San Diego Real Estate Update – October 2022

The market has finally shifted! However, in this month’s blog post, I’d like to break down a number of statistics to show you that while things are changing, the headlines you’re seeing out there aren’t necessarily as accurate as you might think.

Interest Rates

Interest rates have skyrocketed from where they were just a year ago! They have gone from conservative to normal to what we would now categorize as high rates. Interest rates hit highs of up to 6.8% during the last week of September and have stayed there. That is almost double what rates were this time last year! This was due to the fed increasing the federal rate but also their decision to stop purchasing mortgage backed bonds; a measure they began at the start of the COVID crisis.

How Will This Affect Our Market?

Well, for one it’s definitely going to cause many buyers to put off their purchases for a while. While it’s not the sole reason for the market shift, it’s definitely the main factor. With rates like these, we will likely see the same demand we saw since the rates got above the 5% mark.

People may consider the demand a lot less than what we’re used to, but when you look at previous years you can see similar demand levels back from 2018 and 2019. We’re just seeing a distorted picture having come out of a market with 2.5% to 3% interest rates.

Other Impacts That We’re Likely To Feel

While buyer demand has diminished, with sales being down 21% year over year, inventory has actually increased by 20% year over year. What may strike you as odd, is that the amount of new inventory coming onto the market is down compared to last year. We’re down to just a 1.7 months supply of inventory left in San Diego county right now, which still constitutes a sellers market. We need to have at least 5+ months supply of inventory to consider ourselves a buyers market.  Two things we’d need to keep our eyes on is how much new inventory is entering the market, and whether the rate of closed sales are staying consistent which I suspect they will, as this is San Diego and we always have buyer demand.

Seller Advice

Price your home right! To all my sellers out there, you should be looking at the latest pricing trends when pricing your property to sell. Instead of looking back at sales from the last 6-9 months, narrow it down to at least 3-5 months. With the volatility of interest rates, buyers affordability has been affected and sales from a half a year ago might not be reflective to what a home could sell for now with the higher interest rates. We’ve seen resultant market depreciation in areas ranging from 3% to even 10% or 12%. Reach out to a trusted expert here at True Local Realty to give you an accurate pricing estimate for your home.

Buyer Advice

Buyers, I’d strongly recommend looking into the  2-1 buy down option. This involves locking in a fixed rate at today’s prices for a 30-year fixed mortgage. However, you can negotiate with the seller and get them to float you credit toward buying down your interest rate by a whole 2% the first year and 1% the second year. The reason for this is that most notable analysts including Fanny Mae have predicted that most interest rates will come back down the 5% levels by  next year and then potentially down to the 4% mark by 2024. Therefor, buyers should benefit by saving now and be able to refinance down the road by locking in a lower interest rate then.

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