Mortgage Rates increasing can be a huge factor in the reduction or stabilizing of home values - San Diego
Starting off the year 2021: The San Diego 1st quarter "Low Inventory" (homes for sale) is one of the main causes of the continued upward trend of home prices. Another main factor to high home pricing as-you-know is the historically low interest rates that were still being offered during the beginning of 2021. These low rates indeed do create a lot of buyer competition, thus raising prices. Combine the aforementioned two and you got it... we have had housing prices that are looming larger and larger.
If you are a San Diego first time home buyer, do you feel that you are being priced out? And are you a repeat buyer who needs a larger home to accommodate a growing family? In both scenarios, are you feeling that there is no end to home prices that keep escalating up-and-up? The upward indicators of recorded sale prices are not only frustrating the first time home buyer, but it is also creating a sense of negative and/or helpless anxiety to the 1st timers and to those who want and need to "move up" in regards to the size of their current home.
San Diego County is starving for inventory, therefore we are still experiencing that "low supply versus high demand" concept of which the economic end-result is upward pricing.
Can we all collectively agree that pricing needs to at least "plateau off" in order to give some buyers a break? As of late, it does not help potential buyers when Real Estate prognosticators have recently stated that San Diego home prices will go up approximately another 8% this year 2021.
Personally I think that these current monstrous and/or giant sized current home prices may soon go into a little cooling-off period which is against what the prognosticators are saying. My reasoning for this "slow down/cool off/plateau" is due to the mere fact that as interest rates slowly creep up-and-up, a buyers "purchasing power" will start to be reduced (ie: higher interest rates = lesser buyer affordability). Therefore, if a buyers purchasing power is being diminished, then it stands to reason that they will not be able to make such high purchase offers which in-turn will lead to lower home prices or at the minimum the current prices are to plateau (ie: level off). Here the worst case scenario for the seller is that sales prices will start to be reduced.
I love to work with both Buyers and Sellers: So please do not get me wrong in regards as to which of the two parties I am favoring. I simply and truly want buyers to not be left out of homeownership because of skyrocketing prices but on the other hand when I represent a Seller I always place much effort and emphasis in trying to "net" as much money as possible to the Seller.
For the record: The purpose of this message is to let you know what my professional thoughts are and what I think is going to happen to home prices this year - especially if interest rates are to continue going up.
If a Buyer purchasing power is to start trending downward because of higher interest rates, then this will metaphorically sound-off an alarm to homeowners who have been thinking of selling but were patiently "riding it out" to see how high and/or how much they can get for their home.
For the time being, if and when the market starts to look like and/or is starting to show all the signs that it has "peaked", then my belief is that more-and-more homeowners will start to put their house up for sale which in-turn will increase the current low inventory quantity. The result of higher inventory and higher interest rates combined will force the market prices to experience a "tapering off" or a plateau affect thus additionally could possibly lead to lower home prices.
For now the San Diego market for most individuals sure seems and looks like buying a home is a monstrous or a giant endeavor to achieve... "does it not" ?
Oscar Castillo : BROKER - REALTOR®
DRE # 01140298
(858) 775 - 1057