Interest rates up! Home prices down!
Freaking out? Let's take just a few minutes to see how these facts affect San Diego’s real estate market.
We’ve gotten used to very low interest rates since the beginning of the great recession in 2008. But if you take a step back, you’ll see that rates are still considerably lower than the historical average. Even at today’s mortgage rate of 7.156%, it’s still a very good time to borrow money.
The Bottom Line: Based on the historical average, now is still a good time to borrow money to buy a home.
Home prices are directly related to the interest rate, and San Diego has felt that decline. But if home sellers are now kicking themselves over missing the height of the markets, then they’re suffering a severe case of myopia.
Homeowners in San Diego and across the nation have seen the value of their homes skyrocket since the beginning of 2020. San Diego has seen gains of 20%-30% year over year. Let’s say you purchased a home in December, 2019 for $700,00 and prices have increased 25% year over year. Your home is now worth close to $1,093,000. Market values have dipped about 5% since May 2022, meaning your home’s estimated value is $1,039,000. That is still a gain of over $300,000 in just 2.5 years – a phenomenal return on investment.
The Bottom Line: Even if the same house up the street sold for $100,000 more than what you're asking, that’s no reason to kick yourself. You’re still making out like a bandit.
OK, that’s all well and good, but how do I know whether I’m missing out on a better deal than if I wait a month?
As I’ve written before, There are simply too many external factors to consider when trying to predict where interest rates might be in 3, 6 or 12 months. The Fed tends to lower rates during a recession in order to increase economic activity, and increase it when the economy is strong and unemployment is low. But external factors, such as the economic repercussions caused by the war in Ukraine, the Chinese economy, the ongoing pandemic, etc. make it impossible to accurately predict where interest rates are headed.
The Bottom Line: if you’re ready to buy a home, just do it now. If you’re ready to sell your home, then just do it now.
