.png)
I Love Palm Beach
I Love Palm Beach
Why NOW Is The Best Time to Buy Real Estate This Year
Unlock unique opportunities in the Palm Beach real estate market with insights from lending and mortgage expert Stephanie Coe. This episode of "I Love Palm Beach" sheds light on how the typically slow months of July and August, especially during an election year, can offer a rare chance for buyers to secure better deals and seller concessions. Listen in as we discuss the gradual drop in interest rates, the significance of strategic pricing for sellers, and how a balanced inventory market levels the playing field for normal American buyers against cash-rich and institutional investors.
Discover how a financially well-off young couple can maximize their home loan options through South Florida's Hometown Heroes program by taking advantage of a secondary $20,000 mortgage at 0% interest. We'll discuss the perks of new construction homes, like lower insurance costs and included warranties, and dispel common misconceptions about the program. We also dive into the best strategies for buying real estate, whether by targeting lower interest rates or purchase prices, and reveal potential growth opportunities in the rental market, including Section 8 housing. Our tips for first-time homebuyers and investors are not to be missed, as we highlight important market trends and the benefits of acting sooner rather than later.
Hi everybody, welcome to. I Love Palm Beach and we are having a real estate edition. I'm going to say it is August 2nd 2024 and again I'm with Stephanie Coe, who is an expert at lending and everything mortgages. Hey, stephanie.
Speaker 2:Hey Rebecca, how are you? Good morning?
Speaker 1:I'm wonderful. Welcome to August. It's been hot.
Speaker 2:Oh, my goodness, and what a year we're having so far. I can't believe it's going so quick.
Speaker 1:I know I can't believe the summer is over, but it's been a good one.
Speaker 2:You're in Florida. Back to school, parents are back into a little bit more of their routine up north. Get ready for it, it's coming soon.
Speaker 1:Absolutely so. I always call July and August the doldrums in real estate in South Florida. I still end up doing a lot of business because I've been doing this so long, but these are the months that I fear Everybody's on vacation. They're shopping for back to school. We even have a discount on taxes for the parents that are buying school stuff even computers, for that matter. But it's also a really good opportunity, and then, in combination with this being an election year, where people's confidence is really low, I think it's a great opportunity for people to jump in and negotiate. What do you think?
Speaker 2:For sure, and I don't know if it's so much confidence as low as far as it's being cautious right. A lot of times when you're going into, you know not just an election year, but we have very, very different policies on both sides of the aisle economic policies included, so with that, people don't really know what's going to happen with their investment. However, this is real estate we're talking about and historically, there's a couple pieces of data that we can pull from right.
Speaker 1:What is it?
Speaker 2:Eight out of the last nine election cycles, prices, home prices, have gone up after the election. That's one piece on it all. And then, overall, we are at a very interesting crux with interest rates. Right, interest rates have been going up over the past couple of years. There's been a lot of false starts with interest rates being able to lower. Kind of.
Speaker 2:How that works is the Fed will, or the whole market as a whole, the mortgage-backed security market. They'll start lowering rates a little bit on it and then stop, look around, test the market, see how inflation is going, see how the jobs report comes back, see if there's anything that's going to collapse the market for lack of a better term on it. And now it seems like we finally are catching a break. This has been a very steady past couple months as far as interest rates dropping on it, and we'll see what happens around the corner. But in the meantime I think it's one of those where people are, you know, stopping and looking around because they don't know what's going to happen with the election. But with that, home prices have dropped and interest rates are on their first good run in a very long time. I don't know, I think it's kind of the sleeper environment for people.
Speaker 1:Absolutely, I think uncertainty is a better word. You know, I don't know. I think it's kind of the sleeper environment for people. Absolutely, I think uncertainty is a better word. You know, I don't care really who wins the election, it's just that people are uncertain and they don't know where it's going to go. But yes, it is a sleeper time and it's also a time to negotiate. There's five and a half months of inventory on the market right now, which means crazy, at least that's.
Speaker 2:it's not anything alarming. Some people are pointing to that and saying we're going to have a burst or anything else. No, I mean that is pretty normal market. For four years ago.
Speaker 1:That's neither a seller's market nor a buyer's market, but I want buyers to look at it like an opportunity and sellers to not be so anxious that they don't have 10 offers on day one.
