Miami Real Estate Buyer Alert!
Since 2008 the Federal Reserve has been working on measures to help keep the financial market stable and provide resiliency should there be another economic downturn. However, there are still signs that we may be heading for problems. Since 2015 interest rates have been increasing. The continual increasing of interest rates may have an effect of the Miami real estate market for the following reasons:
- The more interest rates rise the more the value of cash flow decreases. This may result in potential home buyers unwilling to risk their hard earn capital they have saved for a down payment on purchasing a home. This can affect younger buyers especially, since they normally have less income to invest in a down payment.
- Rising interest rates also increases the long-term cost of owning a house, since more of your mortgage payments will go to pay the interest for a longer period of time.
- Higher interest rates also increase the cost of borrowing.
What all this means, is that some potential property buyers, especially first-time home owners may be a little gun shy when it comes to investing their money in a real estate market if they are unsure that can meet raises in mortgage payments over the long haul.
While rising interest rates and other measures by the Federal Reserve may cause some potential buyers to postpone buying property it isn't all bad news.
For those individuals who have plenty of disposal income and are looking for investment property, this may actually provide them with more options in Miami properties to buy since fewer property buyers, means there will be available properties on the market.
In addition, sellers looking to sell their property, may actually be willing to consider lower offers for their property rather than having their Miami properties sit on the property for long periods of time.
However, caution may be urged, since drops in housing prices like occurred in 2008 could greatly devalue property and as the past has taught us, recovering property values can be slow and painful process.
How Raises in Countercyclical Capital Buffer Could Affect Real Estate Buyers
The Federal Governors who oversees the financial buffers to help keep the economy stable could decide to raise the countercyclical capital buffer for banks, which would force them to set aside more capital as a cushion in case of a down turn. This may mean that the banks actually have less capital to loan, which may result in them funding fewer mortgages.
Is a Downturn Eminent?
If you are considering buying property in Miami, you may be wondering if a downturn is eminent. According to Boston Fed President Eric Rosengren, there are no alarms sounding off signally that a downturn is about to occur, but there are plenty of reasons for caution.
What this all means is that anyone considering buying property in Miami or the rest of the country should continue to watch the financial health of the economy and look for affordable properties to purchase.
Eddie LaRosa and Miami Real Estate Official of EWM Realty International are local specialists who work on providing the latest local information. If you would like to buy or sell in Miami contact us today at 305-968-8397 or send us a message here. We specialize in the Miami Real Estate market and our knowledge in the area has helped countless of our real estate clients.