October 3, 2018
How historically low interest rates allowed Florida home prices to soar
We all know there was a real estate meltdown during the great recession of 10 years ago. Right after that disaster, the FED chopped interest rates to historically low levels to help revive the economy. Those ridiculously low interest rates allowed people to take on far larger amounts of debt than before the crisis, because there is a huge difference in what the mortgage rep says you “qualify” for when interest rates are 3%, compared to the the more normal 8% average. So as Florida home prices soared, it wasn’t a big deal for buyers because they could borrow lots of money to pay the ever higher prices.
How rising interest rates will cause home prices in Florida to slow further then head down
Now however, mortgage interest rates are rising. Every time the FED raises rates, people “qualify” for a lower amount of mortgage money. This has helped to slow down sales and price appreciation. Now there’s an interest rate expert who say we should get ready for a fast sharp rise in interest rates. I’ve been in real estate for over 30 years in multiple states and whenever interest rates rose quickly, home sales and prices went quickly in the other direction. Worse yet, this time, buyers who borrowed massive amounts of mortgage money to pay ever higher Florida home prices because they could “afford” it due to record low interest rates, may end up owing more on their home than what it’s worth as sales slow and prices retreat. Sound familiar? Great recession 2.0?
Selling or buying at the top of the market
For all of those roughly 1000 people a day who move out of Florida, selling at the top of the market can take a little of the sting out of money lost to multiple home sales and long distance moves to get to the Sunshine State. However, it might already be too late to sell at the top in many areas. For those who are shopping now, if you pay too much and buy near the top, you may end up buying high and selling low if the Florida doesn’t work out as is the case for a surprisingly high percentage of people according to population researchers.
There’s a link below to an article written by a guy who has been studying interest rates for 37 years, and his warning.
Ron Stack “That Best Places Guy”