An uncertain landscape stabilizes to regain its status as a solid investment.
Advice on the current state of the real estate market can be tough to understand – particularly when it comes to apply national market conditions to certain regions. So while some reports this year indicate it’s a great time to buy, other reports warn of another crash and explain that one in four homes actually lost property value this year in spite of a market that’s recovering overall.
While on the surface it can seem like these reports contradict each other, the truth is that the real estate market – and its recovery – are highly dependent on where you live and where you want to buy. With that in mind, we spoke to Consolidated Credit’s own housing market expert Joseph Cvelbar, Director of Housing, to learn his thoughts on how the market here in Florida – specifically South Florida in our neck of the woods – is really fairing.
“South Florida is uniquely positioned as a housing market,” Cvelbar explains. “There’s such a demand in this area because it serves as a gateway to Latin America. This creates such a demand for property that even following the downturn the U.S. – and South Florida in particular – are seen as safe markets and a haven for people to invest.”
Of course, South Florida’s market was all of those things before the crash, too. However, Cvelbar believes increased demand for primary residences and real property investment (i.e. not flipping) helps prevent future market fluctuations and crashes.
“With the number of people looking to move here, invest here and become homeowners here, I think we’re more immune to future market corrections and another potential crash. I think South Florida is an incredibly safe place to invest, either as a homeowner or strategic investor. That’s why Florida is seen as one of the top five markets for property value recovery.”
Part of the reason Florida is such a great market for recovery comes from the fact that it fell so badly during the crash in 2008. A market environment where property investment flippers were flipping to flippers so they could flip (yes, it got that bad) heavily contributed to overinflated property values and excess inventory – most significantly in condominium units along the Atlantic coast. Market values have equalized following the crash and now inventory issues are disappearing in the face of such high demand.
“At the height of the crash, there were certainly issues with too much inventory, particularly with South Florida condo units,” agrees Cvelbar, “however now some markets in South Florida are actually quite tight because of such high demand. For instance in parts of Miami-Dade the average amount of income you have to devote to purchase a home is slightly above normal because there’s so much competition between buyers. It’s not as competitive in Broward and Palm Beach County, but the competitive market is still there.”
In other words, South Florida has recovered so substantially that we’ve gone beyond the buyer’s market that typically signals a recovery. In fact, we’re getting into realm of that other term that hasn’t really been seen since the crash – the seller’s market.
Essentially, mortgage rates and lending conditions are still good for buyers. However, competition between buyers drives up sale prices, it means homebuyers and investors may have to spend more income to afford property in these in demand areas.
“What’s recommended is that you should only be spending 31 percent or less of your net monthly income on housing expenses,” Cvelbar advises. “Any more than that and you risk putting yourself in a position where you’re vulnerable to financial distress.”
In other words homebuyers need to be extremely careful that they don’t overspend just to enter the market. This is where a HUD-certified housing counselor like the ones you can work with through Consolidated Credit can be invaluable for homebuyers who want to ensure they’re entering the market the right way, including helping you find programs that can assist you in achieving your goal.
“A housing counselor can help a family assess their finances to make sure they’re mortgage-ready before they jump in,” Cvelbar says, encouraging buyers to take advantage of free counseling services available. “Programs to help homebuyers are constantly evolving and new programs are becoming available. For instance, there is a new down payment assistance program available to first-time homebuyers. Currently the program is only available in a few counties on a trial basis.”
A housing counselor knows where programs are available, when they become available elsewhere and how homebuyers can use them effectively. Cvelbar also recommends that even if it’s not your first time entering the market, a housing counselor may still be able to help you understand programs that could apply to you.
“The term ‘first-time homebuyer’ is misleading because it doesn’t solely refer to buyers who have never been in the market who are purchasing their very first home,” Cvelbar clarifies. “In actuality, the term applies to anyone who has not owned a home in the past three years. So in a sense, you can become a born-again first-time homebuyer. So even if you lost your home during the recession, it could be the right time to reenter the market.”
If you’re currently looking to buy a home or you plan to buy soon, call Consolidated Credit at 1-800-435-2261 to speak with a HUD-certified housing counselor at no charge.