Radiant Prospects: Illuminating Signs Of A Brighter Market Ahead

“Right now, if you do the same things you did in the beginning of 2022 and 2021, you’re not gonna get the same results. So what are you doing differently?” Smith says. “The market is not the same as it was the last few years. There’s less activity going on right now.”

Smith foresees even more change in two years’ time, especially if and when interest rates retreat below 6%, what some are calling “the magic number.”

 “I think that’s when a lot of people are going to come off the sidelines and we’re going to be maybe even overwhelmed at that point. A huge pent up demand for housing. The move up buyer specifically, who has been on the sidelines, I feel like as soon as our rates reduce, you’re going to see a heavy flow of activity come.”

Smith tries to counsel clients, partners, and agents he works with based on his own daily research into tomorrow’s market trends. “I do think in 2024, we’re gonna see a pretty welcoming pricing and rates environment, and I think activity is going to speed up quite a bit,” he says.

With low taxes and warm weather, Florida has seen an influx of new residents since the COVID-19 pandemic, when many people transitioned to working remotely. A September 2023 Forbes article ranked the state second among the top 10 moving destinations, using address-change-request data from the U.S. Postal Service.

Smith also attributed larger families and a backlog of relocations as factors for a market boom in Florida after the Earth makes its next two trips around the sun.

“These are all the reasons why we feel 2024 and 2025 are going to see a lot of activity with people getting off the sidelines and back into the housing market. I don’t think anybody would disagree by saying rates are going to be lower, especially most economic analysts. And there’s a lot of factors going into that. But number one, inflation is going to get under control.”

Watch it on The Interest: Predicting Markets Ahead

At the end of Q3 2023, economic analysts and housing professionals like Smith were still unsure of what the future would hold in 2024 and beyond. That all changed pretty quickly during the last few months of the year.

“Now more than ever, we do feel that rates will significantly decrease in ‘24, as opposed to before, the forecast was really that they were going to come down in the middle point of ‘25, but we think it’ll be sooner than that.”

Florida has also been an epicenter of impact from change by the agencies, at least since the June 2021 condominium collapse.

“We’ve seen a ton — not a lot — a ton of complexes become ineligible for financing on Fannie and Freddie,” Smith says. “Freddie’s even tighter than Fannie. So it’s a problem. I think it’s going to take some heavy involvement with the legislature to put pressure on the insurance companies and on Fannie and Freddie to meet in the middle. They’re fighting with each other, and originators, clients, and consumers are getting caught in the middle of it because we have so many contracts that six months ago or 12 months ago would have had no issues with financing. Now, all of a sudden, there are big issues. There’s a lot of ground that needs to be made up as far as that goes because right now we’re not in a good place.”

His advice to LOs who want to stay ahead of the curve is to educate themselves and be mindful of movement in the industry. “The more knowledge you have, the better you’re going to be able to make the correct decisions. And align yourself with the right company.”

Real estate agents will be grasping for partners who can help them maneuver the landscape, Smith adds. “If you’re issuing pre-approvals for condos, it’s not helping our agents. Agents are having a hard time understanding what’s happening with that. So the more we can educate ourselves on what’s happening with the market with interest rates and advise clients on the correct way to do the right thing and make good decisions, the more success we’re going to have in getting contracts and getting clients to help.”

Smith plans to teach his son how to be an MLO when he gets older — a gift he might not have wanted to impart circa 2008. “It’s a great industry to have growth and to have a high ceiling. It’s great for entry-level people and people that have been in the business for a long time. I think it’s a great career choice. Back then, I don’t know if I would have said the same thing.”

The Condo Conundrum

It’s impossible to talk about Florida’s housing market without a mention of condominiums, and their sale and purchases are going through their own evolution.

The government-sponsored enterprises (GSEs) recently finalized changes to their condo project manager (CPM) system, a tool lenders use to certify condominium projects.

As of December 2023, the CPM system now provides details about specific properties, indicating if they have been ‘Project Certified’ — meeting the GSEs’ general eligibility requirements for financing. Lenders can also use it to file a Project Assessment Request.

“With a downturn in the market, with lenders understanding what’s happening in this space right now, and with the agencies setting up the industry to have more clear and accurate access to data and signing off on buildings, I think what’s eventually going to happen is there’s going to be a lot more clarity and a really great map for loan officers and lenders to follow.”

Orest Tomaselli, partner and president of project review at CondoTek, anticipates that the agencies will complete this project in the next 24 months.

He anticipates home values dropping across the state because people can no longer afford to live where or how they had been.

“I think you’re going to see values plummet in most of the state. And I think that’s going to happen relatively quickly within the next 12 to 36 months … if you look historically when a market is stagnant, it’s in a high-interest rate market environment, very few units move. But because of the financial uncertainty in the condominium marketplace in Florida, it may very well be a boon to loan officers in the state.”