Homeownership grows more unaffordable as average mortgage payment increases over 95%

The average mortgage payment for a home has almost doubled in South Florida over the past year as interest rates skyrocket.

With interest rates double what they were at the beginning of the year, the typical monthly payment for a mortgage in South Florida is $2,452, a 96.5% increase, an analysis from Zillow shows.

It’s a stark jump from what it was a year ago: $1,248.

“South Florida has already been one of the most unaffordable markets in the country for a long time,” said Nicole Bachaud, senior economist with Zillow. “It’s putting a significant strain on household budgets when it comes to buying and affording a new mortgage.”

According to Zillow’s analysis, South Florida has the third highest increase in the country for monthly mortgage payments.

To calculate which areas saw the highest increase in growth, Zillow used the typical home value in the area, assumed a 20% down payment, a 30-year-fixed mortgage, and used the Freddie Mac Primary Mortgage Market Survey for interest rates for 100 metro areas in the country.

Majority of the metros that had the largest increases were in Florida.

Fort Myers saw a 102.5% increase in monthly mortgage payments from last September to this year, Tampa saw a 93.9% jump and Jacksonville saw a 92.7% increase.

While increasing mortgage rates have played a role, the spike in home values hasn’t helped.

“Overall, Florida has seen some of the biggest increases in terms of home values over the past three years, especially in the last year,” Bachaud said. “It’s more exacerbated in those markets that have seen the highest increases in home values as well.” Bachaud said that buyers flocked to Florida during the pandemic, putting even more pressure on the market.

The jump from the record low interest rates of 2.7% during the height of the pandemic to the current rate of almost 7% has put a damper on buyer demand, as many homebuyers struggle to reconcile their budgets with rising housing costs and high interest rates.

“People won’t be able to qualify for a mortgage and afford these prices, so it’s going to limit the number of people who are shopping for homes,” said Bachaud.

It’s also likely that buyers could see a slight pull back in inventory as some sellers decide to keep their homes with the interest rate that they currently have.

Both of those things are likely to lead to lower sales, she added.

For buyers who can afford to buy, waiting for interest rates to go down may not be the best decision. It’s unlikely they will go back to the 3% rate, and home prices in South Florida probably won’t plummet in the meantime.

Bachaud has some caveats about what buyers should expect. “As many people are leaving the market, it’s going to lead to less competition for houses — buyers have a little bit more negotiation power.“ But, she noted, “It’s not going to get more affordable.”

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