Speaker 2:Well, it's just a time to price aggressively as a seller to make sure that you're handling the negotiations on all sides of the aisle and the people that know know what I'm talking about treating all parties in the transaction fairly Correct, to be able to move your property along quicker with it all, and it's also, like you said, a great time to be able to be a buyer in the market, get a great price on it, maybe get some seller concessions towards your closing costs and honestly it sounds like the bar has been pushed pretty low.
Speaker 2:But the fact that your offer is even considered right, a lot of times over the past, or I should say over the past couple of years, there's been a lot of scenarios where a quote unquote normal American buyer you know, doing a three, three and a half, even 10% down scenario, they weren't even considered for an offer Absolutely. There weren't cash buyers an offer Absolutely Because there weren't cash buyers. There were 50% down buyers. There were people that could offer cash and show proof of funds and then do a loan before closing, and just a lot of institutional grade buyers. You had Black Rock buying up a bunch of property Things that the normal Americans couldn't compete with. So the fact that you even have a shot right now and then, on top of that, have some negotiating power is very powerful and something we haven't seen in years.
Speaker 2:Then, once interest rates drop, because there has been such a dam wall that's been put up of all these buyers that couldn't get in over the past couple of years and then, once they finally could get in, interest rates were the sevens, the eights percent.
Speaker 2:Now we're finally getting back down to an average in the sixes. You know that's going to take a lot of those people that have just built up for years and years that want to buy real estate and once the interest rates go down just enough to where it makes sense, all of that momentum is going to push through. So I, you know, I feel like that's going to be happening at the very tail end of this year. Most of the time people don't really buy property around the holidays, right that August to October, early November is kind of the bulk of it, and then it slows down at the end. So right after the election there probably won't be a huge, huge push. But the beginning of next year oh man, I'm just waiting to see what's going to happen there. And when there's a bunch of demand that reenters, prices go back up. So this is a very unique window from what we're seeing inside the market.
Speaker 1:I know. Let's use for example the couple you and I closed a couple weeks ago. They had been looking for over a year, if you recall, and we just couldn't get an opportunity for them. They took advantage of this market. They got a little bit lower on the price. We even had an appraisal discrepancy. Sellers came down and we got that to closing in under 30 days. But I was so fearful for this couple that if we waited any longer and we were into next year again, prices were going to be back up again. So it's a prime example of what can happen.
Speaker 2:For sure and keep in mind, when we first started looking with them you know we're running payments and everything else and their payments of what we like we were having a hard time finding something within the payment range that they were looking for.
Speaker 2:At the end we ended up finding them a property with a payment of $500 a month less than where their original ceiling was. Absolutely Because of all the negotiations, because the rates came down a little bit lower, because the prices came down, insurance is starting to get a little bit more normalized. It's still expensive, but a little bit more normalized. All these factors made it a really great time for them and you know, if rates continue to drop, their payment is just going to come down further.
Speaker 1:Absolutely, and besides, we even got them in the hometown heroes because they had the money open up. So tell us about that. That is such a great opportunity for people right now.
Speaker 2:Absolutely, and there's a lot of misconceptions out there and I don't want to be here to bad talk other lenders, but unfortunately there's lenders that they don't offer the program, so they'll restate things about it, trying to sell against it because they want their own bottom line to be fulfilled and with that you have a lot of bad information, like I said, out there. But let's talk about what it truly is. So it's a program for first-time homebuyers, and first-time homebuyers, by the mortgage definition, means that you haven't owned a primary residence in the last three years. You know, I have a gentleman right I'm helping right now. He's owned property in the last three years, but he had it rented out to family. He wasn't living in it, so he qualifies as a first time home buyer even though he sold it three, four months ago. So there's a lot of you know. That's one misconception. Another one is people think that you have to, you know, make under a hundred thousand dollars or under $120,000 in order to qualify. Well, there's a couple that I'm helping right now and she makes about 120 and he makes about 150 a year. I don't need his income to qualify, so I can go just off of her income and they still qualify for it.
