Industry Insider Discusses Trends in Florida Home Loan, National Housing Market

Susie Gharib, anchor of PBS’ Nightly Business Report, recently talked with Jim Gillespie, CEO of Coldwell Banker, recently sat down to discuss the state of the housing market. What follows is his paraphrased interview with Susie Gharib, anchor of PBS’ Nightly Business Report.

GHARIB: The National Association of Realtors lowered its forecast for home sales this year and called for the Federal Reserve to take a break from hiking Florida home loan rates. The trade group says the housing boom has ended and home sales are settling into a slower pace. It is predicting a drop of almost 7 percent in existing home sales this year.

New home sales should fall about 13.5 percent. Still, in both cases, sales would slow from record-high levels. Realtors say rising interest rates have slowed sales in many high cost markets, but job growth has boosted sales in some less-costly areas. Do you agree with this forecast? Is the housing boom over?

GILLESPIE: Last year 7.1 million resales set an all-time record. So by being off 7 percent to $6.6 million is still the third best year in real estate history. And one thing that I’m concerned with maybe some of your viewers and potential Florida home loan buyers out there is that they are seeing headlines saying real estate is off by 7 percent.

Well, that’s true with units this year, but appreciation is in the 5 to 6 percent range. So this is a message I’m preaching to our 118,000 salespeople to make sure that your buyers understand that real estate is still a very good investment. Sure, units are off, but there is still strong appreciation.

GHARIB: People are also seeing headlines about the possibility of even higher interest rates, which could mean higher mortgage rates. We’re seeing that the 30-year fixed rate Florida mortgage loan is around 6.9 percent. Where do you see it going?

GILLESPIE: Well, I think the report said that by the end of the year, it would be at 6.9 percent. So over the course of this year, compared to last year, mortgage interest rates will be about 1 percent higher; according to the National Association of Realtors that 1 percent will price out about a half a million buyers - so actually their numbers make sense going from 7.1 to 6.6 million re-sales this year.

Again, the fundamentals are still there for real estate being a very solid investment. The demographics are overwhelming. Interest rates - my goodness, I started selling real estate 31 years ago and interest rates were 7.75. So with interest rates still in the high 6’s, it’s very, very affordable for most Americans.

GHARIB: We know that the rule of thumb is that as interest rates go higher, mortgage rates go higher, that Florida home prices go down. What is the trend you’re seeing?

GILLESPIE: Appreciation is still here. The last time in our country where interest rates went up dramatically was between 1977 and 1982 and during that five-year period, there was tremendous appreciation. So what we’re seeing is fewer units being sold this year, but with depreciation in the 5 to 6 percent range so that’s what I feel and that’s what the national association feels too.

GHARIB: So then what advice would you give to home buyers and home sellers? Is this a time to buy, sell, or hold?

GILLESPIE: Right now we’re in a balanced market for the first time in five or six years. The buyers have the opportunity to see more inventory and not have to worry too much about having a home sold out from under them, although if they see the right home that they want, they need to make a decision [on a Florida home loan offer].

Sellers need to be very, very careful in pricing their home. Make sure you get with a reputable full service real estate company and a professional realtor and get that home priced correctly because there’s a lot more competition on the market. There’s a lot more inventory.

Overall, Gillespie agrees that 2006 will be slow but strong. Just recently, Florida home loan rates declined a bit as inflation eased slightly. That’s good news all around.