The Impact of Rising Interest Rates
I wanted to make this video specifically to show you this graph so you can "see" the impact of rising interest rates on the Miami Real Estate Market. Take a look at this graph as it shows the impact to your mortgage payment and your purchasing power as a Buyer... Seller's take note also.
We started with a budget of $1,000,000 and used the 30-Year Fixed Rate, Conventional Loan with 20% Down and looked at a 1 year timeline from January 2022 - January 2023.
In January 2022 interest rates were around 3.0% at that rate you could buy a property at $1,000,000 and your payment with principal and interest would be $3,372 (Top left Yellow Box). We now took that same payment of $3,372/month and looked at buying in January of 2023 and for this time period interest rates had jumped to around 6.5%
Unfortunately to keep the same payment of $3,372 at the 6.5% rates (bottom right Yellow Box) the purchasing power is now only $667,000 or 33% lower than 1 year ago. This not only has a big impact on Buyers of Miami Real Estate but Seller's also need to pay attention.
Think about it... if you were a Buyer in this scenario, last year you could buy a property at the $1,000,000 level which gave you a lot of options, but today you would only be able to look up to $667,000 which changes the game as inventory levels are still lower than normal, here in Miami.
From $50 million to $500,000 all Buyers needing a mortgage will have to adjust the price range of their home search and move to lower price points where hopefully they are still able to find what they need/want. Seller's need to understand this especially if they are in the higher price points.
I do believe this will force Seller's to lower their asking prices as Buyer's grapple with the impact of rising rates. I also feel this creates opportunity for cash buyers who do not need to rely on getting a mortgage as Seller's start to reduce their prices. A great deal could be found now you just have to be in the market and ready.
Great graph for all buyer's in the Miami Real Estate Market, and hopefully Seller's start to see things a bit more clearly.
If you need any help with any real estate needs, I am always available to help.
Have a great one.