South Florida’s Mortgage Rates: A Closer Look

South Florida home and condo buyers face some of the highest mortgage rates in the nation, presenting a challenge for those looking to purchase property in this desirable area. As of last year, the median mortgage rate was just shy of 7%, according to research from construction data firm Construction Coverage.

Why Is South Florida’s Mortgage Rate So High?

Orlando Diaz, President of the Florida Association of Mortgage Professionals, attributes these high rates to several key factors:

• Small Business Landscape: South Florida has a substantial number of small business owners, who may face stricter loan qualifications compared to borrowers with stable, regular salaries.

• Jumbo Mortgages: The significant home prices in the region often require jumbo loans—mortgages over $806,500—which generally carry higher interest rates.

Key Findings

In examining conventional mortgages approved last year, the analysis revealed:

• Florida ranks among the top 10 states for the highest median interest rates across fixed-rate mortgages. Other areas in Florida, including Naples, Fort Walton Beach, and Panama City, exhibit similarly elevated rates.

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• The Miami metropolitan area stands out with the lowest percentage of borrowers securing fixed mortgage rates under 7%—only 58% fall into this category.

Rising Rates and Economic Factors

Mortgage rates began increasing in early 2022, following the Federal Reserve’s hikes to combat record-high inflation. National averages for fixed 30-year mortgages have surpassed 6% for nearly three years.

Current Home Prices

As of March, the median home prices in major South Florida counties are notably high:

• Miami-Dade County: $670,000 (with 1 in 3 selling for over $1 million)
• Palm Beach County: Median of $625,000 (with 1 in 4 homes exceeding $1 million)
• Broward County: $635,000 (with about 20% selling for at least $1 million)

Condos vs. Single-Family Homes: A Costly Difference

The prevalence of condominiums in South Florida contributes to higher mortgage rates compared to other regions. Condos are often viewed as riskier investments by lenders due to their shared ownership model, leading to increased borrowing costs. Diaz emphasizes:

“If someone applies for a primary home that’s a single-family residence versus a condo, the pricing for a condo is going to be higher. With more condos in South Florida, our average interest rate reflects that.”

FHA Loans: A Limited Option

The Miami Association of Realtors has raised concerns about the limited availability of favorable loans for condo buyers. According to the U.S. Department of Housing and Urban Development, only 17 condo buildings in South Florida meet the criteria for Federal Housing Administration (FHA) backing. FHA loans are generally more accessible, offering:

• Lower credit score requirements
• Reduced down payments
• Competitive interest rates

Cash Sales Mitigate Rate Impact

Interestingly, the impact of these high mortgage rates may be softened by the prevalence of cash transactions. Approximately 25% of homes sold in South Florida are purchased outright for cash. In fact, half of all existing condo sales in March were cash transactions.

Conclusion

Navigating the South Florida real estate market requires awareness of significant mortgage rates, especially for condo buyers. As fluctuating economic conditions continue to affect lending practices, prospective homeowners should remain informed and consider all financing options available to them.

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By understanding these dynamics, homebuyers can better prepare for the financial realities of purchasing property in a region that’s both beautiful and competitive.