Interest rates have been rising since the election and within a few months we should begin to see the impact.  We have discussed this topic at length on our blog because the Federal Reserve has kept rates at crisis levels for the past seven years and now they may have lost control.  Take a look at our first chart and notice the recent spike on the far right.

Rising mortgage rates

Transaction volume

The question for the real estate market is how much of an impact the recent rate spike may have on sales volume.  Usually a rate increase will pull some buyers off the sidelines, but having rates too low for too long may have already extracted the last few drops of demand.  You will notice from this next chart that sales volume most likely peaked in June with a total of 9,103 house and condo sales.  In October, that number has declined 26% to 6,777 transactions.  Keep in mind that does not reflect the recent increase in rates that took place in November.

Average sale prices

The average sale price of houses and condos in South Florida has remained stable prior to the jump in rates, so the next few months will be interesting.  Single-family home prices in South Florida have declined 6% since June and condo prices have dropped 17% for the same period.  Price follows volume, so if the number of transactions continues to decline, you will probably see prices drop as well.

Residential Inventory in South Florida

Finally, let’s look at residential inventory in South Florida.  There were 18,973 houses on the market during the month of October, which has remained rather stable and only shows a slight increase month over month.  As we close out 2016 and move into 2017, we may see some clouds on the horizon for the condo market.  In October there were 28,489 condo units listed for sale and that figure does not include the thousands of pre-construction units that continue to flood the market.  The combination of rising rates, a stronger dollar and a gradual increase in available inventory will impact this market into 2017 and beyond so it will certainly be worth monitoring.