How Much Has Your Purchasing Power Increased In 2024?

In the challenging South Florida real estate market, there's a new silver lining for homebuyers. Interest rates have recently dropped from their highs down to roughly 6.7%. This is a huge increase in purchasing power for everyone. If you were looking to keep your budget under $3,000 per month, this means you can now aim for homes valued around $453,000. This is a notable increase in purchasing power – nearly $40,000 more compared to October 2023, when the same budget could afford a home worth $416,000 at an average rate of 7.8%.

How much home can you afford as mortgage rates change?

The median priced home in South Florida is currently around $615,000, meaning it would cost roughly $3,572 at a 6.7% rate for Principal & Interest (not including taxes & insurance). This is a reduction from the $3,984 monthly payment required when rates peaked at 7.8%.

2024 brings a sigh of relief for homebuyers as mortgage rates retreat from their two-decade peak last October. While today's rates are significantly higher than the pandemic-era lows of 3%, buyers are adapting to the 6% range. Rates are unlikely to ever come back down to the 3% range, and buyers are starting to get used to the idea that this is the new normal.

Starting in the middle of January, our team started to see multiple offers again on our listings and when working with buyers. It's not the peak frenzy like we saw in 2021, but well-priced properties or properties that are fully updated are still selling very fast with a lot of buyer interest. Last year, many buyers were waiting for rates to drop, but now that they've come down over 1% from their peaks those buyers are back in the market. As more buyers reenter the market, its bound to get more competitive again. 

Looking ahead, mortgage rates are expected to stabilize in the mid-6% range. While the Federal Reserve has been signaling rate cuts soon, a lot of that has already been factored into mortgage rates. We think mortgage rates will remain pretty stable around the 6.5% range for most of 2024. 

Redfin Chief Economist Daryl Fairweather advises, “For those serious about house hunting, trying to time the market based on mortgage rates may not be fruitful. The focus should be on personal and financial readiness. What's crucial is finding a home that suits your long-term needs and fits your budget. The era of historically low rates has passed, making market timing less critical than in 2021.”

This evolving landscape presents a unique opportunity for buyers and sellers alike. Understanding these changes is crucial in making informed decisions in the dynamic real estate market.