Experts expect high mortgage rates to be temporary

South Florida residential real estate experts believe rising mortgage rates are just a temporary phenomenon and rates will eventually come down next year.

In South Florida, a huge number of buyers just don’t finance, and if they do they finance less than the average in the country, said Harvey Hernandez, CEO of Newgard Development Group.

“It all has to do with inflation,” he said. “We think that rates will start to go down in the second or third quarter of 2023. How severe that reduction is going to be or how would it start? Nobody knows. But we expect that they’re going to start next year.”

Most first-time home buyers who need a mortgage maybe have to wait to purchase, Mr. Hernandez advised, “because you may not be able to qualify.

So maybe before you’re able to qualify for a $300,000 mortgage, now you’re probably able to qualify for a $250,000, all due to current high mortgage rates.”

Sellers have not been willing to negotiate on selling price, but as the market cooled off a little, so will the prices, he added. “I think it’s important to say that these things happen, and we just have to be patient.”

During the week of Dec. 15, the 30-year mortgage rate fell for the fifth consecutive week to 6.31%. The mortgage rate fell as the federal government downshifted to a smaller 50 basis points rate increase after a series of 75 basis point hikes, according to Miami Association of Realtors’ Chief Economist Gay Cororaton.

The sustained decline in the 30-year mortgage rate is starting to revive homebuying, she said.

“The decline in mortgage rates means a more robust market for home sales in 2023,” Ms. Cororaton said. “I expect home sales to post some uptick in 2023 compared to 2022 as mortgage rates continue to head downwards to 6% in 2023 amid decelerating inflation.”

The reduction in mortgage rate saves households $150 to nearly $200 per month, resulting in a lower level of income needed to afford a home. A mortgage is affordable if the payment is no more than 25% of household income. In Miami-Dade County, the income needed for a household to pay the mortgage affordably falls to about $127,000 from $137,000.

The South Florida home sales market is expected to do better than nationally given the stronger labor market conditions in the Miami metro area, Ms. Cororaton added. “And South Florida will continue to attract people from high cost and high tax markets like New York and California.”