According to the Orlando Regional Realtors, sales of homes in the Orlando area were up 11% in September over last year to 2,711. This represented the highest volume of sales in over a year. The median sales price rose to $167,000 from $156,000 1 year ago. Prices were up over August as well which saw the median home price at $163,000. Inventory has been the big story with the number of homes on the market 35% higher than a year ago. The current supply of homes is 4.54 months.
So where are home prices headed in the near term?
With the dramatic rise in inventory of both existing and new homes, sellers simply have more to choose from. Institutional investors have retreated this year seeking higher yields elsewhere. I think we’ll see a lull in price increases over the next 6-12 months as the market absorbs the new supply. Much of the supply has come from existing homes. Sellers (many whom have been under water for years) are taking advantage of the rise in home prices over the last year and are testing the market.
Rental rates are on the rise so I think we’ll see net rental yields maintain or improve slightly over the next year as home price growth slows.
Beyond that I think we’ll see another leg up in home prices as much of the new construction is priced substantially higher than existing homes. This has created a pretty large gap in new vs. existing home prices.