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Renting Versus Buying: How Increasing Interest Rates Are Affecting Florida’s Housing Market

As the Florida real estate market continues to evolve, potential homeowners and renters are facing a pivotal decision. With interest rates on the rise, the question of renting a home versus buying has never been more critical. According to data from the Florida Department of Financial Services, interest rates in Florida have reached nearly 8 percent, an increase of over 3 percent since 2021. 

Ted Guarnero, licensed realtor and founder of the Florida-based Guarnero Group, has recently seen some interesting trends in Florida’s fluctuating real estate market. While he acknowledges that many individuals consider alternative options to buying, such as renting, there has still been a noticeable surge in interest from potential buyers. 

“75 percent of the business we get is a potential buyer calling to buy a home,” Guarnero says. “We always ask if they have a home to sell because we love to represent them on both sides of the transaction and potentially get them more money for their current home.”

Additionally, Guarnero has noticed that as interest rates have increased, many of the people he deals with are cash buyers. This means they’ve likely already sold their house and are only looking to buy.

“However, cash buyers only represent a small portion of buyers in general,” Guarnero explains. “Many buyers here are still getting a mortgage or a small mortgage. These people are also considering renting based on rising interest rates.”

Potential buyers counting on affordable interest rates to make their dream of homeownership a reality are choosing to delay their home purchases and instead opting to rent. Although, Guarnero notes that prices are at an all-time high due to this surge in renting.

“The furnished rentals that are $8,000 now were $4,500 three years ago. They’ve almost doubled,” he explains. “But people are still willing to pay.”

The surge in rentals has also made short-term rentals a thing of the past. In past years, landlords were more accommodating and would allow properties to be rented out for one month. Now, landlords are requiring three to four-month leases as a minimum. 

“Landlords want one person to take it for the full amount, and it’s no longer $5,000 or $6,000; now it’s $8,000 or $10,000 for three or four months.”

Despite these challenges, Florida’s real estate market experienced a significant boost during the COVID-19 pandemic. Many were looking for a change of scenery and more leniency when it came to sheltering laws. 

“COVID-19 did affect us, but it was surprisingly positive,” Guarnero explains. “Everyone from the Northeast believed Florida was open for business and wanted to come here because it was like nothing ever happened. Restaurants and everything were open.” 

However, Ted also acknowledges that rising interest rates aren’t without consequences. He notes that some homeowners in northern states struggle to sell their properties due to higher mortgage rates. Many are redirecting their cash investments to Florida, which is hurting sales in states like New York, New Jersey, and Connecticut.

Even though interest rates have increased significantly, Guarnero believes that the overall housing market in Florida has remained stable and allows more people to buy this year than last year, where cash offers won over mortgage contingencies.

“When I analyze the numbers, I’ve noticed that the number of sales has decreased, but not dramatically, usually around 5-7 percent depending on the town,” Guarnero explains. “But in most towns, the sales prices have held steady and even increased by 1 or 2 percent.”

Florida’s housing market is navigating a delicate balance between rising interest rates, rental scarcity, and a continued demand for homeownership. As the decision between renting and buying has become increasingly complex, Ted Guarnero offers insights on current industry opportunities and valuable guidance to those looking to make a housing decision in Florida.