Higher mortgage rates heading to 8% are significantly affecting the borrowing ability of home buyers along the Emerald Coast of Florida.
Mortgage rates were about 3% just 24 months ago.
Here’s how the higher rates affect borrowers along the Emerald Coast of Florida.
For every $100,000 borrowed at 3%, the principal portion of the mortgage payment would have been $421 per month. At today’s rates of 7.75%, the principal would be $716. Effectively, the principal payment is more than two-thirds higher.
Here’s an example. Someone borrowing $500,000 at 7.75%, may pay $4000 a MONTH for their total mortgage payment, including tax and Florida’s high insurance costs. At 3%, the rate from late 2021, the payment would have been $2608. So, that’s about $1400 more per month. Hard to take.
In addition, at today’s rate, instead of qualifying for $500,000, they would only qualify for $363,000.
How does that affect the real estate market on the Emerald Coast of Florida?
Sellers who previously thought of selling are holding off putting their houses on the market unless they have to move. If they are currently paying a low rate, like 2.75 or 3.25%, they would be able to afford a much lesser house with the year-over-year home price increases and today’s high interest rates. So, they are hanging on. Buyers who are renting may prefer to continue to do so, since their borrowing ability is greatly reduced.
Home prices have been affected somewhat, depending on the specific market. There is still an undersupply of homes in the U.S. for primary residents (owner occupied homes). Short-term rental properties and resort properties are different, so those prices are affected more, as purchase of this type of real estate is a luxury.
One way to help with mortgage affordability is to use a rate buy down. A rate buy down is a payment to the lender (points) that may temporarily lower the interest rate.
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