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April 9th, 2008 12:01 PM by David W. Welch
There have been some not so great reports about real estate both nationally, and for the state of Florida in the last couple of days. Specifically the pending sale index is way down. Orlando is a bright spot when it comes to pending sales. This is such an important indicator because pending contract eventually turn into closed sales. Back in January pending sales was down around 1,200 and this morning they are up to 2,620. Historically, I have seen between 60% and 70% of new contracts close in a given month. In March there were just over 1,700 new contracts and just over 1,070 closed sales which is about 62% close rate.
The mortgage mess and resulting stricter guidelines has slowed closing down a bit, but deals are closing. Mortgage rates continue to be very favorable at just below 6% on any given day, but that could change radically if we see inflation numbers come in higher. Prices have also come down fairly significantly, and I see them down maybe a little more this month. I don't think they will fall more than another 5%. Based on our median price of $220,000, I calculated that another 5% drop in prices would be offset by a 50 basis point increase in interest rates. Most lending people I have spoken with, feel that a half point rise in mortgage rates is very likely in the next few months. I just want to reiterate that right now is the time to buy. Inventory is high, rates are low and sellers are motivated.