Rising Mortgage Rates and Their Impact on Orlando’s Vacation Home Market
U.S. Mortgage Rates Continue to Climb
The average 30-year mortgage rate rose to 6.84% this week, up from 6.78% the previous week, marking its highest point since July, according to Freddie Mac. While this is below last year’s peak of 7.29%, the upward trend is concerning for real estate markets, particularly in areas like Orlando, where the short-term rental (STR) market plays a significant role.
Rates on 15-year fixed mortgages, popular among those refinancing, also inched up, reaching 6.02% from 5.99%. While lower than last year’s 6.67%, the steady increase in borrowing costs continues to challenge property investors and potential buyers alike.
What This Means for Orlando STR Investors
Higher mortgage rates directly impact the profitability of short-term rental investments. For current owners, rising borrowing costs can eat into margins, especially if they’re carrying adjustable-rate mortgages or considering refinancing. Moreover, as home prices in STR-heavy areas of Orlando remain near all-time highs, potential buyers are hesitant to enter the market, further slowing demand.
This combination of higher rates and declining affordability could lead to a cooling of home values in STR-friendly neighborhoods like Kissimmee, Davenport, and South Clermont. Economists are already predicting further price corrections in 2025, potentially leading to steeper losses for those holding onto properties longer.
The Fear of Holding Onto STR Properties
For many investors, the question becomes: Should I hold onto my vacation rental property or sell before deeper market corrections occur? Rising costs, coupled with potential declines in property values, create a perfect storm of uncertainty. STR markets thrive on consistent demand and predictable cash flow—both of which can be disrupted in a high-rate environment.
If rates continue climbing and economic uncertainty grows, STR investors could see reduced bookings, higher maintenance costs, and lower returns on investment. Many are now considering whether it’s better to sell their properties in the current market while prices remain relatively high, rather than risk a dip in value as the market softens further.
Opportunities in the Current Market
While challenges persist, selling now could be a strategic move for those looking to lock in profits before the market corrects further. With home values still strong in Orlando’s STR hotspots, sellers have an opportunity to maximize their returns. Additionally, leveraging a skilled real estate team that specializes in vacation home sales can help streamline the process and target buyers who see long-term potential in Orlando’s thriving tourism industry.
As mortgage rates climb and predictions of deeper market corrections loom, Orlando STR investors face critical decisions. Rising costs, potential property devaluation, and shifting market dynamics should prompt owners to reassess their investment strategy. Whether you choose to hold or sell, staying informed and proactive will be key to protecting your investment in this volatile market.