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Thinking about buying a house in Niceville, or even Crestview or Fort Walton Beach? You may be thinking about refinancing and staying in the home you’ve got now.
Mid Bay News has six tips from local realtor Cindy Zimmermann and mortgage loan officer Steve Schutt that will help you decide if this is the right time to buy, refinance, or maybe just hold off for a little bit.
According to Cindy Zimmermann; Niceville and the rest of Okaloosa County are currently in a seller’s market, with some caveats.
There are only a few homes on the market right now – but some buyers continue to act finicky despite the shortage.
“Compared to post-COVID, there are more houses for sale, but we’re still at less than what would be considered two months of [home] inventory. It takes six months of inventory to be considered a neutral market,” Zimmermann said, “Anything less [than six months’ inventory] means there are more buyers than sellers. There’s more demand than supply right now. We have that low inventory that has been keeping prices high.”
Despite overall favorable conditions for sellers, there are carve outs for certain types of homes, which are staying on the market for just a few days. “There are still houses getting multiple offers, but they’re more the exception. The majority of houses take longer to sell.” Zimmermann contrasted the current market to the recent past, “A couple of years post COVID, things were selling for either at asking price or way over asking price.”
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That means the market is split between renovated homes, which are selling much faster, and those that aren’t, which tend to sit on the sale block.
Buyers and Sellers can take advantage of the large amount of decision fatigue flooding the market.
Picture this: You’re in a military family at Nellis Air Force Base in scorching hot Las Vegas, Nevada. You just got orders to move near Eglin Air Force Base—across the country.
You don’t have the time to fly back and forth on a three-hour Allegiant flight to look at homes while you mentally prepare your kids to move, clean out your current house, say bye to friends and coworkers, and get the movers moving in the right direction.
That cuts out a lot of house-hunting time. With the time you do have, you need to make sure you have something that you, your spouse, and your kids can live in for the next two to six years.
So, you can’t coordinate re-tiling the roof or putting in new carpets, too.
That means sellers have a huge advantage over other homes if they update and renovate before selling; at least, that’s what Cindy and realtors like her have seen. Most military families don’t care what shade of chestnut the hardwood floors are—they just need a place that fits their specs right now.
On the other hand, buyers willing to live with a chartreuse dining room, a home that doesn’t have the correct number of bedrooms, a dead lawn, or old flooring for a couple of weeks or months have an excellent opportunity to buy in Niceville right now.
Interest rates are high enough that many potential buyers who would enter the market at a lower rate are twiddling their thumbs. That means more options for you with less demand for fixer-upper type homes. You can buy the home and date the interest rate – meaning you can refinance later if and when the rates drop in the not-so-distant future. There are even ways to structure a contract so that a seller helps the buyer pay an effectively low interest rate at first, then refinance when the interest rates come down in the next couple of months and years.
Speaking of which, rates have started to show downward motion from their highs on the back half of 2023 and the beginning of 2024, so junk mail has begun to flood mailboxes offering to refinance now.
Taking the multitude of mailers up on their offers may or may not be a good idea for you.
The short answer is that it’s a really great time for some people to buy or refinance—for others, not so much.
Movement Mortgage’s Steve Schutt says you shouldn’t look at a mortgage as a commodity—the cheapest option will not save you the most money. “Mortgages are a financial tool to acquire our home,” Schutt said, “They should not be handled lightly or looked at as a necessary evil to get the end result. They can be extremely expensive if not utilitzed correctly.” In fact, we’re in a mortgage zone where you might lower your rate some with a refinance, but it would be a wash—thanks to tacked-on fees and taxes.
“There’s a good chunk of people who took out mortgages in the last half of 2023 who could look at refinancing right now,” Schutt noted. Just because rates are lower than what you have on your first mortgage doesn’t necessarily mean that [refinancing now] makes sense. “There’s a lot of costs involved. Florida is an expensive closing cost state. We also expect rates to continue to come down, so it may not make sense to do it now.”
Because Florida doesn’t have a state income tax – the government has to make ends meet in other ways. It nickels and dimes buyers on everything from gas purchases to business licenses to, yes, even home purchases. This allows the state to make up the revenue shortfall other states with an income tax don’t have to deal with. Those fees can end up costing tens of thousands of dollars, which are tacked on to the loan and effectively leave you with the same mortgage payment that you had to start with.
You might be looking to buy a house in Niceville because you orders here – or maybe you got a civlian job on base or in the tourism industry.
Finding the perfect home for the right price may seem daunting for many people who’ve decided to move to this area.
“I have had several buyers who we’ve been looking for months and I even had one buyer who used to live here in Shalimar and wanted to move back,” Zimmermann said, “We looked for over a year, and they finally gave up on trying to find something here that they could afford and they moved to Alabama.”
Zimmermann has multiple stories similar to this one. For the characters in her tales, two big hurdles exist: an explosive rise in the cost of homes in the area combined with a higher interest rate than has been typical for the last ten years or so. These factors force out buyers who could afford a home in Niceville just a couple of years.
MORE: What Will Solve Niceville’s Workforce Housing Crisis?
For example – let’s say Johnny and Roberta Jones need to move back to the area. Roberta is in the military, so they sold their home in Niceville five years ago when she got orders to leave for Davis-Monthan or Dyess Air Force Base (who can remember with all of the moves!) for $400,000. Their monthly payment on a $320,000 loan in 2019 was $1,366 on a 3.1% interest rate.
