We’re already well on our way to the semi-official home buying season. While the weather is less of a factor when looking for a home in Tampa, Florida or anywhere in Hillsborough County year-round, when spring has sprung and the summer months are on their way, sellers and buyers alike start paying a bit more attention to real estate.
For those that have previously owned a home, they can attest to that fact. There are several reasons why the spring and summer months bring out more buyers. Many want to get into a particular school system and when the kids are out of school during the summer it makes for an easier transition.
When there are more buyers out there looking for homes during this period sellers also react knowing there will be a greater demand for homes which in turn should lead to a higher selling price. But first-time buyers won’t have that same experience of buying a home under their belts. If you’re going to buy soon or you’re just thinking about it, here are some things you can expect in 2019.
Home prices have stabilized yet higher prices are ahead. Recently, the median home value in Hillsborough County is around $210,000 which reflects an 8.3% increase from this time last year. Going forward, analysts are expecting prices to rise as well but at a moderately slower pace. By the end of this year, home prices could be about 4.0% higher than they are today. And this is a good thing.
As the price of real estate goes up it creates wealth for those who own it. But a terrific spike in prices can create a housing bubble as a result of nothing more than speculation. When real estate increases in value gradually, it’s due to a traditional supply and demand curve without the problems property flipping can create. When home values decline, it’s a sign of real estate market that’s softening up and sellers are forced to ask less for their homes than they would have just a few months earlier.
A healthy real estate market is a sign of a growing economy and is a major contributor to the local economy as well. When someone buys a home it triggers a host of other economic activity. First, there are those involved with the sale of any home that profit from the transaction. From real estate agents to mortgage companies to attorneys, proceeds from the sale of a home contribute to many bank accounts. And, after someone buys a home it’s almost a given there will be a few trips to the hardware store for some upgrades or remodeling work.
Has housing prices have not only recovered over the years but stabilized. A 4.0% increase in year over year value is a sign of a solid market.
Mortgage Financing Costs
Rising home values is a sign of a healthy real estate market and higher mortgage rates are an indicator of a healthy economy. The Federal Reserve has recognized this national trend and Tampa, Florida is no exception. The Federal Reserve meets about every six weeks or eight times per year. Among the many important items on their agenda is to look at the state economy, peer into the future and adjust the cost of money. At their last round of two-day meetings, the Fed increased the Federal Funds rate by 0.25%, the first increase this year. Analysts are second-guessing what the next move will be but it’s almost a given there will be at least two more rate increases for 2019, possibly three.
The Federal Reserve Board of Governors doesn’t adjust your mortgage rate, however. The Fed adjusts how much it costs banks to borrow from one another when their reserves fall below a certain level. Banks are required to keep a specific amount of available funds to bank customers, so-called “on demand” funds. At the end of the day, if the bank loaned out too much of its cash, it borrows what is needed to meet daily reserves from other banks. This is the rate the Fed adjusts, not mortgage rates.
However, Fed actions give investors an idea about what the Fed is seeing later on down the road. When the Fed increases rates, it does so in an effort to ward off future inflation. As an economy improves and consumers are out buying things again, greater demand for consumer goods and services means businesses can charge more. Too much demand in such a short period of time can drive up prices, reducing the value of those dollars used to buy those goods and services. An increase in prices can good, as in home values, but only in moderation. A target rate of annual inflation for the Fed is somewhere around 2.0%.
But while the Fed doesn’t directly impact mortgage rates they can do so indirectly. If the Fed thinks a rate increase is in order, the economy is ticking right along. This makes investors put more money into stocks and out of bonds. A few of those bonds are mortgage bonds and like any other bond, as the price rises as a result of greater demand, the yield (or rate) falls lower. When the economy is doing poorly or the Fed doesn’t like what it sees, rates can fall lower.
For those who plan on buying a home, they should keep this in mind. As the economy continues to improve it will cost more to finance a home due to higher rates. On a $300,000 loan amount and a 30-year loan term, an increase in rate of one-half of one percent raises the monthly payment higher by about $88.
Home prices should continue to gradually increase and interest rates are expected to move higher throughout the rest of the year. This tells future home buyers that it’s probably a good idea to find that Tampa home sooner than perhaps you had originally planned. Buyers can learn more about all the low down payment first-time buyer programs like USDA, FHA and VA on the website. Please call us at the number above with questions, or simply submit the Quick Contact form on this page.