According to new data from First American, low mortgage rates drove a 1.7% increase in sales of existing homes and apartments in Miami.
First American’s potential index showed home sales rose to 5.3 million.
This increase, with a seasonally adjusted annual rate in December 2019, exceeded expectations by 1.2% or approximately 64,830 sales.
“The growth in market potential for existing home sales is the net result of several forces driving or destroying the potential of the housing market,” said Mark Fleming, Chief Economist at First American.
“However, one market driver is actually both a positive and negative influence on the potential of the housing market: persistently low mortgage rates.”
Despite their positive impact on the housing market, low mortgage rates could deter homeowners from selling, according to Fleming.
“While historically low rates increase purchasing power and make it more affordable for potential buyers to buy a home, they also discourage many existing homeowners from selling,” Fleming said.
“There is little to no benefit of homebuying power for homeowners with an already low mortgage rate, so the only way existing homeowners can increase their homebuying power is through growing household income.”
“This helps explain why more and more homeowners have decided to stay, reducing the inventory of homes for sale.”
Sales of Houses and Apartments in Miami
That’s why as a result, the length of tenure, or the time one stays in a home between moves, increased 8%, from less than six years in 2018 to about 12 years in 2019.
“The consensus among forecasters is that mortgage rates will remain below 4% for the next two years,” Fleming said.
“Low mortgage rates and increased homebuying power will continue to drive demand, as will the demographic winds of millennials entering their homebuying years.
On the other hand, those persistently low rates will discourage the sale of existing owners.
This will increase the length of tenure and limit the inventory of homes available for sale.
“However, that doesn’t necessarily mean we should expect the potential of the housing market to decline,” he said. “There are many considerations that go into the housing tenure decision, which could result in the desire to move.
Lack of housing supply has been the norm for several years, but the housing market has endured.”
This is how with a great closing in 2019, the year 2020 arrived with great dynamism in the real estate market.
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