Mortgage Rates and Falling Prices Make Florida a Better Buyers' Market

By Richard Barrington
Local Lender Columnist
Jun 2, 2008
For a long time Florida had one of the hottest housing markets in the nation, and prospective buyers kicked themselves for having missed the boom. These buyers may well have thought their chance to get into Florida's housing market was gone forever. How quickly things change. Between falling prices and low mortgage rates, things have gotten a lot better for Florida home buyers.

While news stories focus on the negatives, home buyers must remember that one way to get a good deal is to be willing to buy on bad news. If nothing else, the turnaround in Florida's market should remind people of how cyclical markets can be. "What comes around, goes around" is not just karma, it's economics. Therefore buyers should not hesitate to act when conditions are favorable, because the next change may not be far behind.

Prices Head Back to Earth

A poll of Florida newspaper and broadcast editors cited the downturn in the housing market as the top story of 2007. Housing conditions weakened across the country in 2007, but prices were especially soft in Florida.

By almost any measure, the news was persistently bad for Florida's housing market. Home sales were down sharply, and construction jobs declined. The state was second nationally in foreclosures, while Tampa and Miami led the way in price declines.

Deals May Be Even Better Than Statistics Suggest

Certainly, some of Florida's decline in home prices is a correction of an over-inflated market. In other words, just because a home's price has fallen doesn't mean it's a great deal. A home that was 20% overpriced to begin with does not become reasonable just because its price falls 10%.

On the other hand, there are indications that in some areas even deeper discounts may be available. Foreclosures in particular lead to distressed sales that may squeeze any remaining overpricing out of the market. If nothing else, buyers should keep in mind that this is a time when they have the bargaining power--a far cry from the market of two or three years ago.

Mortgage Rates Sweeten the Pot

Further sweetening the deal for buyers is the fact that mortgage rates ended 2007 lower than they had been at any time during the year--lower, in fact, than they had been since 2005. Unlike housing prices, the fall in mortgage rates is not merely a correction of a previous upward spike. In over thirty years previously, there have been only three years which began with lower mortgage rates than those at the start of 2008. That certainly rings in a happy new year for buyers.

Sources:
Freddie Mac

About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.