Many residents in St. Johns County and Ponte Vedra Beach are wondering if they should use a mortgage to buy a home now or wait it out.
With less buyer demand during winter, motivated sellers are willing to lower prices or offer seller credits to closing costs and interest rate buydown. Other factors encouraging buyers are builder incentives on new construction, lender incentives such as temporary interest rate buydowns and improving interest rates compared to 2023. Downpayment assistance programs for first-time home buyers are another avenue that helps those who want to buy now.
Those arguing to wait cite high interest rates and home prices. Prices in the Jacksonville area have not seen a correction from the pandemic, when an influx of new residents increased home values.
Your decision to buy now or wait will also be influenced by your need to sell your current home to qualify for a new mortgage. This is called a contingency to sell, which brings additional considerations.
If you are in the market to buy, contact your local real estate broker and mortgage banker to get prequalified. The real estate sales associate will then help you find a home based on the prequalification amount.
Another factor that will influence your decision when to buy is the local housing inventory. After all, interest rates don’t matter if there isn’t a home you want to buy in your price range.
Once you’re prequalified, begin exploring interest rate options with your mortgage banker. You may find it’s possible to get a short-term buydown at a lower interest rate. Sellers and builders can pay for your buydown. Two options are two- and three-year buydowns. This type of buydown can remove the rush to refinance that has become the popular phrase: “Date the rate and marry the home.”
A second type of interest rate buydown is paying points to get a lower interest rate, also referred to as a discount fee, which is paid at closing. This might make sense depending on how long you plan to live in the home, whether rates decline, and how quickly.
Recent reports of an improving jobs market have tampered down the excitement about the possible early 2024 Federal Reserve rate reductions promoted by Federal Reserve Chairman Jerome Powell in December. The result of an increasingly strong economy is a buyer who is waiting for rates to drop might have to wait longer, per a Breitbart Business Digest article published Dec. 26, 2023. The following is an excerpt from the article.
“The Atlanta Fed’s GDPNow is currently estimating 2.3 percent growth for the fourth quarter. In other words, many of the things that were implying a gradual slowing as the fourth quarter got underway are now telling us that the economy is once again accelerating.
Accelerating growth will make it much harder for the Federal Reserve to justify a rate cut early next year. When the Fed meets in January, it will just have received the growth estimates for the fourth quarter. If these exceed what Fed officials expected — as they seem likely to do — the Fed will definitely not cut rates at that meeting. By the March meeting, Fed officials will have the revised figures for the fourth quarter but not yet the first quarter of next year. This means that faster-than-expected fourth quarter growth will probably also eliminate the chances of a March cut. (Carney, 2023).
The Breitbart article is an example of why waiting doesn’t always make sense and reaffirms my opinion to buy now instead of waiting. It’s impossible to predict what the future holds for the local NE Florida real estate market. Rates may or may not go down considerably this year, and any gains you make with a lower rate will possibly be offset by a higher sales price. Increased demand after rates drop considerably will create more demand and higher sales prices. Regardless of the timing, buying makes absolute sense if you can afford the home; it’s a good investment, and it will improve your, and your family’s, quality of life.
Reference:
Carney, J. (2023, December 26). Breitbart Business Digest: Accelerating Economy Plays the Grinch to wall street’s rate cut Christmas. Breitbart Business Digest. https://www.breitbart.com/economy/2023/12/26/breitbart-business-digest-accelerating-economy-plays-the-grinch-to-wall-streets-rate-cut-christmas/
David Johnson is a mortgage banker with Ameris Bank in Ponte Vedra Beach. His NMLS number is 1446956.
