Ray Seaman, eXp Realty
Your Florida Land Agent
(850) 757-3681

How are higher interest rates affecting Florida’s land market?

Hey folks, it’s Ray Seaman with eXp Realty, your Florida land agent and in this video I wanted to answer a question that I got again recently. This is not the first time I’ve gotten this question, which is, how are the interest rates affecting the land market?

And this is a great question because if you follow any kind of real estate news, you know that interest rates have gone up, as recording of this video in early 2023. The 30-year fixed mortgage rates are usually hovering somewhere between six and a half and 7%, depending on what day or week you’re looking at it. And this is something that affects everyone in real estate, but it certainly affects land. And in this video, I want to get into that a little bit more.

So, the first thing to point out is that higher interest rates affect everyone in the land market, whether you’re looking to sell your land or whether you’re buying land. And at the end of the day, higher interest rates mean that money is just more expensive.

And so the primary way that affects all real estate, land included, is what the mortgage interest rates are. Most people don’t have a bunch of cash, and so they finance their real estate purchases. So, that means that it is harder for buyers to get financing. It’s harder for them to qualify for financing and there may very well be less financing overall available. And this primarily affects two key land buyers in the market. Those are home builders and developers.

If it’s going to cost a home builder more money to build their new homes, that affects land prices. And also if home builders are unable to sell their existing inventory because there’s not enough qualified buyers, this all results in more supply, which of course drives down demand. So, that’s just overall downward pressure on land. And we’ve been seeing that certainly since the late summer of 2022, where land prices throughout the country, and certainly in Florida, have plateaued, or at least slightly declined depending on which market you’re looking at.

There’s certainly a lot more supply on the market as well. Almost no matter where you look, there’s lots of different vacant land properties for sale, and it’s a lot more inventory than what was happening earlier in 2022.

This means sellers are are in a tough spot because there’s fewer buyers out there buying. Obviously there’s always cash buyers, but there’s only so many of them. So a good thing that sellers need to consider if they’re looking to truly sell their property, is a couple things.

First, they may need to consider lowering their price to make their land more attractive to buyers and/or also considering offering a creative financing option in the form of owner financing, where you become the bank. If bank financing is hard to get, well, you can become the bank. If you’re a landowner and you own your land free and clear, that means you don’t have any debt or mortgage on the property, you can become the bank and offer terms to a buyer where they put in a certain down payment and they’re paying you in monthly installments until the land is paid off. And you can charge an interest rate. Or, you don’t have to charge an interest rate. There’s a bunch of things to consider, and I’ll probably do a whole separate video on owner financing.

In terms of how this is all affecting buyers, yes, it’s harder to get financing to buy land if you’re going to build on it, or develop it right away. Nonetheless, if you’re a buyer who has good cash savings, you’re in a very good position in this market.

Cash becomes king when credit becomes scarce. So, at the end of the day, that’s the real big advantage for buyers right now. There’s just a lot more opportunities out there to score some deals, and get some discounts off of asking prices because there’s lots of sellers out there looking to sell their land.

What goes for sellers goes for buyers here too. If a seller isn’t offering owner financing, go ahead and ask. The worst they can do is just tell you no. Or, they may need a little bit of educating from you as to what owner financing even means. That’s certainly something I can help you out with as an agent as well.

Hopefully you found this video helpful, in terms of understanding how interest rates are affecting the land market, good news and bad news for both sellers and buyers alike. New opportunities get created when these difficulties arise, and I can certainly be someone who can help you take advantage of those, whether you’re a landowner or a land buyer.

Reach out to me anytime. And again, if you found this content helpful, please like this video, follow me, subscribe, share, do whatever you need to do. There’s not a whole lot of land focused content out there on the internet, so I’m trying to kind of fill that gap and you can help me by like, following, sharing, et cetera. Thanks for watching and I’ll see you in the next video.

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