Speaker 2:Third misconception is that people think that you know you're just adding extra money that you're going to have to pay back. Well before we get into that one sorry, I think I skipped ahead here what is it exactly? So it's a 5% of your loan amount, capped at either $10,000 minimum, $35,000 maximum, that you can use towards your down payment and closing costs or to reduce your original principal. All that being said, is you can use it to come out of pocket less money, right? And in that scenario, you are going to owe a little bit more money than you would have at a you know, a three and a half percent download. Instead of only owing the 96 and a half percent, you might owe the bank a hundred percent of whatever the more. Or the value of the property is yes, but you barely came out of pocket anything. That's the trade off there. Other scenarios and this is where the misconception lies is people think that, okay, you have to do it that way.
Speaker 2:This couple that I talked about they're well off financially, they've done a great job. They're a young couple that's made great decisions career-wise, on everything. However, they want to start building a family soon. They know that they're going to chop their income in half soon. They want to make sure they're taking advantage of all of these special programs and they have every right to do that. So they're looking at, let's say, a $400,000 loan amount, because that's pretty normal around here for an entry-level home in certain parts of South Florida, and 5% of that, that's $20,000.
Speaker 2:Well, this couple started with another lender and they had the conversation and said OK, you know what? We don't want to owe extra money to hometown heroes. We're just going to turn our backs on it. I said whoa, whoa, whoa, hold up. Instead of just taking out a $400,000 mortgage and we're going to just use round numbers, for example, at a 7% interest rate, why not take out a $380,000 mortgage and change and a separate $20,000 slice at 0% rate? So that second mortgage that you're taking out is zero interest, zero payment, so you can just use it to chop up the amount that you would have originally owed. And now, by this portion being at zero interest, you're brought down your payment on your regular mortgage and you still owe the same amount. So you can use it in any sort of way.
Speaker 2:It's a great program. You either you know reincorporate it when you do a refinance down the road or you pay it back whenever you sell the home. There's nothing pushing you to sell or to pay it back anytime sooner. You don't have a balloon payment or some of the features that you'll see in other kind of scarier down payment assistance programs. It has great interest rates. You don't have to pay any doc stamps, so it saves you on your closing costs. In addition to everything else, it caps how much the lender can charge you. There's no points for your interest rate. It's a great great program. So sorry, that was a lot, but there's a lot to it.
Speaker 1:Yeah, it is, and I think you cleared up all the misconceptions. You know people think you have to keep the home for 30 years and you can't sell it. You couldn't rent it out if, for some reason, circumstances changed. There's a lot of things that are wrong that people don't understand. It's essentially getting some free money, and I don't know why everybody wouldn't do it. Remind me again what's the cap on the purchase price for homes?
Speaker 2:So think of it this way it's all going to vary by county and everything else, so I don't want to get into that too too much, because it's also going to vary by if it's an FHA or conventional or whatever. But when you talk about $10,000 to $35,000, that means that there's people out there with a $700,000 loan amount, correct. So it's a very generous program in either direction. It also works very well at the lower end homes as well. Manufactured home is fine with it.
Speaker 2:Actually, hometown Heroes just changed it. They used to be that you had to have a 640 credit score for any of it and then home and then manufacturing homes used to have to have a 660 credit score. Now they incorporated the manufactured into that 640 as well. That's a very recent change a couple of days ago. So, all of that being said, you know, in other parts of Florida I'll see a property for 150,000 or or even a condo here, and they're still getting $10,000, which is, you know, much more than 5% in their case. So it can be a great help on both sides of the aisle.
Speaker 1:Okay, all right. Well, let's go through and think about some other reasons why we'll not think about explain some other reasons why now is a good time to buy. I know you have an agenda where you're going to go through with us.
Speaker 2:Well before we leave hometown. Here is one last thing, a reminder the program does run out of money. Every year it starts with one hundred million dollars. As of today this morning, they're at thirty seven million dollars left remaining million. As of today this morning, they're at $37 million left remaining.
Speaker 2:However, talk to your lender, see if they're approved with other e-housing plus programs. There's the TBA and Florida Bond. There's other ones that are continuously funded year round. So if you don't make the cutoff for it this year, there's other opportunities out there for you. So just be in conversation with a good Florida-based lender. If the lender is not based in Florida, they will not be able to offer you hometown heroes. So, all right, let's talk about the market as a whole too. I mean, we talked about a lot of this before and good reasons and whatnot. There's a lot more new construction available than there has been before. When you have a property that's a little bit newer, your overhead on that is not going to be as expensive, right? You don't have to replace ACs and roofs and everything like that so immediately, and a lot of them come with a home warranty. So that's a wonderful peace of mind those first couple of years that if your stove blows, they'll go ahead and just fix it for you.
