Higher Mortgage Rates Impacting Home Sales

Rising rates = softening home demand
Rising mortgage rates should soften home buyer demand

As the Federal Reserve continues to aggressively combat out-of-control inflation, home mortgage rates will continue rising. Needless to say, this will force many would-be home buyers to remain on the sidelines. As you can imagine, the ripple effect from this will decrease buyer demand resulting in homes remaining on the market for a longer period of time. However, there is another byproduct of these rapidly rising mortgage rates. With higher rates adding an average of $400 to the average monthly payment on a median-priced home, many homeowners are feeling the “lock-in” effect. In other words, they locked in a much lower mortgage rate when they purchased their current home. This is resulting in more of these owners deciding to remain in their current homes instead of moving.

The mortgage rate dilemma

According to data from CoreLogic, out of the roughly 62% of U.S. homes that have a mortgage, some 92% of them have home loan rates at or below 5%. Furthermore, 57% of those homes have mortgages with rates at or below 3.5%. Similar to the effect that we see in Florida with homeowners that have lived in their homesteaded properties for many years and benefit from extremely low property taxes, we could see the same phenomenon taking place with locked-in mortgage rates. In a market that is already experiencing a record-low inventory of homes for sale, this could present new challenges.


It is important to note that mortgage rates have been declining for decades. Going back to the early 1980’s, mortgages rates were 18%. Fast forward to last year and they were below 3%. This has added a financial incentive for homeowners to lock-in low rates on home purchases or even refinance their existing mortgages. Now as rates continue to rise rapidly, these same homeowners are less inclined to list their homes for sale and purchase a subsequent property at a higher mortgage interest rate. Overall, higher interest rates will decrease buyer demand and thus stabilize home prices. In some cases, we should see some home prices retract some as well. In South Florida, we expect the housing market to fare better than the rest of the country simply due to the continued high demand from Americans relocating to The Sunshine State.

At Live South Florida Realty, Inc. we have assisted many clients with their real estate needs. Are you looking to buy or sell a property in South Florida? Now more than ever, it is critical to have a qualified real estate team and the proper search tools behind you. Live South Florida Realty, Inc., has been a leader in the South Florida market for many years. Let our team of professionals assist you with buying or selling your piece of paradise today! In addition, our recently launched “Florida Home Search” app is now available on the Apple App Store and Google Play Store. With real-time MLS feeds, this app lets you set your own alerts to notify you as soon as a property meeting your needs hits the market. Furthermore, it will also let you know of recent closed sales in your area so that you may be even more educated on the market. Be sure to download this app for your smartphone or tablet today!

By natasha moore

REALTOR® with Live South Florida Realty, Inc.

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