Mortgage interest rates have been historically low for many months, helping to fuel the already incredibly strong real estate markets across the country and here in the Florida Keys. It has been widely reported, however, that the interest rate is rising - and will continue to rise in the coming months. It currently stands at above 3%. In early November, the Federal Reserve announced that it will begin lessening its purchasing of mortgage-backed securities and bonds. This seems to be signaling a shift in the financial arena leading industry experts to believe that mortgage interest rates will continue to go up through 2022. In fact, the National Association of Realtors has predicted that by mid-year of 2022 the interest rate will be 3.6% for a 30-year fixed mortgage.
So what impact will this have on the Florida Keys real estate market? The inevitable result will be that it will make it more expensive to purchase real estate in the Keys. Leonard Kiefer, Freddy Mac’s deputy chief economist, says that a year from now real estate will be less affordable even if prices remain the same because of this rise in the interest rate. The home prices, however, have already been on the rise in the Keys, up 29% in 2021 alone. Unfortunately, with the already rising prices of homes, this may price some buyers out of the market.
There is a silver lining with the rising mortgage rates, however. With real estate less affordable for many buyers, it should help to stabilize the market. Currently, buyers are struggling to keep up. Bidding wars are the new norm, and often properties are trading at higher than ask price. A higher interest rate should help to curtail this and limit competition. When this happens, it is likely that prices will balance out in response. Though the ultimate affordability may be less, it could work out to be better for buyers in the long run as prices will be forced to stabilize.
The rising mortgage rate could signal a big shift in the market. Time will tell how much the impact will affect buyers and sellers of real estate in the Keys.