- High interest rates are combining with high prices to stagnate the Florida real estate market
- Florida’s major metro areas still dominate the national home price increase chart
- But with fewer buyers, homeowners aren’t listing their homes for sale, softening the downward pressure on home values
High interest rates combined with still high home prices in most Florida markets have combined to stagnate real estate sales across the state. While historically high home prices might normally trigger some homeowners an opportunity to cash out at the peak, high interest rates are simultaneously putting a damper on buyers who get sticker shock when they see their projected monthly mortgage payment.
Market data from Jacksonville-based Black Knight, a real estate data analytics company, shows Florida still has four of the top five real estate markets in the nation in terms of annual growth of home prices in 2022: Miami, at 20.1% over last year, is first, followed by Tampa (17.3%), Orlando (16.6%), and then Jacksonville (14.5%).
Miami is also the 6th least affordable real estate market in the nation, which is calculated by comparing monthly mortgage payments with monthly household income. A home mortgage in Miami would consume approximately 51% of household income.
Normally, Black Knight says, all those factors might put significant downward pressure on the real estate market, causing home sellers to lower prices, but across the country, that isn’t happening. Homeowners are holding the line on home prices or just not putting their home up for sale in the first place, causing an inventory shortage for home buyers. New for-sale listings in October were 19% below 2017-2019 levels, marking the largest deficit in six years (excluding March and April 2020 data collected during the pandemic).
“In a world of interest rates 6.5% and higher, affordability remains perilously close to a 35-year low,” said Black Knight Data & Analytics President Ben Graboske. “Add in the effects of typical seasonality and one might expect a far steeper correction in prices than we have endured so far, but the never-ending inventory shortage has served to counterbalance these other factors.”
Across the country, some markets saw drops in home prices, but even that has halted in recent weeks. “Despite home price corrections continuing in many markets nationwide driven by tight affordability and higher rates, the pace of price declines has slowed measurably over the past two months,” Black Knight wrote in its monthly mortgage monitor report.
The report also cautioned that the national early-payment default (EPD) rate – which captures mortgages that have become delinquent within the first six months –– has risen among certain loans for much of the past year, and has now reached the highest level since 2009, excluding the months in the immediate wake of the 2020 coronavirus pandemic.