Reading the Tea Leaves-2022 Bob Dylan in 1978 wrote the well-known song called  “Times They Are A Changing”.  In one of the verses it reads as follows: Come writers and critics who prophesize with your pen And keep your eyes wide open The chance won’t come again And don’t speak too soon, for the wheels still in spin And there’s no telling who that it’s naming For the loser now, will be later to win For the Times they are a changing I wonder, could Dylan have been looking to the future for what we are experiencing now in 2022? I have to admit, figuring out the real estate market has been so easy for the past several years. What happened? Analyzing the marketplace now is a daunting task indeed, even for the most experienced and seasoned of us.  Just a few months to a year ago we had a seemingly never-ending upward trend in property values and pricing. This has definitely changed. Long gone for most market areas are the days when a seller would receive multiple offers, have bidding wars or receive contracts with virtually no contingencies. The market today is now faced with rising interest rates (up from 3% to now over 6%) and still relatively low inventory. The low inventory situation will likely persist as sellers not really needing to sell will be reluctant to act if they have an existing low-interest rate. New buyers needing to obtain a mortgage will be challenged for obvious reasons.  Here in Florida, we are blessed to be the recipient of a large in-migration of new residents from several states around the country. New residents are attracted to the weather, lifestyle, and favorable business environment. This will continue. These positive forces combined with limited inventory should help support pricing for the short and long term. So what are buyers and sellers to do in this changing market? For the sellers: Be realistic. This is not the real estate market of one year ago. Be prepared to negotiate. Work closely with a competent Realtor who knows the market. If uncertain, consider hiring a professional appraiser to give you a realistic assessment of value and market trends. For the buyer: When you find the right property, act! Waiting and thinking that prices are going to pull back can be risky business given the limited supply. The bottom line for both buyers and sellers—be patient, do your homework and most importantly don’t panic. Buying/selling real estate is not like day trading in the stock market. In spite of the challenging macroeconomic factors affecting our national and world economies, market participants (buyers and sellers) have to be willing and able to ride out these changes that inevitably come with any long-term investment. Yes, “times, they are a changing”, but this is the natural process that a healthy market needs to go through to see long-term stability and growth.

THINKING ABOUT WAITING TO PURCHASE? You tell yourself - “I know we are at the top of the market and values are going to drop. Why, with all the turmoil in Europe, rising interest rates, and increasing inflation, how could I be wrong? How long can values continue to rise?” Just like the stock market, trying to time the real estate market can be very risky business. But, unlike a stock, this is your home-an “investment” your going to have and enjoy for a very long time. The intangible and immeasurable pleasure and enjoyment we get from the experiences of homeownership pales in comparison to other purely financial investments we keep in our file cabinet or held in the Cloud for us.  Have you tried curling up around the fireplace with your stock portfolio lately? SO, SHOULD YOU WAIT? If you believe we are in for a market correction, will the correction be enough to offset what we do know to be the case—rising interest rates and strong demand will likely continue. While the market may be demonstrating some uncertainty at the present, can we with confidence conclude that the market will reset? And if so, are you savvy enough to know how much of a reset and just as importantly, time exactly when to get back in? Let’s demonstrate this with a simple example of a home purchase and a few (we think) conservative sets of facts to answer the question:  “Should I buy now or wait 1 year?”  Spoiler alert—Don’t wait.  Purchase price $650,000, 20% down, 30-year loan, interest rate today 5% increasing to 6% if we wait 1 year. We will assume a 5 year holding period and no appreciation for the next 6 months and only a 2.5% increase over the first year. We will then assume a moderate 5% increase year over year for the 5-year holding period. The future value of our $650,000 home in 5 years at these rates of appreciation will be $809,831. The loan balances at the end of 5 years is different in each case as the interest rates are different depending on whether you purchase now or wait (5% vs. 6%) and the time to amortize is shorter for the person who waits out the year. The person who waits also has to pay more for their home and also has to pay more in a down payment.  Assuming the above, the net cost of waiting is $18,738. This increased cost results from: •     higher down payment for the person who waited ($3250)•     less amortization with the higher interest rate mortgage ($15,488) We believe the above analysis is very conservative, especially for our market area. The risk of higher interest rates is real, inventory is at an all-time low, and demand still remains very strong with the continued influx of new residents from large market areas like New York, Chicago, Philadelphia, Miami, etc. and new market participants such as millennials— both of which will continue to be present in our marketplace.  BOTTOM LINEProbably not a very good idea to wait.