Central Florida's Molten Hot Real Estate Market!

by John Ripley

Can anyone really keep up with the speed at which the Real Estate market in Central Florida is growing? The boom is not limited to the Sunshine State...the vast majority of the country is benefiting from unprecedented appreciation rates and wealth accumulation through home ownership. Can this trend continue? What is the outlook for the future and how can you benefit from this season of Real Estate glee? Read on and I will share some perspectives from industry experts on how you can be a winner in today’s marketplace.

Is it a Boom? Is it a Bubble? Will you buy a home today and never be able to sell it again? You might be surprised at my perspective since the mainstream media thinks much differently that I do on this subject. But then again, they think differently than I do on just about EVERYTHING! I clearly see this season of Real Estate appreciation as a long term sustainable boom full of opportunity for Americans at every economic level. In the balance of this article I will share some specific reasons why you should confidently invest in Real Estate with an eye towards long term success.

And Now The Rest Of The Story...

Let’s start by popping the bubble. The entire "housing bubble" concept hinges on the premise that we are approaching the pinnacle of home prices and that those who buy today will not be able to sell their home in the future for the same price they paid for it and will likely take a loss as overall process drop. The proponents of this theory seem to say that interest rates will rise substantially and that future homeowners simply will not be able to afford to purchase a home. Let’s dive into this theory and see if it works.

In Central Florida the average home price is about $230,000. At 6% a 30 year fixed rate mortgage would be $1,378.97 per month principal and interest. If interest rates jumped all the way to 9%, that same mortgage would be $1,850.63 per month principal and interest. This payment difference is $471.66 per month or $108.84 per week. Please do not infer that I think $471 is a paltry sum of money. What I am saying is that home ownership is a common quest for all Americans and other objectives simply take a back seat to the priority of having “a place of your own”. For instance, would the average couple give up their sporty new car for the chance to raise their children in a home rather than an apartment? Would a father be willing to work overtime to know his wife and kids were able to live in a safe, comfortable home rather than a congested multi-family dwelling? Would a mom shop more prudently to trim excess from the family budget in order to see her kids play safely in a fenced back yard? Clearly, the answers to these questions and many more like them are a resounding YES! With that being said, in spite of rising interest rates, people will make every effort to own a home rather than rent one.

In an interview about the "housing bubble" NAR (National Association of Realtors) Chief Economist David Lereah said, "It’s semantics. A real estate boom is really a healthy real estate expansion. You can be in a boom or an expansion and still have one down year. You don’t have to have a record setting year, year-in and year-out. This is a trend that’s moving upward over time and consumers can take advantage of that trend for both a primary residence, as well as for investment property."

Now don’t freak out! I am not suggesting that interest rates are heading north towards double digits. The 9% was simply used for analysis in the example. According to a broad survey of industry experts, average long term interest rates should maintain their gentle upward climb towards 6.75% - 7% throughout the rest of 2005 and 2006. Frank Nothaft, vice president and chief economist at Freddie Mac is quoted as saying that “financial markets currently are very inflation sensitive, putting upward pressure on mortgage rates, however, several economic indicators suggest that the economy isn’t overheating and that inflation is relatively contained.” He has also commented on several occasions saying “I don’t expect mortgage rates to rise too much or too quickly in the near term. As a result, housing activity should stay on track for a strong 2005.” I concur with Mr. Nothaft on this point. I remain bullish on Real Estate as a valuable part of your overall investment strategy and hope that you will do the same.

In summary, all the ingredients for success in Real Estate are right here at your fingertips. The interest rate climate has never been better. Lenders are offering more favorable and flexible loan terms than ever before for both primary and investment properties. Central Florida ranks among the best places in America to live and work and the estimates for growth and continued development are staggering. You are living in a virtual Real Estate gold mine. According to a recent CNN survey of volatile housing markets, Orlando has only a 9% chance of a housing price decline while Boston (the most volatile) came in at only 55%. Now think about it, the most risky city for a real estate price decline has only a 55% chance of a value reduction. How many Americans take significantly larger risks every day in their retirement portfolios? In my mind this recent analysis confirms that Real Estate is a good long term location to invest your hard earned dollars.

Imagine if you had purchased a home in Seattle or San Francisco 15 years ago…wouldn’t you be sitting a huge amount of equity right now? Well, those types of appreciation rates and trends are right here at your doorstep. My advice is to secure a piece of the American Dream and do so with faith and hope for long term success!