South Florida home and condo buyers who borrow money are charged some of the highest mortgage rates in the country.
The median mortgage rate was just a hair below 7% last year, according to a research from real estate and construction data firm Construction Coverage.
“It's no surprise to me to see us at the higher interest rate bracket,” said Orlando Diaz, president of Florida Association of Mortgage Professionals.
The analysis examined conventional mortgages approved last year to purchase homes. A conventional mortgage is not insured or guaranteed by the U.S. government. It is the most common type of mortgage used to purchase a home.
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Florida ranked in the top 10 states with the highest median interest rate across all fixed-rate mortgages. Other Florida areas matching South Florida's comparatively higher median interest rate were the Naples, Fort Walton Beach and Panama City markets.
Diaz said the large presence of small business owners in South Florida could be one reason the region has a higher median mortgage rate, since business owners can face stricter qualifications than a standard borrower with a regular salary. The higher home prices here may also require a jumbo mortgage loan with a higher rate. Jumbo mortgages are those over $806,500. They tend to come with higher interest rates.
The Miami metropolitan area also came in last among large regions for the proportion of home borrowers with a fixed mortgage rate under 7%. Only 58% of mortgages are under that level according to the research. After falling throughout the COVID-19 pandemic, mortgage rates started to rise in early 2022 as the Federal Reserve began raising its target interest rate to address generational high inflation. National mortgage rates have been over 6% for a fixed 30-year mortgage for almost three years.
The median price of a single family home sold in Miami-Dade County in March was $670,000. One in three homes sold for over $1 million. One in four homes in Palm Beach County were bought for at least $1 million in March. The median price of all existing homes sold was $625,000. Broward County’s median price of a house in March was $635,000 with about one in five selling for at least $1 million.
The number of condominiums in South Florida also may influence higher mortgage rates compared to other regions. Borrowing money to buy a condo usually comes at a higher price than buying a single family home. Lenders think a condo mortgage comes with higher risks than a home mortgage due to the shared nature of condo living.
The Miami Association of Realtors has been complaining for months about the lack of favorable loans available for buyers of condos in many buildings. Data from the U.S. Department of Housing and Urban Development shows only 17 condo buildings in South Florida are approved for buyers to receive mortgages backed by the Federal Housing Administration. A FHA-backed mortgage has less restrictions than a conventional mortgage, including lower credit scores, lower down payments and lower interest rates.
”Apples to apples, if somebody goes to apply for a primary home that's a single family residence versus a condo, the pricing for a condo is gonna be higher,” Diaz said. “Since we have a higher concentration of condos here in South Florida, more so than around the state, we're naturally gonna have a higher average interest rate compared to the rest of the state.”
The effect of higher mortgage rates here may be muted somewhat, though. One out of every four homes is sold for cash in South Florida. Half of all existing condo sales were in cash in March.
