If you’re in the market to buy a home now, you will be facing more costs when it comes to financing your mortgage.

Current mortgage loan rates are the highest they’ve been in more than 22 years, and the Federal Reserve has indicated they may raise them more.

The percentage rate for a fixed 30-year mortgage in Florida as of mid-June was 5.99% APR. At this time last year, the rate was 2.96%.

The government raises the Federal interest rate in their attempt to battle inflation, which many experts feel only helps send the country into a recession.

During the recent 2-year buying frenzy for homes across the country and particularly in Southwest Florida, many people were shut out by other buyers offering more for a prospective home, often in all-cash deals, beating them out of the property.

Some were waiting to buy until the interest rates went down, and now those people are less inclined to buy.

The net result is that the real estate market is showing signs of cooling off, while most agree that Florida will still represent a seller’s market, but just not as drastic as in the past few years.

How Will Rising Rates Affect SW Florida’s Real Estate Market?

If the rate on the mortgage you’re applying for goes up by a fraction of a percentage point, that equals about $50.00 more per month, based on the median home sales price and average loan amount.

But those who were thinking of buying when rates were around 3 or 3.5% are now finding that the rate increase can mean hundreds of dollars more for their mortgage payment and are having difficulty deciding whether to buy or not.

When interest rates went from 3% to 5%, a buyer taking out a loan for a home that costs $600,000 would be paying about an additional $700.00 per month, and in today’s uncertain economy, many are finding that difficult to justify.

This means more homes are staying on the market longer, as opposed to in the previous 12 months when there were very few new homes coming on the market, and the available inventory was being snapped up in a matter of a few days, or even hours in some cases.

“We’re having to determine whether to apply for a mortgage and if we can afford it with the cost of everything, like gas, daycare and groceries, also going up,” said a south Fort Myers couple looking for a new home. “We are basically looking at all the numbers carefully, but really it just kind of freezes us into doing nothing right now.”

In the Southwest Florida market, many buyers are affluent and buying homes with cash, and not worrying about interest rate increases.

This explains why many real estate industry experts feel that while there may not be the voracious buying up of homes in the market, the state will still see a healthy, more balanced market of brisk sales.

Southwest Florida is still one of the most desirable locations to live in the entire country, and those with money to buy are continuing to relocate here.

A Look at the Numbers

According to the Naples Area Board of REALTORS®, (NABOR), the number of total residential properties available for sale increased by 16.9% in when comparing April 2022 to April 2021.

For the same period, the number of single-family home listings increased 5.7%. The Naples median sales price jumped from $440,000 to $599,000 for that one-year period, with statistics showing the most increase for single-family homes, and less with condominiums.

A little further north in Lee County, new listings saw a 3.1% increase in April 2022 over 2021. The median home sales price here went from $355,000 to $470,000, an increase of 32%.

Interestingly, the number of days from listing to going under contract dropped from 17 days in April 2021 to 10 days in 2022 for a dip of 41%.

And here is one of the more telling stats on Lee County home sales: Cash sales represented 40% of all closed sales in April 2022, up 17.3% over April 2021.

Housing Affordability is the Real Issue

This indicates the continuing strong market for those who can afford to buy their home for all cash and not worry about interest rates.

The real concern in the Southwest Florida real estate market is the affordability factor, especially for those trying to borrow money for a mortgage.

The inventory is increasing at a normal, healthy rate, but the prices are keeping many from even considering taking out a home loan. The cash buyers are what are keeping our market active, unlike in some other, less appealing places to call home.

Lee and Collier Counties will be less effected by rising interest rates than will other parts of the country. As one long-time local REALTOR® with a history of success in Southwest Florida noted, “2022 will be a great year for our market, just not as great as 2021.”

Professionals in the real estate and mortgage industries feel that a more stable growth rate will be an overall benefit to the marketplace, resulting in a healthier, more realistic pricing environment and more sustainable sales pace.

As to whether raising interest rates will help or hurt the overall economy and curb the alarming inflation rate, that remains to be seen.