can be over $1,200 per month.
Many people who hope to buy a home in the next year will move those plans up due to these numbers. Purchasing a home now, can save tens of thousands of dollars over the life of a mortgage and even if one purchases with cash, the saving can be significant.
And if you wish to browse the market, click here to search the Southwest Florida MLS.