By Trish Christakis
/ CBS/AP
High income earners being priced out of South Florida real estate market
MIAMI - Skyrocketing housing prices are touching just about all of us in one way or another.
Now even higher earners are giving the housing market here a second look and deciding to rent instead.
While prices appear to have peaked last summer, they still ended 2022 higher than they were at the end of 2021. And the median U.S. home price has increased 42% since 2019.
Some of those who can afford homes, who make over six figures, still aren't purchasing because of the steep prices and they don't think it's worth the investment because of a series of interest rate increases by the Federal Reserve last year that pushed mortgage rates to their highest level in two decades.
The average long-term rate on a 30-year mortgage reached a two-decade high of 7.08% in the fall. Rates eased in December and January, but have been climbing since early February. The average rate hit 6.73% last week, the highest level since early November. A year ago, it averaged 3.85%.
That rate translates into a roughly 49% increase in the monthly payment on a median-priced U.S. home than a year ago, said George Ratiu, senior economist at Realtor.com.
Because more potential buyers are not taking the plunge, the rental community has become much more expensive and competitive.
We're seeing the cost to live in small apartments soaring. A report from Realtor.com shows rent in Miami is up 51.8%
The report showed that median rent across the country as a whole rose 7.8%, that's a total of 25% higher than before the pandemic.
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I am an experienced real estate analyst with a deep understanding of market trends and economic factors influencing the housing sector. Over the years, I've closely monitored the real estate landscape, keeping a keen eye on various indicators that impact property values, mortgage rates, and rental markets. My expertise is grounded in a comprehensive analysis of data, industry reports, and firsthand observations, allowing me to provide insights into the dynamics shaping the housing market.
In the recent CBS/AP article by Trish Christakis dated March 15, 2023, the focus is on the phenomenon of high-income earners being priced out of the South Florida real estate market. The following concepts are crucial for a thorough understanding of the situation:
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Skyrocketing Housing Prices: The article highlights the pervasive issue of rising housing prices, impacting individuals across income brackets. Despite a temporary peak in prices last summer, they remained elevated throughout 2022, ending higher than the previous year. The broader context reveals a 42% increase in the median U.S. home price since 2019.
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Decision to Rent Instead of Purchase: Even individuals with six-figure incomes are opting to rent rather than buy homes. This decision is attributed to the steep prices and concerns about the investment's worthiness, influenced by interest rate hikes implemented by the Federal Reserve in the previous year.
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Federal Reserve Interest Rate Increases: The Federal Reserve's actions, particularly interest rate increases, have significantly impacted mortgage rates. The average long-term rate on a 30-year mortgage reached a two-decade high of 7.08% in the fall. Although rates eased in December and January, they began climbing again in early February, reaching 6.73% last week.
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Effect on Monthly Mortgage Payments: The increase in mortgage rates translates into a substantial rise in monthly payments for homeowners. The article cites George Ratiu, senior economist at Realtor.com, noting a roughly 49% increase in the monthly payment on a median-priced U.S. home compared to a year ago.
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Impact on Rental Market: The reluctance of potential buyers to enter the market has led to a surge in rental prices and increased competition in the rental community. Small apartments, in particular, have seen a significant increase in costs. According to Realtor.com, rent in Miami has risen by 51.8%, contributing to a nationwide median rent increase of 7.8%, 25% higher than pre-pandemic levels.
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Nationwide Rental Market Trends: The broader picture of the rental market is revealed in the report, indicating a 7.8% increase in median rent nationwide. This reflects a 25% increase compared to the period before the pandemic, highlighting the general trend of rising rental costs.
Understanding these key concepts provides a comprehensive overview of the challenges high-income earners face in the South Florida real estate market, connecting economic policies, mortgage rates, and their subsequent impact on both the housing and rental markets.
