Coldwell Banker Realty
Arielle Biscayart, Coldwell Banker RealtyPhone: (305) 303-1218
Email: [email protected]

Will Rising Interest Rates Cool Down The Super Hot Real Estate Market?

by Arielle Biscayart 05/12/2022

Most of us know that the US Federal Reserve raised interest rates by half of a point in early May, so what does that really mean?

The Fed's primary goal is to slow down the record inflation, which means it hopes to reduce the rise in prices we are seeing on nearly everything we buy today; from groceries to household supplies and of course real estate.

Rising interest rates also mean you could earn a higher return on your savings, whether you bank with a traditional institution or you keep your savings in an online bank.

However, there is another side to rising rates; borrowing money is going to become a lot more expensive than it was in previous years.

Rising rates will have stronger effects on purchases that require large loan amounts, like real estate properties and cars. With the housing market especially, the effect of rates can easily add up to tens of thousands of dollars (or hundreds of thousands of dollars) in added interest charges over the average timeline of an average mortgage.

We can wonder if rising interest rates may bring a few incisions to the super hot housing market, either by lowering the average price paid for residential and commercial properties or by slowing down the average time it takes to make a sale.

In addition to paying more in interest, rising mortgage rates can also reduce the mortgage amount borrowers can qualify for; which means that a higher number of buyers ( those who need to borrow money of course) will be priced out of the current real estate market.

As there is a relatively higher number of cash buyers for residential properties in South Florida, let's see in the upcoming months how far rising interest rates will cool down the South Florida real estate market.

As for the US job market, according to a recently publshed article on Costar.com, it seems quite dynamic:

"More than two years after the severe job losses that occurred at the onset of the pandemic, the labor market continues its recovery with the number of jobs growing at a healthy and steady pace.

Firms added 428,000 positions in April 2022, according to the Bureau of Labor Satistics, marking an annual gain of 6.6 million jobs. The unemployment rate remained 3.6% for the second consecutive month, just a tick higher than its pre-pandemic rate.

For now, though, April’s relatively strong jobs report showed an economy reopening as concerns over the pandemic ease. About a quarter of the overall net job change came from the accommodation and food services sector, which added 66,100 positions, retail trade at 29,200 positions, and arts, entertainment and recreation at 11,300 positions. While pent-up demand could drive outsize demand from these sectors through the summer, job growth is likely to return to its long-term fundamentals thereafter."

If you have any questions regarding the Southeast Florida residential or commercial real estate markets, feel free to contact me:

Arielle Biscayart - Coldwell Banker Realty - Ph: (1) 305-303-1218 - [email protected]

Follow me on Twitter:@athomeinmiami and on Instagram: @ariellebiscayart

 

Photo courtesy of Jason Leung for Unsplash.

About the Author
Author

Arielle Biscayart

Arielle Biscayart was born in Rome, Italy, raised in Paris, France, and moved to the Miami area in 2004.
Since becoming a South East Florida resident, Arielle has been a Florida licensed real estate agent, involved in the growing local arts community. She has been offering her real estate consulting and sales services in the Fort Lauderdale, Hollywood, Aventura, Miami Beach, Miami, and Allapattah areas since 2005.
Speaking four languages ( English, Spanish, French, and Italian ) helps her market her service a portfolio of local and international clients.