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Probably one of the biggest topics out there right now for homebuyers is the current mortgage rate environment. On the other hand, sellers are really looking at home pricing. Overall, there’s also a lot of news about foreclosures. This month we take a deep dive into each, so you can put all those headlines into perspective. 

The Mortgage Rate Myth

The geopolitical environment has continued to affect mortgage rates.

And the question on people’s minds is, "Hey, when are we going to go back into lower mortgage rates?" And if they are thinking of something with a two or three in front of it - that's not going to happen. The truth is the mortgage rates we saw post pandemic were because the economy was on life support. Those rates were an emergency policy, not a new normal. Businesses shut down, millions lost their jobs, people stopped spending, and the markets panicked. Don’t forget, too, that home prices exploded, affordability got worse, and inflation spiked. Seeing those kinds of rates again would be an economic shock.

Mortgage rates this spring fell to a lower level than in the last 3 spring homebuying seasons.

That might be welcome news if you’re thinking about buying a home, but are on the fence. So how much does the mortgage rate affect your monthly payment? Right now, in Tallahassee, the average sales price is $356,008. Simplified, this means that a 6.4% mortgage rate versus a 6.3% mortgage rate is a difference of about $23 a month. So, the question really becomes: Is $23 a month worth waiting for?

Buying a home is a long-term investment. Homes go up in value over time. Locally, over the last 12 months, homes have increased in value 2.37%. So, that $356,008 home would be worth $8,437 more next year. How’s that for perspective?

What’s Ahead for Mortgage Rates?

Fannie Mae, the Mortgage Bankers Association, and Wells Fargo have released mortgage rate projections through the second quarter of 2027.

On average, the end of the year should see rates around 6.20%, and around 6.17% heading into next spring. Overall, very flat projections. Mortgage rates are not expected to change much over the next several quarters.

To learn more about buying a home, look for local homebuyer classes like HumBuyer.com where you can talk about your specific situation with local real estate agents and lenders to find out what options may be best for you. Local organizations like the Tallahassee Lenders Consortium are also helpful places to look at, and don’t forget to search the over 2,000 down payment assistance programs at DownPaymentResource.com!

Pricing Matters

In this market, price it right or be ready to adjust. The number of homes with price reductions seems to be on an upward trend.

There is a disconnect happening right now between what sellers feel like they're going to be able to get for their home and the reality of today's market. Locally, we are seeing sellers making concessions like a new roof, closing costs, and repairs.

According to a realtor.com survey from last month, 80% of sellers think they'll get their asking price or more.

There are a couple of reasons for this. First of all, a lot of people still remember their neighbors selling their home for $50,000 above asking price, multiple offers, under contract in days - like it happened for so many people just a few years ago. Combine that with the fact that people go on Zillow and look at their Zestimate and they feel confident that they know the value of their home.

So, let’s talk about Zillow’s Zestimate. Zillow used to publish accuracy tables for the Zestimate. In one of the last tables that was published, here’s what the data showed for Leon County:

Let’s break that down. Zillow believed that they were 60% sure their Zestimate was within 10% of what the home would actually sell for in Leon County. 60% 👀

Now, those accuracy tables may not be available anymore, but Zillow does still report the data for large metros at Zillow.com/Zestimate. Here you will find the stats for Jacksonville, Florida, as an example. If your home is not currently on the market, Zillow is 65.37% sure it’s Zestimate is within 10% of the sales price. 65%.

Your home is your largest financial asset. How would you reply to someone who gave you a valuation they said they were 65% sure it was accurate?

The past few years has seen homes selling for less than their listing price.

So, while 80% of sellers think they'll get their asking price or more, the reality is that 62% are likely going to sell below their asking price. Pricing your home to the market value is crucial.

One of the first things potential buyers notice about a home is the price.  A home that is priced well can actually sell at a higher price more quickly due to increased interest and showings.

What if you over price your home? It will get less interest, and spend more time on the market. And plenty of people think, “We can just drop the price later on.” Sure, you can! Happens every day! But… keep a few things in mind about price reductions:

1.        A high list price may send the message that the seller is not motivated.

2.       Price reduction announcements get lost in the plethora of email and social media posts both buyers and real estate agents are inundated with daily. The big news just simply gets overlooked.

3.      The buyers who have already eliminated the home from their search take one look at the main photo and only remember that they’ve already eliminated that home from their search. They may not remember why, but they know the house and it didn’t make the cut.

4.      Buyers may think the price was dropped because something was found wrong with the home.

5.      And, according to Anna Bozovich at Analytics Miami, "Properties that sit on the market and go through multiple price cuts can develop a sense of staleness."

Real estate agents see this all the time. It’s not ideal for the seller or the agent for something like a price reduction to get overlooked, but this is the reality. Right now, almost 1 of every 5 homes will see a price reduction.

In fact, according to the National Association of Realtors, the amount of a price reduction a home sees increases the longer the home is on the market.

A home that sells between zero and 14 days will have an average price reduction of 4.9%. If it stays on the market for over 90 days, that goes up to a 10.6% price reduction. All the way up to over 120 days at a 13.8% price reduction. 13.8%!!! That’s almost $50,000 on the average priced home in Tallahassee.

There's a very big difference between pricing it right up front and waiting and having to ultimately go through a price cut in the end.

To find out your home’s value, you can visit sites like HomeSweetHomeBot.com for a detailed, interactive report, or reach out to a local real estate expert for a Comparative Market Analysis.

Foreclosures

Foreclosure trends are more than numbers. They represent real challenges faced by members of our communities. Nationally, foreclosure filings are rising. But, thankfully, not every filing turns into a foreclosure. The truth is that, historically speaking, the numbers are actually quite normal – even low.

Credit Karma recently said, “More than 3 in 4 Americans (78%) report that they do not feel financially secure. The top culprit is the rising cost of living (47%), followed by the current state of the economy (42%).” The rising cost of living is affecting everyone, and people are going to do everything they can to protect that because they probably couldn't go out and rent an apartment for what they have in a mortgage payment.

When you look at the number of loans that are more than 90 days delinquent, you can see that mortgages and home equity lines of credit are low compared to auto loans, credit cards, student loans, and other debt.

This means people are maybe forgoing the credit card payment this month to make sure the mortgage is paid. That’s the natural choice, and also a good sign for the housing market. In the first quarter of this year, the average foreclosure took 577 days. That is down 3% from the previous quarter, and down 14% from the same time last year. It also marked the sixth consecutive decline.

Equity

What’s helping the foreclosure situation is that home equity remains historically high.

Two-thirds of homeowners have more than 50% equity in their home. Nobody is walking away from that kind of money.

Again, you can see your home’s value at websites like HomeSweetHomeBot.com, but a local real estate expert doing a detailed market analysis on your home is always a better choice.

Bottom Line

• The difference between today’s mortgage rate and a slightly lower one is unbelievable marginal.
• Mortgage rates are not expected to fluctuate much between now and 2027.
• Home price reductions and sellers offering concessions are increasing as the market shifts.
• Historically speaking, foreclosure activity is low to normal.
• Homeowners have an enormous amount of equity today.

Prior Month's Market Statistics in Tallahassee