Still, major changes in the nation’s hectic housing market are months away, Yun said in a June 29 report. “Some calming of the market is only expected to happen in late autumn of this year and into 2022. Home price growth will be in the single digits in 2022 … A home price decline is unlikely.”
The trajectory of the residential real estate market is important, as every home sale in the state has an estimated local economic impact of $90,300, according to the National Association of Realtors. In addition, the housing market often is considered a reflection of the local economy's overall health.
Amid a historic period in Orlando’s red-hot housing market, real estate professionals identify one factor that eventually may slow home demand: mortgage interest rates, which multiple analysts expect to climb later this year.
Rates rising above the current historically-low levels will not crater the housing market, but instead cause some buyers to “back off,” Orlando Regional Realtor Association 2021 President Natalie Arrowsmith told Orlando Business Journal. “Something at some point has to give. I think it’s going to be interest rates.”
Rock-bottom interest rates, which influence what a borrower pays on a mortgage, contributed to the past year’s housing boom. The average mortgage interest rate in Central Florida hit a 20-year-low of 2.7% in December, according to the Orlando Regional Realtor Association. It ticked up to 3.07% in March but slowly fell to 2.97% in May.
These low rates make a home purchase more appealing. There were 3,872 home sales in Central Florida in May, the third-strongest month for home sales in 20 years, according to the Realtor association. The two months with more home sales were also in 2021, a testament to the intense seller’s market in metro Orlando partly caused by new residents pouring into the region.
However, interest rates are projected to undergo an upward swing in the second half of the year. For example, National Association of Realtors Chief Economic Lawrence Yun expects the 30-year fixed mortgage rate to hover around 3.5% nationwide by the end of 2021, according to a June 28 report from the organization.
Likewise, Greg McBride, chief financial analyst for financial services company Bankrate LLC, said in a July 1 report that rates likely will creep up in July due to actions by the Federal Reserve, economic growth and higher inflation.