With a nod to the immortal bard, people looking to purchase a home need to answer that question. After the initial COVID-19 pandemic and resulting panic, which caused a temporary lull in home buying, the market rebounded robustly to record prices, particularly in 2021 and even more particularly in the Southwest Florida area. Going into 2022, the market has leveled off a bit, but it shows no sign that prices are going to return to pre-pandemic levels - not even close.
According to the latest NABOR home purchase statistics, the overall median closed price in April had increased 39.2 percent to $599,000 from $440,000 in April 2021. The upturn reflects the low number of sales in the $300,000 and below price category, which used to be staples of entry-level Collier County real estate. Median closed prices continue to rise in the single-family home market, up 8.7 percent from March, but median closed prices during April in the condominium market decreased 1.1 percent from March.
The drop in price reflects the fact that inventory rose 39.5 percent in the single-family home market during April. When inventory rises, buyers have more options, which enables them to put downward pressure on prices when negotiating with sellers. If inventory continues to rise, it should create more balance during negotiations between sellers and buyers, enabling prices to drop a little more from their record highs earlier this year. Furthermore, as builders try to catch up to demand by building more new-construction homes, the increase in supply should further help restore balance.
Whom to believe...
Of course, deciding whether or not to buy a house right now depends on which of the many "experts" to believe about what the market is doing, or more to the point, what it's about to do. Opinions abound on this topic, just as they do on any topic related to the economy. For example, one school of thought has the housing market descending into a "full-blown correction." "The housing market has peaked…everything points to a rolling over of the housing market," Chief Moody's economist Mark Zandi says. "In terms of home sales, they're falling sharply. Housing demand is coming down fast. Home price growth [will] go flat here pretty quickly; we will see [home] price declines in a significant number of markets."
And then there's the other school of thought, which opines that buyers shouldn't hold out hope for a major correction. "After a two-year surge in home prices during the COVID-19 pandemic, the housing market is finally showing signs of cooling — in terms of demand and sales, if not those persistently high prices — partly due to rising interest rates, high prices due to a shortage of quality inventory, inflation impacting the cost of raw materials, and a volatile stock market. Sales of new homes fell in April for the fourth month in a row, to the lowest level since the pandemic began." This same group believes that as Millennials reach age 40, their household formation rate will accelerate due to higher marriage rates and more stable incomes. In other words, they're going to do exactly what their elders have always done: buy houses to raise their families. The increased demand would then, of course, keep prices elevated.
Don’t Wait for a Better Price
Here in Collier County, it seems that while prices are probably going to level off from this point, they're never going to descend to what they were even two years ago. Buyers should therefore adopt the strategy that you're ready when you're ready. If you need a home and you don't want to rent (see our previous article on renting), then it's time to buy a home. Don't fret so much about the fact that the price could come down, however unlikely that is, because over the long term - the 30-year term of your mortgage, for example - the price will increase. It always has, and it always will. But do use the fact that there are more homes to buy to help yourself negotiate the price down, even if just a little bit.
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