As we all know, the Florida real estate market boomed after the pandemic. People from all over the country flocked to the sunshine state in record numbers, causing sellers to make impressive gains while buyers were subject to high prices and low inventories. For several years now, experts and everyday people have been predicting how long the scenario would last. As the Federal Reserve continues to raise interest rates and inflation rises to new highs, we are now beginning to see a shift in the real estate market.
The Impact of Rising Interest Rates
We are living through turbulent times as it feels like it costs more for just about everything these days. With inflation and interest rates rising, everyday people are feeling the effects, and many are struggling to get by. The housing market has also been impacted and has slowed down considerably as a direct result of increasing mortgage rates. Here are some of the obvious, and not so transparent reasons why there has been a downshift in the market and why demand is expected to continue to level off and perhaps decline into 2023:
- Many potential buyers will not be able to afford a mortgage or even qualify for a loan due to high interest rates.
- Real estate owners with adjustable mortgage rates are subject to much higher monthly payments as rates go up. Many will not be able to sustain these increases, and some will likely have to sell these properties, leading to an increase of inventory in the market.
- Cash buyers will have less competition and will gain leverage in the marketplace. They’ll be able to negotiate prices downward as less buyers are qualifying for mortgages.
- Should a recession hit, as it is currently predicted, employment and salaries will be negatively impacted. This would normally trickle down to the real estate market as less people will be able to afford to buy a home, or some might have to sell theirs because they can no longer afford it.
Many have been waiting for the real estate bubble to burst, and we are beginning to see the signs that we are entering into the anticipated correction cycle. Supply should continue to increase as demand slows down due to rising interest rates and the negative impact of inflation. Now more than ever, it is important for consumers to be financially prudent to get through these turbulent times. Making smart offers and keeping expenses in line is more important now than in recent boom years.
The Law Office of Donna Hearne-Gousse, P.A. is here to guide you through the volatility and help you with overseeing purchase contracts, examining fees, clearing title issues, handling escrow, and many related real estate needs. We represent both sellers and buyers with their real estate needs. You’ll also enjoy all of the benefits associated with an attorney-based title agency at similar, and in many cases, lower costs than a standard title company will charge.
If you are in need of a real estate attorney in Palm Beach County, we welcome you to contact us for more information.
The Law Office of Donna Hearne-Gousse
Royal Palm Beach, FL