How higher interest rates are impacting our local housing market.
You might be wondering about the impact of these 8% interest rates on the San Diego real estate market. San Diego stands apart from the rest of the nation, and it's natural to question whether our prices will rise or fall or if there's any relief on the horizon. What makes San Diego unique is our perpetual shortage of inventory.
In 2022, we were accustomed to about 3,000 homes selling on average every month, with 3,500 to 4,000 new homes entering the market. However, in 2023, we're observing a shift. Now, the average monthly sales have decreased to around 1,800 homes, while new listings range from 2,200 to 2,500. This shift is noteworthy, and the impact of 8% interest rates on these statistics is a topic of interest.
Let's delve into the numbers: In 2022, homes under $700,000 were selling at 105% of the original asking price, and homes over $700,000 were selling for an average of 107% of the asking price. Now, in the midst of higher interest rates, homes over $700,000 are selling for an average of 98% of the original asking price. Meanwhile, homes under $700,000, which are in high demand due to their relative affordability, are fetching 102% of the asking price.
So what's really happening? High interest rates have adjusted the dynamics, particularly benefiting buyers of homes under $700,000. These properties are experiencing strong demand. The situation varies with average monthly sales of around 1,800 homes and 2,200 to 2,400 new homes coming onto the market.
"More affordable homes are attracting more offers."
This is equal to roughly one month's worth of inventory–it's about double the shortage compared to last year. However, despite the high interest rates, there are a few creative ways to approach home buying. Options include interest rate buydowns, seller financing, assuming more loans, VA Super Bowl loans for VA buyers, and FHA Super Bowl loans for FHA buyers.
While it's true that there may not be tons of buyers in the market due to budget constraints or approval issues, those brave enough to dive in may reap significant rewards when interest rates eventually drop, resulting in a sudden increase in home values. The bottom line is that now might be the time to get in on our market.
If you have questions about this topic or anything else, please call or email me. I am always willing to help!