South Florida Real Estate Market Trends in 2024: High Mortgage Rates and Their Impact

By: Justin J. Shepard, Esq.

Introduction: The Current State of the Real Estate Market

Scores of think pieces have analyzed the effects that current mortgage interest rates have had on the real estate market and the ability for new homeowners to purchase a home. There have also been many prognostications on when current interest rates will begin a downward trend.

Understanding the Impact of High Mortgage Rates

An overlooked but critical effect however has begun to surface in the last couple of years. As interest rates have increased and then remained at their current highs of 6-7% many homeowners are reluctant to re-enter the home selling and buying market.

Historical Mortgage Rates: A Comparison

If you were a current or prospective homeowner looking to enter the market with a new loan or potentially refinance an existing loan between 2012 and 2021 chances are you have a mortgage rate under 5%. During this 2012 to 2021 span only two years peaked at an average rate above 4% – 2014 when average rates was 4.17% and 2018 when average rates climbed to 4.54%. Otherwise interest rates often hovered around the 3.5% range dipping as low as 2.96% in the year 2021.

Challenges Faced by Homebuyers in 2024

While these record-low rates years provided a boon for current and prospective homeowners alike they have also had an undue effect when looked at in comparison to the current rates beginning in the year 2022 and trending upward since that time as many homeowners with low rates now feel as though they are trapped in in homes they would like to sell but cannot because of the high rate of interest they would have to pay to finance a new home.

Effect on Housing Inventory and Market Mobility

Per an investigation by the New York Times between 1998 and 2020 there had never been a point where more than 40% of mortgage holders had locked-in rates more than one percentage point below market conditions. Now? Approximately 70% of mortgage holders hold rates that are more than three percentage points below the market average.

This discrepancy has created a chokehold on the housing market as homeowners with low interest rate mortgages have no financial incentive to put their homes up for sale The value of the below-market interest rates on average are estimated at approximately $50,000.00 per mortgage loan. The resulting decrease in mobility has led to a low inventory of housing that has plagued the industry over the past four years. The low inventory has made home buying particularly difficult for first time buyers.

Proposed Solutions and Their Effectiveness

The attempted to put in place some measures to help stimulate the mobility of the real estate market with varying degrees of success. A temporary tax credit was proposed that is worth up to $10000 for new homebuyers and also to the homeowners who sell to them. However because the cost to borrow money at today’s rates is so much higher than during the low-rate times the tax credit has done little to motivate buyers and incentivize sellers.

Future Outlook: What to Expect in the Real Estate Market

It’s still widely agreed upon that the most effective fix for the current mortgage conundrum is the lowering of interest rates across the nation. It should be noted however that the industry is unlikely to see interest rates of pre-pandemic and pandemic America and any decreases in interest rates will only slowly trickle into the existing homeowner’s market. Wage increases and general deflation of consumer prices will assist in the ability to purchase in the future however such changes are as cloudy and uncertain as the mortgage rate industry itself.