As the roaring demand in the residential property market is coming to an end, some homeowners are beginning to opt for rent, not sale. The growing interest rates on mortgage loans and the reducing customer demand force homeowners to lower the prices or look for tenants.
Sellers are beginning to realize that it could take years for prices to level out. The current situation forced them to postpone looking for buyers and watch how the market behaves over the next few months, explains Brian Perl, Principal Agent at the Pearl Antonacci Group in Boca Raton, Florida.
The buyers’ attitude to the market is gradually changing, as they are losing the upper hand. A nationwide Frannie Mae survey showed that 35% of respondents believe now is not a good time to sell, compared to 27% a month earlier.
Nevertheless, many homeowners are still listing their properties to take advantage of the current prices. They realize that the housing market has reached its peak.
Sellers probably understand that prices of some properties are below the peak values but they are still at record highs, double the values we could observe only a few years ago, thinks Danny Hertzberg from The Jills Zeder Group. Most homeowners realize they can still count on capital gains.
Some South Florida homeowners, however, decided to lease their properties instead of selling them, as the rent is still high. According to a survey of real estate agents conducted by John Burns Real Estate Consulting, 4% of sellers in South Florida have already opted for lease instead of sale.
Buyers are also beginning to prefer leasing a home. The same survey shows that 18% of South Florida agents reported an increasing number of their clients who refuse to purchase and seek to rent instead.
Such a shift is a sign of market normalization, declares Ken H. Johnson, Economist at the Florida Atlantic University. This shift will not greatly affect the supply of leased apartments but it could eventually slow down or somewhat reduce the rents, he believes.
Some sellers decide to wait and see what happens with the prices. Hertzberg says that about 10% of his clients are taking longer, while approximately 25% wait only a few months.
For sellers who missed the peak market values, trying to wait out the current slowdown is hardly the best idea. Experts believe that prices will level out and the market will re-balance itself, so there are no chances of a new sharp surge of prices in the nearest future.
It could take more than five years for real estate value to reach its record-high performance again, so homeowners who are not planning to keep their properties for that long should close the deal as soon as possible, Pearl says.