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How Rising Rates Impact Florida Real Estate Prices

Learn how rising interest rates affect monthly payments 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 been rising. As the Fed has also hinted at multiple rate hikes in the year ahead, you may be wondering how will this affect Florida's real estate prices, and if they will begin to fall?

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 interest rates are not the only factor which affect housing prices. As Florida has welcomed an abundance of new residents since the start of the pandemic, this has caused housing prices to significantly rise as buyer demand has far outpaced available inventory. Housing prices have also risen due to increased labor costs, a shortage of building materials from supply chain issues as well as rising inflation.

Another important factor in the real estate equation is the increased number of cash buyers, where interest rates have no relevancy. Based upon March 2022 home sales data from the Florida Realtors website, 33.5% of single family homes and 56.2% of condos/townhomes were purchased with cash, which is higher than in past years. See breakdown of cash sales in the table below.

Florida Home Sales Activity
Mar 2022

Type Total
Closed Sales
Paid
in Cash
% of
Cash Deals
Single Family Home 30,793 10,326 33.5%
Condo / Townhome 14,631 8,219 56.2%
Source: FloridaRealtors.org

Market Outlook From Our Real Estate Experts

With interest rates now rising from all-time historic lows, we asked our Florida real estate experts, who actively work with buyers and sellers in Florida's most popular markets, what this means for Florida housing prices in the months and year ahead, and how this could affect buyer demand. Below are comments from some of our experts. To view all comments from all experts, be sure to visit out our Florida Real Estate Market in 2022 page.

Jacksonville

Florida's NE Market Remains Strong

"The demand for Jacksonville real estate continues to be strong, and this trend is likely to remain. In fact, Zillow has recently named Jacksonville to be the 2nd hottest housing market in the country for 2022 and forecasts that home prices will rise roughly 22% this year. Should interest rates begin to increase later this year, the strong demand for housing will likely continue since we are still near historic lows on interest rates."

Tampa Bay

Tampa Bay Home Prices are Rising

"My outlook for the Tampa Bay housing market in the year ahead is a continuation of the same strong demand, low inventory levels and rising housing prices. In my conversations with out-of-state buyers, many are simply wanting a change as they are tired of being cooped up during the pandemic. Should interest rates increase later this year, in addition to the rising inflation, I don’t really see this as a factor in slowing home sales as so many deals are all cash and do not obtain any financing."

Lakewood Ranch

Unprecedented Buyer Demand

"We will likely see several interest rate hikes this year, according to the National Association of Realtors, which should slow the rate of homes sales on a national level. However, in our local Sarasota and Manatee County market, in which the inventory level of homes is very limited paired with outrageous buyer demand, home prices are likely to keep rising and not plateau within the next 12 months. These two main factors will give the all-cash buyer, and the heavy-cash buyer (i.e. buyers who make a large down payment to mitigate lending costs) the advantage in the year ahead."
View all Florida market outlook comments from our experts.

How Rising Rates Affect Monthly Mortgage Payments

Let's take a quick look at a couple examples using a 30-year and a 15-year fixed mortgage to see exactly how much one's monthly payment would be affected by rising interest rates for a home price of $400K with 20% down (which avoids additional PMI costs). As shown in the table below, one's monthly payment would increase by approximately $100 per month for each half-point rate increase, and approximately $50 per month for each quarter-point rate increase.

Example 1
30-Year Fixed Mortgage

Home Price: $400K
Down Payment: $80K (20%)
Loan Amount: $320K

Interest
Rate
Number of
Payments
Monthly
Payment
Total Interest
Amount
4.0% 360 $1,527 $229.9K
4.5% 360 $1,621 $263.7K
5.0% 360 $1,717 $298.4K
5.5% 360 $1,817 $334.1K
6.0% 360 $1,919 $370.7K
Example is for illustrative purposes only.
Using the same home price of $400K with 20% down, except switching to a 15-year fixed mortgage, one's monthly payment would increase by approximately $83 per month for each half-point rate increase and approximately $41 per month for each quarter-point rate increase. The total interest paid on the 15-year mortgage is also considerably less than a 30-year mortgage, but keep in mind that your monthly payment will be approximately 47% more per month (varies slightly per actual interest rate).

Example 2
15-Year Fixed Mortgage

Home Price: $400K
Down Payment: $80K (20%)
Loan Amount: $320K

Interest
Rate
Number of
Payments
Monthly
Payment
Total Interest
Amount
4.0% 180 $2,367 $106.1K
4.5% 180 $2,448 $120.6K
5.0% 180 $2,530 $135.5K
5.5% 180 $2,615 $150.6K
6.0% 180 $2,700 $166.1K
Example is for illustrative purposes only.

Mortgage Calculator

To estimate what your monthly mortgage payment might be, simply enter a loan amount, interest rate and desired loan term below. Keep in mind that relevant expenses for PMI insurance, property taxes and/or HOA fees would be in addition. Always contact your mortgage lender for an exact monthly payment amount.