Rising mortgage rates, higher real estate prices and a scarcity of listings have some Orlando homebuyers rethinking their search for a new house.
"Since we lost out on an offer by $5,000 or $10,000 a couple of months ago, I've just said, 'Hold on,' because it just seems like everything is conspiring against us — the higher prices, the lack of inventory, the rates," said David Schrader, a 43-year-old product manager and married father of two who lives in College Park. "... Although if you ask my wife, she still is ready to move."
Some potential homebuyers are changing their price range or the neighborhoods where they're searching, said Dennis Nolte, a certified financial planner at Seacoast Investment Services in Winter Park. Those who are fortunate to be downsizing, perhaps with their kids out of the house, seem least affected, he said.
A fixer-upper that could allow a quick way to add equity could get Schrader and others like him back in the game.
"If you're in a really good school district, where it rates a 9 or a 10, then you're basically saving on private school tuition," Schrader said.
Other potential buyers are cutting their household budgets in other ways to make monthly payments fit or changing the terms of their mortgage.
Shopping several lenders for a better rate rarely works, though. The national average interest rate for a 30-year fixed mortgage has jumped 0.8 percent since mid-September to 4.61%, according to Freddie Mac.
A 0.5 percentage-point increase for a median-priced home in Central Florida these days can push mortgage payments up about $75 a month, said Grant Simon, a former mortgage broker and now branch manager at Fidelity Bank in Winter Park.
"Buyers need to raise their price point, either for inventory reasons, or to afford the quality they want, or the location," said Simon, also rattling off several constant sources of concern. "... Is it in a flood zone that will affect insurance? How will taxes impact the house payment? How is their credit score?
"So you can't look solely at the interest rate."
At $257,000, the midpoint sale price for a single-family home as measured by Orlando Regional Realtor Association is 9.4% higher than a year ago.
A credit score near the national average — that's 675 according to an annual report by credit reporting company Experian — won't get you the best mortgage rate.
"People whose score is around 680 will probably be around 5.25," said Angela Jaspon, a Realtor in Altamonte Springs. "I think people are kind of unaware until they go to get their mortgage. They think it's still around 3.75 or 4. They're a little sticker-shocked when they see it's closer to 5."
Buying points against the mortgage by paying the bank up front can get the buyer a deal that lasts as long as the loan.
"A lot of times I tell the buyer to look at the break-even savings on payment vs. cost, and if it's within a period of time where it makes sense, you might buy it down," said James Nemeh, loan officer at Direct Mortgage Lending.
An adjustable-rate mortgage can offer savings if a buyer doesn't expect to live in the home for a decade or more. Rates for a 5/1 ARM can save about a quarter point, according to BankRate.com, or half of a point according to Zillow, but are scheduled to adjust annually after five years — and the risk that rates would increase has many buyers avoiding them.
"We don't have too many people asking about an ARM, and I really don't recommend it," Nemeh said. "You can still get a low rate with it being fixed, and it can offer better benefits, rather than getting a lower rate and then seeing it change."
Most buyers, according to lenders, aren't straying from the traditional 30-year, fixed-rate loan. Nolte said there are few instances when people find them useful.
"It looks like we've returned to a phase where the rates will still be going up for a while," he said.
