TAMPA, Fla. (WFLA) — Florida and other parts of the U.S. are finally starting to see more houses on the market, but higher mortgages are pushing affordability further away. Real estate company Redfin reports that homebuyers are now looking at smaller sizes to cut costs.
In early October, Redfin analyzed market data across the U.S. to see how home purchases were trending. Their findings suggest buyers on a budget are looking at smaller homes, with a smaller square footage, to increase chances of affording monthly payments.
In August, closed sales of single-family homes statewide totaled 24,877, down 15.8% year-over-year, while existing condo-townhouse sales totaled 10,000, down 20.3% over August 2021, according to data from Florida Realtors Research Department.
The change of pace comes as more homes are coming back on the market after months of purchase volume slowing down, but rising mortgage rates are making prospective buyers get more flexible with what they’ll move on.
Freddie Mac, a federally-backed mortgage company, updates its measure of 30-year fixed rate mortgages weekly. The current measure, reported on Oct. 6, was a 6.66% interest rate. The week before, on Sept. 29, the rate was 6.7%. Rates have been on a near-constant increase since mid-August, when they hit more than 5%.
“Mortgage rates decreased slightly this week due to ongoing economic uncertainty,” Sam Khater, Freddie Mac’s Chief Economist, said. “However, rates remain quite high compared to just one year ago, meaning housing continues to be more expensive for potential homebuyers.”
For Redfin’s analysts, it meant the differences in price and size ranged widely across the country.
In San Diego, Redfin reported that homebuyers could afford just 931 square feet with a $3,000 monthly budget. It’s a 435 square foot drop from the year before, with the same cash on hand every month.
For Tampa homebuyers, the amount of space available for a home costing $3,000 per month actually increased, from 1,544 square feet to 1,565, according to Redfin.
“That’s likely because the selection of homes for sale this year is very different from the homes for sale last year,” Redfin said. “They may be larger, but less valuable in other ways–perhaps they’re in less desirable locations or old and unrenovated–and thus priced lower.”
Nationally, however, Redfin reported higher mortgages have meant homebuyers lost at least 100 square feet due to lower affordability. Similarly, Zillow reported the higher mortgage rates would “likely dampen demand” in the fall, putting more “downward pressure” on home prices. Despite the volatility, Zillow also reported that active inventory rose 3% from 2021’s levels.