Learn how rising interest rates are affecting Florida housing demand and home prices
If you've started researching Florida real estate online and in the process of getting pre-qualified with your lender,
you're likely keeping a close eye on interest rates and noticed that they have risen considerably as they have rebounded from all-time historic lows.
As the Fed has already hiked rates by a quarter point in February, March, May and July of 2023, to help curb rising inflation, you may be wondering how this is affecting Florida's real estate prices, and where they may go from here?
You may have heard that interest rates and home prices have an inverse relationship, meaning that when one goes up, the other goes down, but this is not necessarily the case.
Interest rates typically rise when the economy heats up through expansion, employers are hiring and overall wages are going up.
In a growing economy, people typically feel more secure and comfortable in taking out a mortgage versus an economy that may be slowing down or heading into a recession.
But our current interest rate environment is quite different from the historical norm. The Fed intentionally raised interest rates (10 consecutive times to be exact) to combat the rising inflation during a time in which there is talk of a possible slowing economy or recession. The result of these many rate hikes is now a 30-year mortgage rate at over 7% which is causing many homeowners, who previously locked in a low rate, to stay put in their current home versus moving to a different home and securing a loan at a much higher rate. The lack of people moving means fewer new listings hitting the MLS each month keeping the supply of homes low and prices high.
The Effect of Rising Rates on Monthly Mortgage Payments
Now let's take a closer look to see exactly how monthly payments for Florida homeowners have been affected by the now higher interest rates and home prices. In the following table, for calendar year 2020 versus present day, we compared the median Florida home price for single family homes, the 30-year interest rate as well as the average monthly payment to see how much they have increased in such a short period of time. Calendar year 2020 was selected as the comparison year as this is before all the inflation and Fed hikes started to take effect. The result is that the median Florida home price has increased by 41%
, the interest rate by 135%
and the monthly payment by 127%
|Median Florida Home Price
Monthly payment based upon 20% down.
Florida Real Estate Experts' Outlook on Rising Interest Rates
As interest rates have risen quickly over the past 18 months, to help slow the rising inflation, we asked our Florida real estate experts what this means for Florida housing prices in the months and year ahead, and how these rate increases are currently affecting housing demand around Florida. Below are comments from a few of our experts. To view all comments from all experts, be sure to visit out our Florida Real Estate
page where our experts provide their market outlook and housing predictions.
A Healthy and Vibrant Market
"My outlook for the Jacksonville
real estate market for the 1st half of 2024 is that buyer demand will continue to be very healthy, and that this trend is likely to remain. Should the Fed raise rates again, which is likely to be minimal at this point, I don’t see this as having a big impact on our market as buyers have now digested the hefty rate increases and are now moving forward again. I also expect our Jacksonville home price appreciation to be much less than we saw during the pandemic years and think we’ll see appreciation more in the 1% - 5% range in the year ahead."
Consistent Sales with Low Inventory
"While the Fort Lauderdale
housing market experienced a substantial slowdown in activity during the latter half of last year, mostly due to the steep rate increases which eroded purchasing power, we are now seeing much stronger housing demand again which is causing available inventory to be constrained, but not nearly as extreme as was during the market peak. Currently, housing inventory in Broward County is at a 3 month supply of homes which continues to keep home prices at elevated levels."
Continued Healthy Demand
"My outlook for the Lakewood Ranch
and Sarasota markets for the year ahead is a continuation of the same strong demand derived from retirees relocating to our region, families seeking our top-ranked schools as well as work-from-home lifestyle changes. However, with the now higher rates and general increase in the cost of living across the board, we will likely continue to see more and more buyers priced out of our market, allowing inventory levels to continue rising over time. I also expect to only see the realistically-priced and well-marketed listings continue to sell, in addition to continued strong interest from all-cash and heavy-cash buyers."