Gone are the 3-3.5% or so interest rates and even the ones in the 5-6% realm. Times have changed.
Unless your endeavors have not been real estate related recently, there's a strong chance that you're already aware about this. We're dealing, after all, with numbers that are quite unlike the ones that were front and center during the decade that followed the 2007-2008 financial crisis. Now that the low rate environment that once prevailed across mortgage lending for years is gone, the new reality has fueled new conversations with our customers about what to expect and not expect.
If you're a current or prospective buyer, and unless you are part of the 27% of the national market that's buying without a mortgage, your loan estimate likely comes at an average rate of 7% or more on a 30-Year fixed rate mortgage (as of October 4th, 2023), more than double when compared to the 2.88% average seen about two years ago. With Miami's median prices now up 17% over the past year (Source: Redfin), the combination of higher prices and higher borrowing costs combined has made buying a piece of Miami real estate more expensive than ever before.
Sellers are also not immune to higher borrowing costs. For those with lower rates that bought or refinanced over the past decade, the motivation to sell is lower when it involves losing their current interest rate and having to purchase elsewhere at a higher interest rate. In some situations, such as relocations, some customers are deciding not to sell and rent their homes instead. This particular drawback has been seen across most market across the country and remains one of the reasons in which inventory remains low in most major U.S markets.
Rates are now higher. Prices are now higher. These are the new realities...what's the solution?
First off, let me be the first to say that it is ok to admit, whether you are buying or selling, that rates have caused an unforeseen impact on your real estate plans. Despite the circumstances, be assured that opportunities are still out there, waiting to be found. Here in South Florida, we have been implementing new strategies to better assist our customers over the past year and some of them have been very effective over the past few months. Below are a few:
The Market Keeps Moving
Take Advantage of Your Specific Situation
If a real estate analyst states that the average days on market for Miami-Dade County homes has largely been the same over the past 12-15 months, I would agree. Based on the data across all parts of the county, it's true that the average number of days has hovered at just under two months on the market. It also shows why median pricing has continued to increase but not as drastically compared to the surge of demand seen during the pandemic.
The numbers do change, however, when looking at more specific segments of the market. This occurs because across every segment and section of any given market and especially in large markets such as Miami-Dade County. Below are two examples. One showing the average amount of inventory of all condos under $1M across all of Miami-Dade County and the other one showing the average amount of inventory of all condos under $1M in just one municipality (I used Miami Beach as an example).
Since one of the segments is a smaller segment of a much larger market, it's still part of the same inventory. But one clear distinction can be identified right away: In this particular segment of Miami Beach's market shown above, there is more inventory available for sale compared to the whole county.
More research goes into effect with each individual customer, but some of this data can be a clear indicator that buyers looking for a condo for under $1M in Miami Beach will have more inventory available to choose from. Using this formula, we have been able to provide better pricing strategies to sellers in markets with more inventory and identify good investment opportunities for buyers looking to buy at a competitive price.
Buy Within or Below Your Means
In this market, some buyers are choosing to wait until rates improve while others are still in the hunt. Some sellers are in the same situation, especially those looking to buy after selling. Every situation is different and we look at each individual case carefully. Our advice for the time being is to not let rates and low inventory discourage any potential but to also act with prudence. Real estate is best when discussed with long term goals.