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Home Buying rules remain unchanged despite high prices

House for sale
Kindel Media
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Pexels
House for sale

Rule of Thumb

A general rule that many have used for decades when it comes to buying a house is the 3x rule, which means your mortgage should be no more than three times your annual salary.

Although housing costs are high in Orlando, Rose Kemp, President of the Orlando Realtors Association, said that rule still holds true in 2024.

“You still have to qualify,” she said. “So the rule holds true when it comes to the requirements and the qualifications of the lending program that you are applying for.”

Kemp said the home buying process is unique to each individual, but the most important part for everyone is preparation.

“So many buyers, I find, will get information from their neighbors or read information on their own, and they assume what they can purchase or not purchase,” she said. “They assume if they can qualify or not qualify.”

Kemp said it is best to shop around for a lender and realtor that fits you, and use that team of professionals to help guide you through the market as it can shift quickly.

“Even if it takes you a year, it's better than sitting on the sidelines and not knowing that maybe you can't have two car payments, or maybe you have a bill out there looming that you didn't even know,” she said. “There's just so many factors that impact what you can and cannot afford. And those are the kinds of questions that you review with your professionals.”

Challenges & Successes

As Central Florida continues to see ongoing population growth, Kemp said one of the biggest challenges facing potential buyers is low inventory.

Orlando’s housing market continues to stay competitive as inventory remains below a 6 month supply -- which is the threshold considered for a balanced market.

The Orlando region has around a 4 month supply as of May. That’s up from a 2 month supply last year, according to the latest monthly State of the Market Report from the Orlando Regional Association.

Approximate months of supply from the latest State of the Market Report by the Orlando Regional Realtors Association
ORRA
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ORRA
Approximate months of supply from the latest State of the Market Report by the Orlando Regional Realtors Association

However, Kemp said the added inventory is helping the housing market stabilize.

“But with all of the relocations we have, we still need more inventory. So we're stabilizing. It's great not to see the values continue to climb because that's not sustainable. But at the end of the day, we also don't foresee values declining, because we uniquely here in Central Florida, have a market that's high in demand.”

As of May 2024, the median home price is $385,000 in the Orlando area, down from $388,500 the month prior.

Another challenge facing potential buyers are interest rates, said Kemp.

After dropping to a historic low of under 3% in 2021, according to analysis by Freddie Mac, mortgage rates now average between 6% and 7%.

Kemp said that low rate of 3% was due to the COVID lockdown.

“A lot of our buyers right now look at those interest rates of 6.6% and they want to sit on the sidelines because they're hoping that the interest rates are gonna drop to that (3%). But that was actually a very unique historical situation,” she said.

In order to be successful, some families are stepping in and helping younger people purchase their first homes.

“We're seeing a lot of parents and immediate family members, assisting the younger people in their families to purchase because the rent factors are high,” she said. “We're definitely also seeing young adults that maybe have been in their profession just a couple of years under 30 jumping into the market for the very same reason.”

Although Kemp said inventory remains an issue for those younger buyers as well.

Average median home prices in Orlando from May 2022 to May 2024
Orlando Regional Realtors Association
/
ORRA
Average median home prices in Orlando from May 2022 to May 2024

Finding Assistance

Various programs throughout Florida offer potential buyers assistance in attaining their first home, like the Hometown Heroes Housing Program which offers up to 5% on the first mortgage loan amount in down payment and closing cost assistance.

“Hometown for Heroes is a state program that got funded for the third time recently,” said Kemp. “But your lenders are also going to have programs. And then you also have city and county programs that may or may not be available because sometimes they don't have funds. A lot of times when the funds hit, you have to be ready to go.”

There are also programs at the county level, like the Down Payment Assistance Program in Orange County.

After a brief stint as Morning Edition Producer at The Public’s Radio in Rhode Island, Talia Blake returned to Central Florida Public Media. She is a graduate of the University of Central Florida with degrees in both Broadcast Journalism and Psychology. While at UCF, she was an intern for Central Florida’s public affairs show, Intersection. She joined on as Morning Edition Host in 2019. In 2022, Ms. Blake was appointed to the Florida Association of Broadcast Journalist’s board of directors.
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