How will mortgage rates affect South Florida’s real estate market?
Without a doubt, the prevailing mortgage-lending rates have a decided effect on the overall affordability and value of Florida real estate. With that single fact in mind, a home buyer should understand how this rate affects the property that they may buy. Here is a quick rundown on how mortgage rates directly affect the real estate market in South Florida:
Values decline… or appreciate – Mortgage rates are one of the primary determiners of a property’s value in the South Florida market. While location is certainly a factor when it comes to prime commercial properties, the affordability of a residential property as defined by its monthly payment really determines how valuable home can be… and the mortgage rate figures prominently in this calculation.
Mortgage availability is affected – The simple availability of capital is largely affected by the mortgage interest rate. More specifically, the interbank exchange rates – to which the mortgage rates are closely tied – can dramatically impact how much capital banks are willing to and can legally lend. Lower interest rates mean more capital to lend but also indicate a concomitant rise in the demand for the money. In short, when rates are lowered, it is best to borrow the money as soon as possible before latent demand drives up the interest rate again.
Other investment rates affect the value – This factor requires a fairly technical explanation but laymen only really need to know that the more that other investments like stocks, bonds and futures pay, the less money will be available to lend on the mortgage market. This means that capital to lend will be more expensive and the real estate market will be valued at a lowered price. Simply put, if better investment opportunities present themselves in the broader market overall, the less interested investors are in providing capital to the real estate market at competitive rates
The effect of outside influences on mortgage rates and therefore on real estate prices is complex. In fact, for the uninitiated it can seem downright daunting. Still, there are experts available who can explain the “ins and outs” to you. For more information on mortgages in the greater South Florida area please visit us online at Adams & Associates P.A. We can be found online at RichardAdamslaw.com or reached directly at 305-615-2905.