Many expected rising interest rates to be a beacon of hope for those looking to buy in Miami’s competitive real estate market.
Under normal circumstances, rising interest rates should cool the market, but housing demand remains so strong and there is so little building land in South Florida that the market looks solid, experts say. .
“Everyone wants a piece of Miami,” says Edgardo Defortuna, a developer who has built some of Miami’s biggest projects.
“In general, the growth of the Florida market has been very good. We continue to see very strong demand, not just from natural markets like Latin America, but from the rest of the United States,” adds the Executive Chairman and Founder of Fortune International Group.
Not only South Florida, but also Naples, Tampa and Clearwater are sought-after real estate markets that have benefited from the ability to work remotely, Defortuna says.
Miami is also becoming increasingly attractive to buyers who work in technology, an industry that was favored when Greater Miami has become the fourth fastest growing area for tech jobsaccording to a recent report by the Computing Technology Industry Association (CompTIA.)
The data confirms that in Miami real estate sales continue to rise. February was the best month in Miami-Dade condo sales history, posting a 13.2% increase over last year, according to the Miami Association of Realtors (MIAMI).
“Demand remains at an all-time high for real estate in Miami,” MIAMI Chairman of the Board Fernando Arencibia Jr. said as travel protocols put in place during the pandemic are relaxed.
Rising interest rates won’t have a big impact on Miami
After two years spent below the 3% mark, interest rates reached 5% on April 5 for a 30 year mortgage. While house prices are not expected to fall sharply in the general market, price increases should at least level off, according to experts in the country.
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Rising interest rates mean a higher monthly payment, and people selling their homes will refrain from asking too high a price because of the risk of not finding buyers. At the same time, with less attractive interest rates, homes will be on the market longer.
Last year, Miami buyers started bidding wars, making above-sale offers, often in cash, to buy a home. Experts expect this scenario to become less common as The Federal Reserve Raises Interest Rates, Which Will Happen earlier than expected several times this year.
“Rising interest rates affect the local buyer,” Defortuna explains, indicating that in many cases they “finance 70% of the purchase of the property and a 1% change in rates means something different. important to them”.
People who applied for mortgages in February will pay $127 more in principal and interest than those who closed in January, and $337 more than those who financed a property a year ago, according to national figures from the Mortgage Bankers Association (MBA).
READ MORE: Housing in Miami-Dade heats up in February. Will interest rate hikes slow the market?
Miami a boon for international buyers
Raising interest rates would not affect international buyers, who make up a sizable percentage of the Miami market.
“International buyers not only come with cash, but are used to paying much higher rates than what we have here and potentially higher than what we are going to have,” Defortuna says, indicating that the expected policy changes in Latin America will stimulate investment in the countries of the South. Florida real estate.
“If Latin America is bad, Miami is good, and if Latin America is good, Miami is good too,” he repeats, a bit jokingly, a common saying among developers and real estate agents.
As a result of this flow of foreign investors, in Miami cash is king. In January, 40% of homes sold in Miami-Dade were cash transactions, while 41% of sales in Broward did not include mortgages, according to the Miami Association of Realtors. Both figures are well above the national average of 27% for cash home purchases.
This is one of the factors that affects members of the middle class in Miami who want to buy a home. Rising interest rates, leading to less affordable monthly payments, will cause many first-time home buyers to abandon or postpone their plans. This would further complicate the rental market, which is already saturated and in the midst of a housing crisis.
READ MORE: ‘It’s frustrating’: Miami-Dade’s middle class is out of the housing market
In this scenario, is it better to buy than to rent?
“It’s 100% better to buy,” says Claudia Serna, CEO and Founder of Brokers, LLC, with 20 years of experience in the South Florida real estate market. “Rents have risen more than mortgages and interest rates are lower inflation.”
Real Estate Market Trends in South Florida
With housing in short supply and exorbitant prices for those near the water, buyers are still looking for condominiums, now preferring larger ones, which is one of Miami’s market trends.
“Buyers want to be near the water, and when there are no houses available, they buy condos, which is why condo inventory is going down,” Serna says, noting his company has 500 agents. real estate and sometimes they don’t have anything to sell to customers, due to low inventory.
A large condo project near the water took the land where the tennis courts used to be to build more apartments, Serna says as an example to demonstrate the shortage of land.
“We are always cheap, and for [buyers] in California and New York, we are a gift,” she says, indicating that this situation represents a “problem for people who sleep and work in South Florida”.
Even so, other experts point out that rising prices in South Florida are bringing them up to levels with those in other parts of the country where buyers are coming from, which could limit interest from those coming. look for savings in housing. .
The median rent in South Florida last year was $3,000, according to rental website Redfin, and with rising property insurance and repair and construction costs, landlords have raised rents by as much as $500, prompting proposals and emergency measures to control rents in Miami. -Dad.
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“The cost of land and construction has increased significantly,” Defortuna said, adding that sometimes it increases by 30%, including labor, which is not reflected in employee salaries. “It makes affordability much more difficult for people who can’t afford Miami’s price levels.”
Buyers and developers can protect themselves from rising rates, Defortuna argues. There will be a trend towards fixed rate mortgages, which in turn is an advantage for buyers, who can guarantee a specific monthly payment for their homes. Unlike those who rent, they will not experience a drastic increase in housing payments.
“Developers can buy insurance against rate increases, even if it costs a bit more at first, to make sure that costs won’t change if rates go too high. There are always financial mechanisms to prevent such rate hikes,” Defortuna said.
READ MORE: Trying to buy a house in Miami-Dade? Here are 6 helpful tips from real estate experts
Serna has some tips for those looking to buy in Miami’s competitive market.
“Get advice from an agent with knowledge and experience. In this market, you have to know how to manage what is happening and know how to play with the numbers. You have to look for references, do not hesitate to ask for references,” she concluded.