Florida Housing Market Predictions | 5 Important Thoughts

This article is a direct transcription of our YouTube video, the video is linked at the bottom.

Hello, everyone. Welcome back to the channel. I'm your host, Adam Hancock. And in today's video, I'm going to attempt to unpack what I think is going to happen the back-end of 2022 and the first quarter of 2023. Real estate and macroeconomics is going to be the focus here. So I hope you find a ton of value in that. Hope it helps you form some better opinions on what you're trying to do.

• Supply & Demand
• Consumer Confidence
• Interest Rates
• Resale, Homes, and Inventory

All right. Obviously, the real estate market right now is wild to say the least. There's a lots going on. It's really hard to know how to make a decision, what you risk by waiting, what you risk by doing something too early, who to believe that's telling you information where most mouthpiece, speaking on these kind of topics, even myself, have some intrinsic benefit for doing something. So it's hard to know who's telling you what they believe and who's telling you something short-term to benefit from it. It's an unnerving time, and a political environment and this relocation state thing. So there's five things that have been really hot on my mind that I've been thinking through. I've been trying to think how to articulate, speaking with a lot of people about, they're circling back to these same five topics. So I just wanted to relay that to the masses. So I'm going to talk through... These are my opinions.

I also reside in Sarasota, Florida and cover Sarasota, Tampa and Naples. So that is rather a unicorn to the United States and Florida especially. So take that ceiling, that umbrella with my opinions, but I do want to at least speak on this topic. I think it might be helpful for some of you. So that's what we're going to do here, and let's hop into my first topic.

Supply & Demand

Number one on my list, I want to talk about supply and demand as a relationship. Obviously, a very, very macro view of this general term, but I want to talk about how it relates to what's happening right now, specifically. This trickles down to everything else on this list, but everything else in this really this whole conversation. What I mean by that is how I think about supply and demand and real estate is it's not that different from stocks and even sports betting to certain senses, is value is determined by two parties on swaying things in different directions for different reasons. Sometimes good, sometimes bad. Someone benefits, someone loses. Sometimes it's more even than not, but there's a lot of different variables that affect it that might not be controllable to a lot of senses and people win and lose because of that.

So sports betting, the odds change by people hedging on one team or another. The benefit of a big windfall changes by one team being more in vogue than another, stocks are the same thing. Regardless of how good a company is, which definitely P and E ratio and all these things are an indicator of that company's health. It's not trivial, but there are things that sway these things that are out of the control of the masses in a lot of senses. Real estate's not that different.

A couple of examples, one person may be researching this market all the time, every day, maybe have a background that even orients to that day-to-day facilitation of their familiarity with the market, that just has way more data points on what to do than someone that's not doing that all day. One person may be moving from a state that's like California, where the perspective of money's very different. They may be liquidating where they had half the size and it's twice as expensive in the state that they're exiting, and they're moving here and they're going to buy in this market thinking all of things are cheap. So the little intricacies of it being more expensive here than it was a little bit ago, which would matter much more to someone that's like, "The price should be this." We're not arguing should it be that. It's that if someone comes in from another state and does something that you view as absurd, that's still going to affect the supply and demand. That's going to then affect when people are going to sell, the comps for the purchases in the neighborhood. It's going to move the entire market.

And all of these things are out of your control. It's not to say that those people are making the right decision. It's not to say that it's fair or that it's even. It's that supply and demand, none of that matters. It's the orientation of how those two level to each other and they get out of order and in order. And then, when they get more even, then we're saying that's more fair. But still, you can't control any of that. So what I'm saying here is all of that I think circles back to some level of simplicity and logic.

A lot of what I just explained, there are little things that happen, it's a bunch of noise, but they're usually over a 10, 15-year span. It levels, just like stocks, just like sports betting. Yeah, that team, they may perform in the winter not as good historically. Their record does orient to the thing, but there's a lot of other things that people can control that sway the ups and the downs.

So the way I would look at this is take Southwest Florida, right? Do you actually believe that this... Sarasota versus a Naples, or a Boca Raton, or whatever, do you believe it is the right move? Do you believe Apple's a good company regardless of the little ups and downs of their sway, right? It's the economics of your intuition as it relates to actually making a large financial decision, I think is really important because a lot of the little stuff that changes over a one, two, three year span can be adjusted, can be refinanced, can be readjusted. So if you're looking at principle and long-term economics of do you think this is actually the right decision, regardless of the short term hysteria, I think supply and demand is going to relate to this topic more than it ever has.

