It is now November and we have less than 2 months left to 2014! Another year is near its end. Hope you have had a good year with more ups than downs and more joy than sorrow. As we approach Thanksgiving at the end of this month, we hope you have plenty to be thankful for with your family and loved ones.
Let’s recap the Orlando real estate market thus far in 2014.
First a refresher: as I have discussed in the past, since late 2010, the Orlando housing market has been in the recovery/rebound mode with very robust activity. The Orlando real estate prices were considered “below fair market value” by investment standards. So outside money poured in from many sources, the most notable were large Wall Street institutional investment funds. The demand outpaced supply, resulting in price appreciation. This solidified the Orlando housing market, local economy, and secured the tax revenue base for local governments. This has been a very positive thing for Orlando.
By mid 2013, the Orlando real estate prices were considered to have reached “fair market value”. This was when the large institutional investors stopped purchasing. The market then shifted from large-investor driven, to home-owner and small-investor driven. With a big chunk of the demand gone, the market normalized and stabilized with supply more in line with demand.
There are different market perimeters worth considering. For simplicity, we will focus just on the inventory level. That is the number of homes for sale on the market.
Figure 1 above shows the steady increase of inventory since April of 2013. By now we have had about 17 consecutive months of inventory increase. The latest number from September 2014 shows a dip in inventory level from 13,084 to 12,316. This is the first time we had a month-to-month decrease in a year and half! However, my current unpublished data indicate the inventory level is back above 13,000 again. Perhaps we will see a “saw-tooth” pattern of fluctuation as we enter 2015. If that happens, it can be considered a good thing, because the inevitable result of unrelenting inventory buildup can only be pricing decline. The leveling off of inventory level will help Orlando housing market remain healthy and balanced. This is still a great place to own real estate.
With approximately 4.5 homes for every buyer right now, buyers have the opportunity to shop around and try to find a home with the best fit. But keep in mind this is not a buyer’s market. It will take a ratio of about 6 homes for every buyer to reach that threshold. It is also not a seller’s market. Sellers have to be more realistic about price and cannot expect a premium over supporting market comps. With both sides evenly leveraged, the art of negotiation is important once again. The side with better representation can expect better outcome. This has always been our practice in order to consistently achieve the most favorable outcome for our clients.
Okay! We will stop right here. Have a safe and fun November! As always, if you have any real estate related questions, give us a call! We are happy to discuss real estate even when it’s not business. And, we love referrals!