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South Florida’s housing market may see a lot more cash buyers than other regions, but it remains sensitive to mortgage rate changes. The market has stabilized as borrowing rates have been dropping since the spring.
It means the regional real estate market has plenty at stake with this week’s meeting of the Federal Reserve’s Open Market Committee, the group which decides the Fed’s short-term interest rate and influences all kinds of borrowing rates. The group will make its announcement Wednesday, just after 2 p.m. Eastern time.
The Fed is expected to cut its target rate by one quarter of one percent. It would be the central bank’s third rate cut this year. The Fed first cut interest rates in September after cutting rates three times in 2024.
The pace of home and condo sales increased in Miami-Dade County for the second month in a row in October. Region-wide, it was the first month in more than two years total sales increased. It has helped underpin optimism that sales activity will continue picking up.
“The strong finish this year sets up the market for a full-year growth in 2026, underpinned by several favorable tailwinds — lower mortgage rates, sustained condo market stabilization, and an expected increase in out-of-state migration, particularly from New York and California,” Miami Realtors Association Chief Economist Gay Cororaton said.
There’s optimism the lower rates will help buoy residential real estate throughout Florida.
“Lower rates have boosted everything, and new pending sales of condos and townhouses are trending upward,” said Florida Realtors Chief Economist Brad O’Connor.
About a third of existing home and condo deals are done in cash nationwide, insulating those buyers from changes in mortgage rates. It’s even higher in South Florida, especially in the condo market where more than half of sales in October were done in cash.
Still, the market is sensitive to mortgage rates, especially among first-time buyers who have had difficulty chasing the regional market as prices skyrocketed during the COVID-19 pandemic.
Higher mortgage rates also may contribute to the “lock-in” effect, when existing home owners with historically low mortgage rates are reluctant to sell and face higher borrowing costs. Real estate firm Redfin estimates that 53% of homeowners with mortgages have locked-in rates below 4%. Conventional mortgage rates today are around 6.2%, according to data from Freddie Mac.
Federal Reserve Bank of Atlanta Pres. Raphael Bostic, whose region includes Florida, was skeptical in November of the need for lower interest rates. He said he favored “keeping the funds rate steady until we see clear evidence that inflation is again moving meaningfully toward its 2% target.” While Bostic participates in the Fed’s discussions, he does not have a vote this year on the bank’s interest rate setting committee. He has announced his retirement at the end of his current term in February.
The Fed meeting this week comes without a regular cadence of economic data on inflation and employment. The most recent unemployment and inflation data is from September due to the 43-day government shutdown.
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