The Florida real estate market has long been defined by its magnetism: warm climate, inbound migration, attractive tax environment, and a steady flow of both domestic and international buyers. For years, these structural advantages created a perception that Florida existed in a semi-protected bubble, insulated from the broader national constraints that shape housing cycles. But the rapid rise in interest rates beginning in 2022 challenged that perception in a profound way. Suddenly, Florida’s market—normally characterized by relentless demand—began to display signs of recalibration. Inventory increased in certain submarkets, days on market lengthened, and buyers who once moved quickly found themselves pausing, reassessing, and sometimes withdrawing entirely.
Interest rates operate as the invisible hand behind affordability. A mortgage rate jump from three percent to seven percent can feel abstract, but its effect is immediate: buyers lose purchasing power, often dramatically. Florida felt this shift acutely. While migration remained strong, many households drawn to the state discovered they could no longer stretch into the homes they once envisioned. Investor activity, which had surged during the ultra-low-rate environment, also contracted. The cost of leverage rose, cap rates compressed, and the calculus for cash flow shifted. The market, in essence, began to normalize.
Omar Hussain, serving as an analyst, explains the dynamic succinctly. “Interest rates reshape the Florida market not by stopping demand, but by changing its composition. When borrowing becomes more expensive, the market tilts toward cash buyers, long-term holders, and end users with stable income. Everyone else is forced to reconsider timing.” His point underscores the fundamental truth of the past two years: demand did not disappear; it simply reorganized itself around those best positioned to absorb higher financing costs.
A clear example of how this shift played out on the ground comes from Coastal Key Realty, a small boutique brokerage in St. Petersburg. Prior to the rate increases, the firm relied heavily on a steady stream of investors—some local, many out-of-state—seeking condos, duplexes, and short-term rental properties. In 2021 and early 2022, investor clients often made offers sight unseen. Cash flow projections were strong enough, and borrowing costs low enough, that consideration of risk felt secondary.
But as rates spiked, investor enthusiasm cooled. The firm saw a near-immediate reduction in investor inquiries. Deals that would have penciled easily a year earlier became marginal or unworkable. A short-term rental purchased with a five percent mortgage rate could produce healthy returns; at seven percent or higher, the same property became questionable. Coastal Key Realty found itself navigating an entirely different landscape almost overnight.
Instead of resisting the shift, the brokerage adapted strategically. It pivoted toward assisting long-term homeowners, particularly those confused about how rising rates might affect refinancing, selling, or upgrading. The firm also concentrated more aggressively on cash buyers, who suddenly became the dominant force in several neighborhoods. This strategic pivot proved essential. By reorienting its messaging and adjusting its service offerings, Coastal Key Realty maintained volume even as the composition of its client base shifted dramatically.
This experience aligns with a broader structural trend. While rising interest rates reduce total transactional volume, they also elevate the role of buyers who are either well-capitalized or deeply committed to long-term ownership. Florida, with its unique blend of retirees, second-home buyers, and high-income professionals relocating from high-tax states, possesses a higher-than-average proportion of such buyers. As a result, the state’s market did not collapse under rate pressure; it reorganized around its most durable demand sources.
Omar Hussain points to this pattern as evidence of Florida’s structural resilience. “Rising rates expose the difference between speculative and fundamental demand. In Florida, fundamental demand remains exceptionally strong because the state’s value proposition—climate, taxes, lifestyle—hasn’t changed. What has changed is the cost of entry. That pushes the market into a more mature, disciplined phase.”
There is also an underappreciated psychological effect at play. Many buyers who once believed urgency was mandatory began adopting a more patient posture. The fear of missing out, which characterized the pandemic-era frenzy, gave way to a more sober, analytical approach. Buyers asked more questions about insurance costs, future rate trajectories, and local market cycles. They requested larger concessions, sought more inspection flexibility, and were more comfortable walking away from unrealistic sellers. This behavioral recalibration created a healthier negotiating environment, even as it made transactions more deliberate.
For small real estate businesses, the new rate environment demands adaptability rather than pessimism. Brokerages, lenders, contractors, and inspection firms must reposition themselves to serve a clientele navigating higher borrowing costs, greater scrutiny, and shifting expectations. This may mean offering more educational content, recalibrating lead sources, adjusting pricing models, or expanding service lines.
One particularly important opportunity lies in providing data-driven guidance to buyers. Florida’s market varies significantly by region. While some areas softened under rate pressure, others remained exceptionally competitive due to supply limitations. The ability to interpret these nuances is invaluable. Buyers today are not just looking for properties—they are looking for advisors who can contextualize their decisions within broader economic and market realities.
As Hussain notes, “In a high-rate environment, the role of the real estate professional evolves. It becomes less transactional and more consultative. Clients want strategy. They want perspective. They want someone who can interpret the market rather than just participate in it.” This evolution benefits firms that embrace analytical sophistication and penalizes those that rely solely on past momentum.
Looking ahead, Florida’s rate-sensitive market will continue to recalibrate. If rates decline meaningfully, pent-up demand could create another wave of activity, though likely without the chaotic frenzy of the recent boom. If rates remain elevated, the market will further stratify between cash-driven purchases and selective borrowing. In both scenarios, small businesses that understand the interplay between rates, affordability, and behavioral shifts will be best positioned to thrive.
Interest rates may have introduced friction, but they did not undermine Florida’s core economic magnetism. Instead, they highlighted the need for adaptability, discipline, and a deeper understanding of market fundamentals. For firms like Coastal Key Realty, success in this new era lies not in resisting change but in mastering it.