Real Estate Market – Insight Data
Low Interest Rates Are Driving Buyer Demand
WHEN THE COST TO BORROW MONEY GOES DOWN, PRICES TYPICALLY RISE
The posted interest rate by FreddieMac for a 30-year fixed mortgage in February 2021 was 2.81%. Just 10 years earlier, that rate was 4.95%, and that was considered low! Who would have thought that we would be living through an era of generationally low interest rates?
No doubt that has been a key contributor to the growth and accessibility of homeownership in recent years, as well as the robust increases in home prices throughout many areas of the country.
Just as home values generally increase during periods of low-interest rates, they often trend down when rates trend up. Our inventory issues in South Florida will continue to keep home values on the upswing, but increasing interest rates will certainly impact select areas of the market.
The solution? If you are thinking of buying. buy now. If you are thinking of selling, sell now.
The Effect of Interest Rates on Buying Power
On the typical blown of $500,000 that mortgage payment is $2108 a month, the principal of interest payment is $2,108 a month, If the rate goes up to 3.125% but if the rate goes to 4.000% you lost borrowing power.
So many people borrow exactly what they can afford, so they’re approved to borrow $500,000 and the rate is 3.000% today $2108 principal interest, but if they decide to wait when the rate goes down and then the rate goes up to 4.000% you lose 11.7% of your borrowing power, so you will not be able to borrow any longer $500,000 you could only able to borrow $441,548. See the graph below.
As you see there if the rate goes up to 4.000% you are still only qualified to borrow $500,000 for a $2,387 monthly payment then you’re looking at a home that is $58,452 less than you can buy today.
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Over this three-year period, our inventory as you see in the graph is dropping.
As you see on box 3, a year ago there are 15,057 single-family homes on the market in Miami-Dade County price under a Million Dollars, at the end of June we have 8039 so we have a 46% decrease in the number of listings available for people to purchase in Miami-Dade County under a Million Dollars.
Then you look at the number of sales that we’ve been making, this is comparing April, May, and June this year to April, May, and June of 2020 our sales are up a 109%. Last year during that three month period there were 4736 homes sold in Miami-Dade County under a Million Dollars and this year we sold 9895, now because we are a little concerned about comparing 2021 to 2020 because as you remember last year April, May and June was the height of the pandemic, most of our country was shut down, so we felt like it was probably wise to go back and look it 2 years ago as well. Check out box 6 to see the details.
The Rental Market
Rental Market caught us by surprise, the rental market inventory for single-family homes has decreased from 965 properties on the market a year ago as you see on box 3 and this year only 358, so we have 358 single-family homes in the MLS for people to look at it in Miami-Dade County.
We are taking a lot of new listings at 653, it says sold on the graph but it’s actually rented, we actually rented 940 properties in the last three months, we listed 653 during the month so as you see we’re out renting the number that is coming in with a large margin, so the number of rentals is down because we just don’t have this many opportunities for people to rent for the price that they needed to rent. see the graph below