Teaser rates

Teaser rates may be a thing of the past and now we will see if the South Florida residential market can hold-up.  Today we will look at the average sale prices of houses and condos in the Greater Fort Lauderdale area.  This chart is through August, before the last pop in mortgage rates hit.  It looks like June was the final month of price gains in the South Florida residential real estate market after years of crisis level interest rates. In August, the average sale price of a house in Broward County, Florida was $449,870.  This is a 3% decline from June prices.  Condo prices averaged $220,116 in August which was a 17% decline from June prices.

Teaser rates & sale prices

Teaser rates and deal volume

Transaction volume declined from August until June as well.  House sales dropped 7% from 1,648 in June to 1,531 closed sales in August.  Condo sale declined 18% from !,806 in June to 1,480 in August.  These transaction volume declines occurred before the climb in mortgage rates, so it will be very interesting to see how much deal volume drops over the next few months.

teaser rates blow bubbles

No more teaser rates

Over the last week there was a noticeable increase in mortgage rates that will hit property markets pretty hard.  Our chart only dates back to 2013 and rates haven’t been this high since 2011.  The Freddie Mac rates are showing 4.9% on a 30-year fixed and 4.29% on a 15-year fixed rate mortgage.  These rate quotes do not including points and fees.  We are now breaking into a multi-year high on borrowing costs.  Mortgage rates over 5% will certainly impact real estate prices as we move through the end of 2018 and into 2019.

The dangers of keeping interest rates so low for so long is that low rates “tease” people into buying more than they can afford.  The low rate environment over the last decade is not much different from teaser rates on credit cards.  The stores / banks get you to load-up on debt, the teaser rates expire, rates climb and eventually those bills come due.  Be careful out there, the real estate market is changing quickly and something tells me the smart money understands.

teaser rates are cooked