The COVID-19 pandemic severely impacted the housing market this past year. Stay-at-home orders and rising health concerns led to fewer buyers looking for homes and fewer sellers willing or able to list their properties while remaining cautious of people from multiple households touring their homes during a pandemic.
Now, as CDC guidelines relax and more people become vaccinated, the trends have shifted in favor of the seller, especially here in the Orlando housing market. This includes the Orlando-Kissimmee-Sanford areas.
The Impact of Residential Growth and Decreasing Housing Options
Orlando is one of the nation’s fasting growing cities. The Orlando metropolitan area gained over 60,000 residents in 2019, and it’s projected it gained more in 2020. As such, the demand for residential properties is higher than ever. Orlando home sales have increased 2% this past year alone.
With Orlando’s ever-growing population, coupled with a decrease in inventory due to the pandemic, buyers are seeing an increase in home values. The median selling price for a home is up $35,000 compared to a year ago, which is the fastest-paced increase since 2006. And the Orlando housing market is seeing an average property overvalued by more than 17%.
Florida’s Housing Market Remains Strong
Florida’s overall housing market in April had more closed sales, higher median prices and increased pending inventory compared to a year ago, according to Florida Realtors® housing data. Also, the interest rate for a 30-year, fixed-rate mortgage averaged 3.06% in April 2021, significantly lower than the 3.31% averaged in April 2020. However, note that the April data is being compared to April 2020 during the first statewide lockdown due to COVID-19.
Will a Housing Bubble Pop and Prices Drop?
While most sellers remain optimistic about their home selling potential, some may fear a bubble in the U.S. housing market reminiscent of 2006. However, economists say the housing market isn’t overinflated, it’s just simply a lack of supply, and a bubble won’t pop, thousands of homes won’t slide into foreclosure, and buyers who wait likely won’t be better off.
Instead, housing inventories will remain low for a while, credit will remain tight, and lenders won’t issue risky loans like they did in 2006. Product risk – such as from mortgages with introductory periods, teaser rates or balloon payments – comprised about 40% of the mortgage market between 2004 to 2006. Those factors are now at only 2% of the mortgage market, according to Morgan Stanley.
As we start to compare June, July and August 2020 to June, July and August 2021, we will start to see the abnormally high year-over-year growth figures shrink. This is because June of last year was the beginning of the recovery in sales.
It is our hope that as the country moves to more normalcy, people will be ready to put their homes on the market again, and consequently, we will start a long, gradual slowdown in the rate of increased home values.
About the Author
Gonzalo Senior is broker/owner at IRM Investments, Real Estate & Management with over 20 years of experience. His vast knowledge of the residential and commercial real estate market enables him to assist buyers and sellers in receiving the best return on their investments.