Consumer Confidence

All right, onto number two. So now that we lay the groundwork with number one, a lot of these are going to bump against that general umbrella, more or less. And number two I'm calling consumer confidence. So this might be the most important one on this entire list by far, in my opinion, that I think a lot what happens over the next five months. Should I make a decision now? Should I wait and do something later? Did I make the right decision? And did I mitigate my risk against making the wrong decision at the right time so that I have a no regret scenario? I think that is the biggest key to what's happening right now. And it's all related to people getting confident around that decision. And it's going to be different for everyone. That's where all these layers come into play.

So at what triggers a particular person as the final straw or what they need to hear? And some of that's interest rates, some of that's pricing, some of that is politics. You have all the political stuff happening when I'm filming this in very real time to that conversation. You have taxes, you have government overreach, you have all these different elements, the prices in other states, them disagreeing with your beliefs, all these kind of things. They're going to hit people in different ways and at different stages of life where you're annoying but I can't make a move yet. Or people that are going five years before retirement, you're going to have all these things happening.

I think that I don't think actually we're going to be, in my opinion... Now, this is a guess in November in 2022. So timestamp that. That I don't think we're going to be materially different in a lot of the economics about, I would say two weeks from now, two weeks from now versus February in the southwest Florida as far as pricing for what you're getting, interest rates versus what they are now, what these builders and stuff are trying to do, what sellers are trying to do. I don't think a lot of that actually gets materially different. But the fact of the matter is that people don't know that yet, where it's way too fresh from what just happened with the real estate market.

I want to believe what other people are telling you either. It doesn't matter how deep people are in, I don't think people have the ability to get enough information to give a very deep opinion on it. So you have to feel right about it personally because you're the only one that's going to be sitting in January like, "Damn it, I could've had this house cheaper." But I think a lot of it's like, at what point can you... Is it December? Is it January? At what point can you get your head around being like, "This is the new normal and I'm going to move forward."

I don't think actually by going real early you have a risk of it being so different in February, you're like, " Damn, I could've had a windfall or interest rate at 3% now instead of six." I don't think that's true. And I also don't think it's true if you wait you're going to get a big windfall either. So because of that, I think you might be make a poised decision, but I think consumer confidence is the name of the game here and all of this stuff are just triggers under the idea of someone getting confident enough about making a sound decision.

Interest Rates

All right, onto number three. We're going to talk about the always fun one of interest rates. And I'm going to also hit home pricing as it relates to this subject matter. So as we work deeper down the funnel and we get more micro, then all the variables I mentioned, all the volatility, all the fragility, there are ways to align yourself potentially, or at least understand enough about it that you may be in the right side of that equation. Because the fact matter is, when things are high, when things are low, someone's going to benefit in that relationship.

So, for instance, interest rates are going up, right? When interest rates are higher, innately, there's a lot of people that are bummed about that and there's a lot less people that are going to be in the market because it does vastly effect affordability at a lot of price ranges. You can't just all just send afford $1,200 more a month for a house. So that could've completely changed debt to income ratios, everything, as it relates to affordability. So there's going to be less people in the market. Because of that, people typically can't price their homes of whatever they want. They can't do Zillow make me move in that kind of environment because there's less people in play. There's also people opportunistic in play because they know that.

So if you're someone that, in one scenario, interest rates doesn't matter. You're cash, right? Then you can take advantage of a lower home principle, which is by far the most important. Over a 10-year term, the interest rate's a point in time, it's a percentage base that hits a principle. If the principals are lower, then everything's lower. And then if you get the right home price, that's the first thing you need to get. Interest rate can be rearranged. But if you're someone that's buying cash, then you get lower home prices potentially because the interest rate messed that up and it doesn't relate to at all. If you're also someone that understands that the interest rate's a point in time, then you should be going for lower principle. Higher interest rate on a lower principle is a better idea than a lower interest rate on a higher principle. I mean, this isn't cleanly in every single numbers. We're not running all the numbers here, but the idea of that I think is the right way to think about this is you want to buy the house for the right price.

