During 2022, inflation reached a more than 40-year high of 9.1%. While the national inflation rate has fallen over the past few months and currently hovers around 4.9%, the effects of its drastic rise continue to be felt in every corner of the country and in every part of the economy. Whether it be in above average food costs or higher than average credit card and mortgage rates, inflationary effects still linger especially within the housing market. Even areas such as Orlando, Florida that enjoyed a fast paced frenzied housing market have witnessed a sudden and severe shift. Here are several ways that inflation is affecting the Orlando, Florida housing market.
Home prices
Home prices were out of control during 2021 and 2022. With buyers sometimes paying $50,000 to $75,000 over list price. Why? Because with zero percent mortgage rates and serious competition buyers were willing to pay more to get the house they wanted. As inflation continues to eat away at people’s savings, buyers are stepping away from the market. With less demand for houses, there are fewer bidding wars and in turn fewer homes selling at record prices. Since home prices are not setting any sales records during the current housing market it is a good time to purchase a home. If you are interested in buying you may find less competition and more reasonable prices. Contact a top Orlando, Florida real estate agent if you are interested in purchasing a home.
Mortgage rates might go higher
The Federal Reserve has made no secret that their effort to fight inflation will be done through interest rate hikes. This means that the days of 0% interest mortgages are long gone. The effort has led to increases in mortgage rates, credit card rates, and loan rates across the country. Mortgage rates have steadily climbed and with each increase the pace of the housing market has slowed. Currently, a 30-year fixed mortgage rate is 7.11%. There is no doubt that the increase has made homebuyers think twice about paying more for a home and has led to a slow down in even the fastest housing markets.
Construction could slow
Typically, the construction of a new home isn’t done until after a buyer closes the deal on a new build. With fewer buyers rushing out to purchase there are few homes being built. In addition to lower housing demand, the cost to build a home continues to rise along with the cost of building materials. With everything from lumber to shingles costing more than they did prior to the pandemic, building costs will continue to stay high thus leading to higher new build price tag. With buyers looking for better deals on their future home, they may be hesitant to spend more on a new build.
Slower market
In March of 2022, Orlando homes were moving quickly, oftentimes coming and going from the market within 24 hours. But in 2023, homes are spending more time on the market. The current average days on the market for an Orlando, Florida home is 32 days. While the current number of days on the market is not excessively long, it is still a sharp increase from just one year ago when the average was 8 days. The longer market time is more than likely caused by buyers thinking twice about a home purchase due to the rising cost of living.
The housing market is not immune to rise and fall of inflation. In fact, it hinges quite a bit on the economic health of the country. With inflation still higher than most would like and with prices on everyday goods eating away at people’s wallets, there is no doubt that the housing market, even in areas such as Orlando, Florida will continue to slow.
