Miami Real Estate Learning Center

DO MORTGAGE RATES AFFECT SELLERS?

When were the highest mortgage rates in history? In October 1981 with the peak at 18.45%! The current mortgage rate is close to 7% and 99% of borrowers have a mortgage rate lower than 6% nowadays.

So how are sellers affected by this rise in mortgage rates? The number of active listings declined lately and one of the reasons is the higher mortgage rate. Homeowners with low-interest mortgages are reluctant to sell their properties because they won't be able to re-purchase somewhere else with the previous rate that they had, leading to a significant decline in inventory.

During the pandemic housing boom, homeowners locked in a low-interest rate before or during, and now, they do not want to lose their low rates. The rate was about 3% during the pandemic. During that time, refinancing was one of the best decisions for some homeowners because they are now locked with a 3% rate for 30 years. With a current rate close to 7% it is difficult to decide to sell and purchase somewhere else because the mortgage rate affects the final price paid by buyers.

To give you an example. with a $700,000 mortgage at a 7% rate, your total monthly payment would be $4,657 whereas at a 3% rate with the same size loan, your monthly payment would be $2,951. It's a huge difference for the same house ! The prediction seem that the rate will decline at the end of 2023. Let's hope so !

MIAMI CONDOS REAL ESTATE MARKET 2022 VS 2023 :

The inventory of active listings was going up in 2022. However the first quarter of 2023 shows a steep decline of 29%. We have nothing to sell anymore !

On the other hand prices went up 24% between the last quarter of 2022 and the first quarter of 2023. Of course this trend is correlated since less inventory means sellers have more power to raise prices.!

THE EAST COAST AND WEST COAST REAL ESTATE TRENDS DIFFER

There are big differences in the housing market trends between the East and West coasts of the United States. The differences are in price, demand, and also in mortgage rates.

Prices on the West Coast have been skyrocketing because of the high demand and low inventory. The mortgage rates in this area are lower, which drives prices up. Interest rates on mortgages can differ from state to state for a number of different reasons. Foreclosures and state law are one of the reasons. Another reason is that in expensive and highly populated areas, competition for business can often drive mortgage lenders to reduce their prices but there is not a big difference from state to state.

The East Coast is experiencing a more balanced market, with some cities seeing an increase in home prices while others have remained stable. We have already noticed the price appreciation concerning Miami's condos in the previous article but in some other cities, prices remain stable. The East Coast had a diverse economy and a larger supply of housing compared to the West Coast.

To conclude, as rent and housing prices soar in South Florida, many wondering if renting or buying is cheaper. You should check with me on which option I think is best for you.