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Accelerating Real Estate Market & Interest Rates May Mean Rising Rents

October 3, 2013

The Florida real estate market is on the rise, but locals are experiencing a spike in interest rates — which may mean higher rent.

The Bergstrom Center for Real Estate Studies in UF’s Warrington College of Business Administration conducted a survey that showed investment outlook in the real estate market declined for the first time in two years. Interest rates went up 0.66 percent between the beginning and end of this year’s second quarter. The results apply to apartments, commercial rental property, single-family houses, condominium development and developable land.

The Florida real estate market is on the rise, but locals are experiencing a spike in interest rates — which may mean higher rent.

The Bergstrom Center for Real Estate Studies in UF’s Warrington College of Business Administration conducted a survey that showed investment outlook in the real estate market declined for the first time in two years. Interest rates went up 0.66 percent between the beginning and end of this year’s second quarter. The results apply to apartments, commercial rental property, single-family houses, condominium development and developable land.

Timothy Becker, the center’s director, said interest rates went up another 64 basis points since August, which translates into about a 1.3 percent increase in interest rates. If that trend continues, Becker said, people will start worrying about investing in the real estate market. He said rising interest rates could lead to higher rent prices, which could narrow down the places students can afford. “If I were wanting to invest in student apartments right now, and I was coming to Gainesville and looking at buildings, interest rates are 1.3 percent higher than they were three months ago, and so that has an impact on how much I can afford to pay,” he said.

Cheryl Hartley, a Realtor with Prudential Trend Realty, said UF undergraduates tend to lean toward apartments and condos, while the graduate students seek houses in residential areas. She noted she has already seen reactions among her clients to the rise in interest rates. “What they felt they could afford six months ago, they may not be able to now” she said.

Fortunately, according to a section in the survey that references information from Visit Florida, state tourism increased by 2.6 percent in the second quarter. This rise in tourism could have a positive effect in investment in the land development sector of the real estate market.

Becker said it is unknown when the rise in interest rates will end, but, as a whole, the real estate market is improving despite the rise in interest rates.

Source: Alligator.org

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