South Florida, along with the rest of the nation, is experiencing a new trend not seen since the start of the pandemic - one which could indicate a new phase of the market beginning. Last month, June 2022, the largest number of purchase for sale contracts fell out of contract. This is something we have not seen seen in many months, when the rush of frantic - and largely all-cash - buyers have been racing to close quickly to beat out the masses. Nationwide, nearly 15% of all deals fell through last month, but the averages were even higher in South Florida. Miami saw 21.5% of deals fall through, while West Palm Beach and Fort Lauderdale areas both saw 22% fall through before close.
There are a number of factors behind this market shift. On a national average, buyer competition is easing. With a smaller buyer pool, the door is now open for buyers to negotiate - when it was clearly closed for the past two years. With buyers lining up to snatch up properties, sellers had no need to negotiate so buyers often settled to be able to lock in the deal. Now, buyers have less pressure and as such are not settling for unfavorable deals. Another big development is the re-emergence of contingencies. In order to win deals the past several years, many buyers waived their right to contingency periods including appraisal and inspection. [Check out how this has led to pandemic buyers remorse] As competition is easing, buyers are retaining these contingency periods, which in turn gives them more opportunities to back out of a deal, especially if problems come up during these times.
One of the largest driving factors of the increase in lost deals is the rise in the interest rate, which has made buying so much less affordable than it was last year. Not only that, but it has been rising so consistently, and to such a degree, that many buyers are finding themselves able to afford the purchase at the rate as it stands in the beginning of the deal, but by the time the deal is set to close they can no longer afford it or no longer qualify, and are forced to back out. This is increasingly becoming a problem plaguing buyers across the country. In June, the average mortgage interest rate was nearly 6%, and many insiders predict that it may rise as high as 8% by the end of the year, making this a problem that is set to stay - or even get worse - for the foreseeable future.
It is important to recognize, however, that this also creates an opportunity for buyers who have missed out on multiple deals. In this market, do not be afraid to be second in line! Some buyers choose not to submit an offer if the property is already under contract. Submit it! The worst that can happen is the first deal closes and you do not get the property; you have nothing to lose. But, in South Florida there is a 22% (and probably growing) chance that the first deal will fall through, putting you first in line. Even if multiple offers are being accepted - still submit! Be realistic with yourself, but take the chance and the opportunity could very well come to fruition.
The Florida Keys real estate experts at Broker’s Edge Realty can walk you through everything you need to know to capitalize on this unique market!
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