Well, Johnny sees his house from last time is on the market. Super!
Well – actually, no it isn’t. You see, the median home sale price has increased 55% in the last five years in Niceville. Some of that is just new construction – but most of it is home value increase.
Long story short – The Jones family will have to pay about $620,000 for the house, depending on how good a negotiator they hire as a realtor. If they get the house back and still put 20% down on the home (that’s $124,000 – $40,000 more than last time) – they will have to take a $500,000ish loan – more than the total value of the home when they sold it.
With a six percent interest rate on the loan, they are looking at about a $3,000 monthly payment on the same home that they owned just five years ago. The monthly payment, by the way, is before property taxes and insurance, which will also be higher because they are a percentage of the home’s value.
But before you think to yourself – “well, that’s great for the buyers,” you’ve got to remember they can only sell a home for that price if they can find a buyer – with housing becoming more expensive, that means fewer people can afford to buy it.
Let’s look back at Roberta and Johnny’s finances. Roberta is an O-4 (major) Air Force Pilot, and Johnny teaches 7th graders (god bless you, Johnny).
Together, after flight incentive pay, base pay, base housing allowance (BAH) for Eglin, and the base salary for teachers in Okaloosa County—and subtracting their taxes—they bring in about $190,000—or about $150,000 post-tax. Those numbers work out to roughly $12,500 per month.
According to Time Magazine, you should spend at most 28% of your pre-tax income on housing. Roberta and Johnny will have to spend 24% of their monthly income on the same house they lived in five years ago.
When they first owned the house, Roberta made O-3 (captain) – and they brought in about $800 less per month. Their $1,366 mortgage was just 11.6% of their monthly income $11,800. Although Roberta got a promotion, they can barely afford roughly the same quality of life they did before – thanks to the increase in housing prices and mortgage rates.
RELATED: Affordable Housing – Could This Move Spell the End of the Okaloosa Housing Crisis
The economic reality for Roberta and Johnny means people with homes that have appreciated more rapidly are basically stuck in those homes, paying higher property tax and insurance rates. They don’t have as large of a market to sell to either – because there are fewer jobs up the food chain that could afford to buy their house – and there’s stiffer competition, too. Since a good portion of the people moving into and out of the area on a regular basis are active duty and therefore have similar budgets, this effectively removes these homes from inventory for most buyers.
But it doesn’t remove those homes for everybody. There are two groups of people can buy these homes – they are just a much smaller group than previously.
The first group are cash buyers. Many of them have been here before – they are the stereotypical retired Air Force Lieutenant Colonel with a pension, some disability money and a seperate civil service or contracting job on base.
“Cash buyers are immune to a lot of the expenses that financing buyers would experience, obviously, the cost of financing. So, interest rates are off the table. [Cash buyers] don’t necessarily have to carry homeowners insurance if [they] don’t want to, certainly not for windstorms or whatnot. [Those who pay with cash] can get a much [less expensive] nsurance policy. – so really then [cash buyers only have to worry about] property taxes. And so these buyers are coming from out of state. You and I have equity in our home. And so if we sold and decided to move, we, could sell our homes here and go pay cash for a home someplace else, or put a lot of money down on a home someplace else. So, it, it, was expensive, but it’s not the most expensive place in the world. You know, imagine somebody who purchased a home just right down the road on a 38 area, Grayton beach. They flooded here during COVID because they wanted to get away, but they were able to buy a home for $1.5 million,” Schutt added.
He says those same people have realized that a lot of people come this way during the summer – and places like 30-A can be a little less relaxing when half of Atlanta, Nashville and Houston have invaded the beach in July. “They bought a home that was worth $1 Million that’s now worth $2 Million,” Schutt noted, “They sell that 30-A home and move to Freeport or Niceville to get away from the chaos of the vacation market and buy a really nice home for cash.”
The second are even rarer – but still around, the legendary mortgage assumer.
According to Investopedia, an assumable mortgage is…
It’s great because the seller can find a motivated buyer and a seller doesn’t have to get a mortgage rate twice as high as the last buyer’s. Anyone (asterisk) can assume a USDA, FHA, or VA loan. You have to qualify for the loan.
Because of the low rates on the assumable mortgage, finding someone who will allow you to assume the mortgage and pay the difference in the home’s price is like finding a needle in a haystack.
Finally, if you’re holding out for a three percent interest rate on a home loan, it won’t happen.
It was a perfect storm, you see –
“Rates were historically low. [Those low rates are] what’s in everybody’s most recent memory. For the last 10 to 15 years really, rates have been very, very low, historically speaking. If we see rates that low it’s because of some type of financial collapse, Schutt said. According to the mortgage broker, the Federal Reserve Bank lowered interest rates to “stimulate [the economy] artificially, to get things moving,” he noted “As you can see, with inflation and home prices rising and everything going up over the last handful of years, those low interest rates were great for a lot of people, but they drove up the cost.”
In fact, only two of the last 50 years had an average 30-year fixed mortgage rate below 4%: 2012 and 2013.
The local real estate market has more than a couple of weird quirks right now. These are the seven things you need to know if you are planning on buying or refinancing a home in Niceville right now.
📱850.974.0869
📧 cindy.zimmermann@cbrealty.com
📱(850) 897-8971
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