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  • Writer's pictureJared Jones

LACK OF AFFORDABILITY; How Will It Affects The Next Portion Of Growth For The Housing Market




Is obviously you can see there are market stressors and then there's some existing walk back from people who aren't saying, Whoa, this is too expensive. Now here's the thing. If you take just what FHA will allow. Okay. Because if you look at basic mortgage, most of the people that are buying entry-level homes in the Orlando market, what type of loan are they getting most way FHA. Right. So according to, they have an FHA requirement. The FHA allows you to use 31% of your income towards housing. That's what's called a top-end ratio. For those of you who know to lend, and then 43% of housing, all-inclusive debt. Okay. So 31% of your income can be housing, no matter if you have debt or not 31% towards debt. Okay. So that means if you have 30, let's say $3,290, average income a month, you could have approximately a thousand dollars of that could be your house payment.

Okay. And I say that number, that's the median income for the area. Okay. My point is, if you start to work backward, the more of the range of median income for the Orlando area, and then you break down how much of those of that Al's household income can actually be paid on the mortgage and the average price, like our entry price. Now listen to this, our entry price now uses a different data agency that actually aggregates MLS data. And they're saying that the entry price point now is around two 95. That means the majority of the homes on the average that are at the entry portion, they're pushing 300. Okay. You know, that's true. If you go into even suburban areas that are more affordable, like the outskirts of Claremont, stuff like that, you can't find anything under 300,000. Yeah. You know, and so, you know, the question becomes, how much does lack of affordability affect the next portion of growth for the housing market? Right. So it's like, it's easy to have this Inferno of activity when there is buyers for it. But what happens when the entry market is so expensive that the local public cannot afford to purchase it. Right. And I think that becomes one of the major stall factors that going to see coming up.

Yeah. Interest rates are going up. I mean, it's kind of, it's been unsustainable what we've been doing with interest rates, but now I think there are three-point 18 now. And at the bottom of COVID, it was, I believe at 2.6. So interest rates are on the climb. They're just going to keep going back up. But by this year, and I think that's going to cool things off for a lot of people that don't know if you're, if, how much you pay to the bank, if you pay more to the bank, that means you qualify for less house. Um, so it's, it's a big factor in how much or what housing affordability, uh, to the average buyer. So,

So interest rates are climbing. I'm also seeing reports in the last week that interest, uh, or that loan programs are being tougher to fund. So some of the banks are actually adding more of what's called overlay policies, things of that nature to make loans harder to get. Yeah. So it seems like, and we've done reporting on this before, where it seems like there's a lot of, you know, they're trying to actually slow the market down, you know, maybe as unintentionally as they can, it's not like direct force, but there's definitely some, some signs. And the interesting thing becomes, how does the rest of the market move up? If the bottom rung cannot be grabbed? Now, one thing that I will predict about central Florida, okay. And this is a major difference to all of the marketplaces is central Florida is a massive relocator for some of the most stalled out States that exists.

So we are an inbound recipient of States that I believe has a heavier population predisposed to being very concerned about COVID because we've become abashed and for retirees, right. We become people, the recipient pool for our state, which would drive future demand. And honestly, that's the sad thing for the locals is that you, unfortunately, have, um, you have a freeze-out happening. And I think within six months, any local renter that is in this marketplace, trying to get onto a home purchase site is done. Like I sadly do not. I think probably a huge majority of that available pool is they cannot afford it. Okay. There are locked in their tenants for good. But the flip side is that because of the nature of our state's inbound resources, I mean, we are taking on, particularly in our state New Jersey, um, in New York, Chicago, um, people that are used to paying much higher prices, people that are selling a home to get here and receiving much more in terms of, um, of high revenue.

And they're actually, a lot of them are settling into the entry market. So they're selling out everything, they got a $350,000 check from the Bronx, and then they just want a 1500 square foot star home here, and they're going to pay three 50 for it. And the locals can't afford it because the average renting income isn't enough to qualify for $350,000. So yet still okay. While there's a lot of predictors okay. For, for months and months and months all over YouTube, you have people constantly saying that the market is done. It's going to be cold by the fourth quarter, right? Because of, uh, underlying delinquencies and for various things that we've covered. In other topics, I have a feeling that Florida, my prediction is Ford is going to see a double spike before it actually sees a cooling. Okay. We are going to see a double spike.

In fact, while if, if there is a triggering event, fourth quarter or first quarter, next year, Florida's going to go right through it and probably be hotter as the other markets are cooling. Okay. So much so that people are going to be finally vaccinated. There's gonna be people that have been there's so much pent-up demand due to the nature of the States, sending us population, being concerned about moving in, buying here, and making sure they have everything inline into a play place where they're actually comfortable doing it. Right. I E being inoculated and then moving here and you're going to have another second demand. So my prediction is when I, I believe the board is going to be so much further down in terms of any correction. I'm saying this candidly, I'm happy to give a doom and gloom update when there's one to give.

But I am telling you, Florida is going to see in my opinion, because there's so much demand ready to come here, which at the same time will create a selling cycle that will be hard for those other areas to overcome. And, you know, it'll be interesting to see, I think when other areas are, are gonna, you know, are going to see a softening as people try to get here that have been waiting for the air here. And so that's going to drive a second wave. Um, and that wave would only be hindered by trying to get out of the marketplaces that are in if those areas are going soft because then you have them put their home on the market to get that 300,000 out of the Bronx, but then everybody's on the market in the Bronx trying to get out and you have market dilution. What do you think host way?

Yeah. I mean, I think you're right. I mean, I think it's hard for us to picture because it's so already populated here, um, that, that we can imagine things getting bigger, but I mean, you can trust us when we say that'll like a large portion of the calls that we get. Um, a lot of the traffic that we're seeing online, um, they're, they're from New York, you know, they're, they're from these States that are shut down. They're already moving here. But imagine the people that are they're older, they don't want people walking through their house. They don't want to list their home yet because, Hey, they haven't gotten the vaccine or they don't know if anybody else has gotten the vaccine. Once these people start feeling comfortable, um, to list their home. I mean, this is where they're going to come to you next. And we know that because they've already come here, uh, from the very beginning of COVID, you know, we've, we opened up pretty early. So, I mean, the past is the pre the future is usually like the past. So if these folks have already started coming here before the vaccine, I mean, they're, they're going to come to start coming hereafter, and that's what we're talking about. The second spike, the second boom, um, in Florida, in Florida, real estate market,

I think it could be a year away. So I think, I think there is a real reality of possible market softness in many States and local localities, in the fall into winter and early spring next year. And I think we will see the opposite. So that's it.


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