Speaker 1:The insurance rates are much lower on those new homes like incredibly much lower. So when you have the choice, it's something to think about. I'm a fan of older homes. I love the character and the cuteness of an older home, but it's something to think about when those insurance costs are really skyrocketing.
Speaker 2:Absolutely. But you know what? I think we covered a lot of it. I think we covered the majority of kind of what we're seeing right now. We expect the market to shift in about you know, three, four months from now, and it's really just that pocket in time, that kind of from that insider information on it, of when we think it is a great time where people will be looking back and kicking themselves Because, you know, because when you're talking about buying a property, there's two approaches you can take.
Speaker 2:You can go off of, you can try to target, or two approaches that people do take. There's more, but the two main ones are people target the lower interest rates or people target the lower purchase prices. If you target a lower interest rate, yes, you're being payment conscious. However, you're never going to get a cheaper payment on it. You can't refinance off the amount that you owe. You can refinance off your interest rate. So if you lock it in at a great value, whether you're just being disciplined and paying it down early or you refinance it to a lower interest rate, you are actually saving way more money in the long run. And then, on top of that, talking about saving money in the long run, the sooner you start buying property, the sooner you're saving yourself money on your property taxes, especially in Florida. There's other states that do it as well. You have your homestead, so your homestead locks in your tax rate on that property and you can move that forward with something called portability. When you're doing all of that, you are now having subsidized property taxes, which is a huge part of the overhead of owning a home for a long, long time. If you continue it up, you know it could be for the rest of your life. So your future self will save you.
Speaker 2:The sooner you get involved in real estate, the sooner you start homesteading and and then you know when prices go up after the election or whenever it happens you have a huge amount of equity that you can use to trade in that home for the next one. You know sometimes it's hard to keep up its savings. I see people that you know they save $10,000 and they're ready to buy a home. Well, by the time they saved that up now, they needed 20. And then by the time they have 20, now they needed 50. And it just becomes this vicious cycle where they were never quite ready versus the people that bought in at the you know, a home that wasn't going to be their forever home, but there was a little dinky town home or whatever it is. And then the next market cycle, they sold it. Now they had $80,000 to put into the next property, whereas their counterparts had saved up less than half of that at the same income brackets.
Speaker 1:So you know, I have some buyers that were looking two or three years ago that are now out of the market. They can't buy and they kept thinking the home pricing was going to take a dip. But really what happened is rates went up, prices really haven't come down significantly and now they can't buy a house.
Speaker 1:They haven't gone back to where they were, their income has gone up a little bit, but not enough to compensate for it. So waiting is not the best thing, that is for sure. So I'm going to just recap Right now we've got about five and a half months of inventory, which means a balanced market. Not, as the sky is falling, we're in a crash. This is how the market normally should be equal opportunities for buyers and sellers. Interest rates have come down to the lowest point in a long time right now low sixes, from what I understand.
Speaker 2:In the sixes.
Speaker 1:Yeah, and our market still in Palm Beach County, 56% of the homes bought are still cash, so there's still a lot of cash money in the market. So, with all that being said, the cash buyers out there that think they're going to get a significant deal because they're using cash not necessarily true that seller if they've got a good buyer with a strong loan, they're going to take the money and run. But it's so nice to see you again and have a little market update. We need to do that a lot more frequently. If anybody is interested in doing a one-on-one with Stephanie and I or taking a class about homebuyership buying sorry, losing my words about buying a home, first-time homebuyers we're going to have some classes that are offered and we're also going to be offering a class for investors.
Speaker 1:There's some real investor opportunities right now. Section 8 is even making a comeback. It's a great opportunity for homeowners that maybe want to put that market into the rental market and move up and buy something else. So, again, we're always happy to be here with Stephanie. Thank you for listening to. I Love Palm Beach and we'll see you for our next real estate edition soon. Bye.