Low inventory for the Single-Family homes segment is causing an imbalance between supply and demand in Florida. For this kind of property, we have nowadays a very strong seller market, as already mentioned a few times on this blog. While there is a shortage of residential homes for sale in Orlando, demand has increased considerably. More and more people are looking for large houses with an outdoor area, to the detriment of apartments, to spend the pandemic period. And who already owns a single-family home does not want to sell, either for fear of receiving visits from strangers to show the residence (risk of contagion) or because it is worth postponing the sale plans and preserving the property with ample space until the pandemic passes. However, there is another factor that contributes to reducing the inventory of these houses: low interest! Keep reading to understand.
Refinancing keeps inventory low
The American government lowered interest rates in order to stimulate the economy in times of pandemic. Basic American interest rates are at one of the lowest historical levels. For an American, it is possible to finance the purchase of a property with rates below 3%.
Low-interest rates not only encourage the financed purchase of new properties, increasing demand, but also creates another impact on the market. Current owners prefer to refinance their properties rather than sell. This behavior curbs the offer of new properties.
Single-family home owners, who are already well established during the pandemic, are seeing lower interest rates as an opportunity to refinance with lower installments. At the same time, these owners are watching the prices of this kind of property rise and decided to wait and take advantage of this appreciation. Why sell now?
In times of uncertainty, the tendency is for current owners to remain where they are. While they can get good offers for their properties, the question also arises whether they will be able to find another property within the desired profile and price, since there are not so many options available. In many cases, it becomes easier to refinance the property at lower rates and renovate it.
Developers ready for new projects! Builder confidence high
Low inventory and high demand are making construction companies in Florida come back with their projects. Most developers suspended new construction at the beginning of the pandemic due to the scenario of uncertainties that was installed. Now, with this evident imbalance between supply and demand, they have changed their minds.
The Builder Confidence index, measured by NAHB (National Association of Home Builders) shows that with regard to the newly-built single-family homes segment, the willingness to build new projects is extremely high and at a historical level. The index hit an all-time high of 83 in September. The highest previous reading was 78. Normally indexes above 50 are already considered good.
This is a strong signal that developers are aggressively resuming their activities, which could alleviate, within a period of 6 months, the supply side of the single-family home market.