Fort Lauderdale Real Estate Market Report 2022/2023 (Part 3)

In Part 3 we discuss the reasons WHY changes are occurring in the Fort Lauderdale Real Estate Market. Typical market reports usually present numbers and charts without the necessary context for the reader to comprehend what the numbers mean and “why” the market is reacting in a certain way. In this section of the report we will review current Economic Influencers and how they are impacting the housing market in Fort Lauderdale. This review will help us forecast how these impacts could play out over time.

Primary home buyers. Interest rates have historically been much higher. Historically rates have averaged 7.77%. Interest rates in recent years were at the lowest levels until 2022. The low interest rates supercharged real estate sales in Fort Lauderdale . Buyer psychology was affected by the low interest rates because house payments were manageable. Buyers were able to stretch their budgets and were more aggressive in offer negotiations. Now that interest rates are rising the cash “flush” Buyer Psychology has switched to a more conservative stance. This does not mean the downfall of the real estate market. This just signals that Buyers’ are returning to a more normal buying psychology. They are more cautious and overbidding for overvalued properties will no longer be acceptable.

Interest rates into 2023. What is likely to come in the coming 6 months? In a recent article in Forbes, the 30-year, fixed-mortgage rate forecasts of several experts are shared and the opinion is that they will vary from just above 5% to as high as 7% by the end of 2022. To put this information into historical data context, between April 1971 and June 2022, 30-year mortgage rates averaged 7.77 percent. So even with the 30-year FRM above 5%, rates are still relatively affordable.

According to a report from Forbes, inflation in the U.S. was 8.6% at the beginning of July 2022. To put this number into context, the long-term average inflation rate in the U.S. is around 3.2% and in 2021 the interest rate averaged 4.70%. In other words, the current year over year increase to inflation is +82%.

The effects of increased inflation are very evident in new construction homes and condos. Increased inflation raises the cost of labor and building materials for new construction. Supply chain issues further exacerbated the increased costs of building materials. We see this reflected in the increased price per square foot valuations of new homes and condos. The chart below shows neighborhood examples of price increases for new construction homes since 2020.

Fort Lauderdale Real Estate Market Report 2022 | The Effect of Supply Chain Issues