Interest rates are expected to spike next week. The Federal Reserve previously indicated it would raise rates following its March meeting. That added expense will considerably impact an already tight housing market.
When interest rates on homes spiked in the past, buyers had options. Sell and move further out where you get more for your money, or sell and rent. These days, “If you trade rents for distance you end up probably paying a lot of that back and increase fuel expenditure,” said FGCU Real Estate Professor Shelton Weeks.
Weeks and Visiting Professor Bennie Waller worked on a study on Florida’s rental crisis. Waller said with gas prices fueling inflation; interest rates will soon spike. “Fewer people are going to be able to qualify to buy a home. There’s going to be more demand on the rental market,” said Waller.
That will put future home buyers in a tough spot. “Most people don’t understand (at) my age that they have to pay at least three and a half percent down payment on a house,” said FGCU student Evan Milionis.
Milionis dreams of buying a home, but that dream is on hold. The same is true for lots of people already in the workforce.
Weeks’ and Waller’s report says rent in Fort Myers is on average 14.9% higher than it should be, up 28% in the last year.
“The values I’m quoting you are the Zillow values that are right down the middle, the average middle-class American in this area, that you know, they work at Walmart, they work at the city schools, they work at FGCU,” said Waller.
If people can’t buy a house and can’t afford to rent, where do they go? “There aren’t many really prime spots where we can add inventory. So it’s pushing the growth out further and further away from the location for jobs and all the other activities,” said Weeks.
It’s a double-edged sword. People might save on housing but will spend more on gas.