Hey guys, in this article we’re going to analyze what occurred in Quarter 1, and make some predictions for Quarter 2.
When we look at the first 3 months of this year, we see a similar theme characterized by low inventory, massive buyer demand and simply not enough homes to go around. Though interest rates have risen a bit, we’re finally starting to see a bit more inventory. So how is all of this going to impact the market heading into Quarter 2?
Even with interest rates as high as 5%, properties are continuing to appreciate due to the low inventory. San Diego coastal properties alone are already up 4% this year. While this is unlikely to continue, it’s definitely a good start for you homeowners out there! So here are some of my predictions:
BUYER ACTIVITY WILL SLOW DOWN
While demand throughout last year was driven by a variety of factors, interest rates remained a big reason. Now that rates are back up, we are back to a 2018 situation that will likely slow down some buyer activity. While the inventory itself will likely not increase substantially, we can at least expect less bidding wars. So for example… previously where we’d have up to 10 buyers compete for a property, that’s likely to shrink to 2-3 buyers competing for a quality home
INVENTORY COMING BACK IN
If we look at the data from the last 3 years, the period between April and July is when inventory levels peak on the market. This will not flood the market with homes as we just have too many homeowners sitting on their properties with good interest rates and high equity. Many of these homeowners likely either don’t want to make the move or really just have nowhere else to go.
SLOWDOWN IN SECONDARY MARKETS
We’re likely to see a slowdown in secondary markets, as vacation homeowners aren’t going to be out there making purchases with rapid inflation happening, rising cost of living, etc. actively deterring them from doing so.
Don’t be greedy right now! We’ve seen this pattern repeat over and over again in this first quarter where homeowners are setting unrealistic prices resulting in their home not selling. I recently had an experience where one of my buyers offered the full listing price for a property only to have the seller counter with $100,000 more… that property is still sitting on the market and loosing value everyday.
I’d also suggest you get your property looking move-in ready. Buyers don’t want to be looking at additional remodeling prices with property and interest rates already sky-high.
Don’t be scared away by these interest rates, 4-5% is actually still a good rate when you look at the historic data. The most important thing is to find a payment that makes sense. Reverse engineer the loan approval process and instead of finding out how much you can get approved for… tell your mortgage lender how much you’re willing to spend on a monthly basis. Once you’ve determined how much that payment will allow you to get approved for, let your agent get out there and find a good property within that price range.
If you ever have any questions at all, please reach out to us!
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