Buyers in Southwest Florida are ready to get in the game

As Published in the News Press – 11-Feb-2012

In no secret that many experts have predicted that 2012 is heading in a better direction for the Southwest Florida real estate market, but how are potential buyers, both local and non-local, really feeling about it? With the number of closed sales in Naples, Bonita Springs and Estero, Florida increasing by 5% in 2011 from 2012, the fourth consecutive year of increases, buyers are really starting to feel confident. Additionally, the comparison in renting versus owning seems to favor owning more and more with each passing month. The point is that whether you’re a local looking to purchase a primary home or a seasonal resident looking to purchase that vacation or second home, now is the time to get in the game and it seems many buyers are ready!

First, when you compare the cost of owning a home to renting, you’ll find that buying may soon make more sense. Paul Diggle, a housing economist at Capital Economics, performed a recent analysis that showed record-low mortgage rates (with 30-year fixed-rate mortgages available under 4 percent now), and a 15 percent rise in rents, which are making more consumers take a closer look at buying. The national median monthly mortgage payment of about $700 has fallen to about the level of a median monthly rent check. If mortgage rates keep falling and rents keep rising, the equation will tip even further toward owning. While the costs may be a bit higher in the Southwest Florida market, the ratio of rent versus a home mortgage is moving in the same direction.

Case in point: a buyer who purchases a median-priced home and stays there for at least seven years would likely come out ahead by about $9,000 than if they chose to rent for those seven years according to Diggle. Diggle’s calculations factor in rents continuing to rise 3 percent a year, and housing prices staying flat for the next two years before rising in 2014.

Much of the decision to buy a house still depends on your personal finances and preferences, your career or family life, or level of financial security of course, but with market conditions improving and inventory decreasing, it doesn’t pay to wait much longer. And, if you’re comparing just the cost of owning and renting, buying a house may soon be the better choice in Southwest Florida, especially for locals and our seasonal residents looking to put down roots.

Second, general speaking mortgage rates are at their lowest levels in decades. It’s a combination which means affordability is up, so is now the right time to buy a home in Southwest Florida? You bet it is. What can be said with confidence is that now is a good time for buyers and investors to look at their local markets.

While you couldn’t ask for better marketing conditions to buy a home in Southwest Florida now, if you’re still not convinced, there are seven basic factors when deciding for yourself if now is the right time to buy.

1. Price. Home prices in Southwest Florida are the best they’ve been since before the the economic downturn, but don’t expect them to stay there long. The available inventory in Naples, Bonita Springs and Estero has dropped 23% during the last 12 months (2011).

2. Mortgage Rates. There’s no doubt that mortgage rates are low by historic standards. While there are stricter standards for obtaining that loan, it is not impossible for those who qualify. Lenders, however, will only make loans today that are fully documented. That means to get a mortgage, borrowers must be able to prove income and employment. The best strategy is to assemble application information in advance and to be pre-approved or pre-qualified before looking for a home.

3. Affordability. The combination of affordable home prices and historically-low mortgage rates means that affordability is strong — buyers with a given income can purchase more house in most markets than just a few years ago.

4. Rental Rates. As we touched on before, renting versus buying has taken a turn in favor of buying. Additionally, reports that rental rates have increased consistently in the last few years in Southwest Florida.

5. Taxes. Property taxes and mortgage interest are generally deductible. Investors can also write-off depreciation and ownership costs. Real estate deductions lower tax costs and effectively increase affordability.

6. Ownership. All real estate comes with what are known as a "bundle of rights." There are different rights and responsibilities associated with "fee-simple" homes and condos. A homeowners association can also impact ownership costs and amenities. For instance, one single-family home that belongs to a homeowners association may have access to a community pool while an identical house outside the association does not. Your real estate agent can explain the differences.

7. Personal Preferences. We each have different likes and dislikes that drive our choices. One person wants a condo in downtown Naples while someone else wants a resort community in Estero or Bonita Springs.

One thing I haven’t mentioned is that are some things in real estate you just can’t measure, like the sense of joy and satisfaction that comes from owning a home. While insignificant as they may seem when we talk a lot about investments and money, etc., it is still an important factor for many buyers