So think about that general idea of, are you in somewhere where other people deem this as a negative scenario? But your perspective of where you're coming or your background of it actually is a benefit to you, so you lean into that idea and during a lot of these people getting the new construction, people getting desperate, and the sellers and stuff reorienting their new thought of the new normal in 2022. Do you win in that scenario? And if you do, that would be something to really look at in the current market.

Resale, Homes, Inventory

All right. And that brings me to a combination of my number four and my number five. First, resale, homes, and inventory. A lot of people have been talking about the resale inventory creeping up. This subject, just a quick preface here, is going to really be innate and intimate with Southwest Florida, the way I'm going to speak about this, right? The reason I said it's a unicorn, it relates to this subject because we're not every market. So think of Sarasota, Tampa, Naples when I talk about this. So just wanted to mention that. But I just did a piece for this inventory idea for Sarasota Magazine about they reached out because inventory's creeping to 3.6 months. They would say, "Supplying demand, you're saying maybe it's an even market at about six months where it's a seller's market still at 3.6." But the creeping of it going up versus two weeks, it was a year ago is getting people pumped up. They're feeling good about it. They're feeling that they have leverage and all this kind of thing.

I think the 3.6 months is a good indicator, but a little bit of a smoke screen for southwest Florida right now. Inventory is building. That's no doubt. Those are real numbers, but I think a lot of that is the lingering effects of people overpricing things in a market that was way out of control and they're still sitting. I think the things that are priced right and are good homes are selling immediately. I don't think sellers can completely call their shots anymore, but if something's priced right, it's nice, it goes immediately still.

Okay. I do think that this will get more back to a better inventory situation for buyers. I don't think it's going to get into a crazy leverage position. And the reason why that I wouldn't completely hedge on waiting to do something necessarily... I'm not saying pushing you into buying something. I'm saying on this being your main premise for waiting is that we're going to get back to where I'm going to be able to come in and crush people and all these things is because the reason that inventory can't build out of control in a way that would benefit you is that, where would these people go? I think that's a big key. You live in Sarasota, Naples, Tampa, Fort Myers, where would you go to replicate that situation? So liquidating to them, a lot of folks that that's their homestead property isn't a huge benefit. They might lose, especially if they bought in the last couple years, or they might be at a crazy low interest rate. That's something I don't want to forget to mention. What if they're sitting at a 2.5% interest rate? Them breaking, that would be tough.

Now, with that being said, a couple things that would be interesting is, one, I've seen investors liquidating like crazy, them taking portfolios and selling. So if they're selling for the reason of being an investor, then you could be in an interesting situation there because they don't need to make a trillion dollars. They're just cutting and running.

New construction's really interesting here. So, new construction, the creeping of inventory and the demand being lower overall, those two factors are scaring new construction builders really badly. The creeping of inventory is a premise of more competition to them. Even if I believe it's overblown and not that real, to them, it looks like it's real. And then there's less people in the market. Those two combinations are like they're incentivizing people heavily. Lowering their pricing, they're giving away... Now, that's a business. So you don't have to feel bad about this. That's not normal supply and band, that's a business with margin. And macro margin over an entire neighborhood, entire company, it's one element, it's one tentacle in their equation. So if they're giving you money, it's not free money. It's coming from margin, and they're taking less and maybe they were taking too much. So this is something to take advantage of.

The other things relating to resell market might give you an unbelievable new construction deal on a principle that you can control, that you can negotiate, that you can get incentives, you can buy down interest rate and fix that part, hopefully permanently over the 30 year term. But this would be an example of where you could take the scenarios of maybe bad in one sense or overblown. But as long as it's perceived good in another sense, you can win. So that's why I would lay out supply and demand, consumer confidence, interest rates, timing, inventory, new construction, all of that in between. That's what I think is going to happen as a semblance of a forecast, right? Again, my personal opinion, Adam's opinion, a forecast over the next five months. So I hope that you can resonate at least with some of this video and I appreciate you for watching.

Conclusion

All right, folks, that is a wrap for this article. Really hope you enjoyed it. If you did and you're not already subscribe, please consider doing so. Secondly, you're looking to buy real estate, sell real estate, relocate, regardless of your timeline, please consider reaching out to my team if you're resonating with these videos at all. Lastly, before you leave, check out the description box below. Free digital guides, free analytical tools, my website. There is going to be an ever-growing library or free resources there, so we would love for you to check that out. Most importantly, thank you for watching. We'll see you on the next one.