Ocala home appreciation is a function of strong demand and the historically low inventory of homes for sale. Together they may impact affordability in the intermediate to long term. Today we live in times when interest rates are at levels that are unsustainably low as well. Additionally, GNMA estimates that builders must add 3,800,000 housing units nationally just to meet current demand. To make things more difficult, construction materials are in short supply at this point. As a result, even though demand is strong, the construction of new homes is actually declining. Of course, the larger the gap between supply and demand, the more likely that home prices will continue to rise. Therefore, the real estate market faces a perfect storm. How will we cope?
Ocala Home Appreciation And The Mortgage Market
To be sure, mortgage rates must climb over time. We have never seen such low interest rates for such an extended period of time. Additionally, the extreme shortage of homes we face will take years to overcome. Therefore, these forces that drive Ocala home appreciation will soon collide. When rising prices intersect with escalating interest rates, affordability suffers. As a result, recognizing the predicament the housing market faces, GNMA has recently introduced forty year mortgages.
These mortgages will be government guaranteed. Since they will lower monthly payments, they will make homes somewhat more affordable. For example, servicing a 30 year mortgage loan of $500,000 at an interest rate of 3% will require $2108 monthly. However, the same loan amortized over forty years will require a monthly payment of only $1790, a 15% reduction. Of course, as interest rates rise, the impact of a forty year amortization period will become more significant.
However, 40 year mortgages have a downside as well. Homeowners will build equity more slowly and the interest they pay over the life of the loan will be higher. But current economic forecasts suggest that the local economy is entering a period of rapid expansion. As a result, Ocala home appreciation is expected to be brisk for years to come. Therefore, at least in our community, the benefits of appreciation should greatly outweigh the disadvantages of a forty year amortization.
How Will Bitcoin Impact Ocala Home Appreciation?
The electronic currency known as bitcoin has created an incredible amount of wealth. Bitcoin millionaires and billionaires abound. But the currency is not as freely spendable as good old American greenbacks. Therefore, many Bitcoin holders where shut out of the housing market. However, that is changing. Today United Wholesale Mortgage announced that it will begin accepting Bitcoin in payment of loans. This breakthrough makes homes affordable to more people than ever before.
Of course, there is more to the Bitcoin story. Sellers began accepting Bitcoin as a currency in housing transactions some time ago. Additionally, the trend is clearly accelerating as more and more sellers jump aboard. But are there unintended consequences here? I don’t know if “unintended” is the right word. However, the acceptance of bitcoin is bring more buyers into the housing market. Of course, due to this added demand, home values are forced further upward. Therefore, the acceptance of Bitcoin in home buying transactions has made housing more affordable for some. But it has also made it less affordable for many others.
Ocala Home Values and Government Intervention
President Biden has long advocated steps to make homes more affordable. Therefore, it is no surprise that his administration is proposing concrete steps to implement Joe’s policy. In so doing, they are making homeownership possible for many who would be shut out otherwise.
The government has plans to subsidize the construction of affordable housing throughout our country. Additionally, the President plans to offer tax credits and outright financial assistance to those meeting new stringent criteria. Finally, the administration is writing legislation that will combat local regulations that prevent the construction of affordable housing. No longer with builders be shut out from building multi unit project in the suburbs for example.
The impact of these actions on real estate markets is unclear. But two things are certain. It can’t be a bad thing to allow more people to share in the American dream. However, good intentions often have unintended consequences. Therefore, as the administration and others that follow oversee the economic shifts created by this legislation, they must act prudently. They must respond aggressively to deal with any negative ramifications that may result.
Here are three articles that discuss in more detail the matters we have addressed in this blog post. Enjoy reading:
40-year mortgages keep payments low, but there are some problems that come with longer loans. Get the downsides and alternative options. Continue reading on THE BALANCE.
United Wholesale Mortgage aims to be the first major lender to accept cryptocurrency for home loans. Continue reading on REALTOR MAGAZINE.
How could Biden’s proposals end up impacting the overall housing market? But are there potentially unforeseen consequences? Here’s what you need to know. Continue reading on HOUWZER.
“Real estate is an imperishable asset, ever increasing in value. It is the most solid security that human ingenuity has devised. It is the basis of all security and about the only indestructible security.” Russell Sage
We are fortunate to be living in Ocala, a town that has been growing rapidly for over a decade. Yet few places experience the economic expansion we are about to see now. Therefore, there may be no better place to own real estate than here and no better time than now.
Andrew Kruglanski, Broker