Lately San Diego home buyers have become more cautious and sellers a tad impatient. The extraordinary and immediate demand for housing in 2020 and 2021 has cooled for numerous reasons.
The increase in inflation certainly has impacted the market. According to Trading Economics, inflation peaked in July 2022 at 9.1% and dipped slightly in August to 8.5%. Whether that downward trend continues depends on many indeterminate factors, from the Federal Reserve adjusting lending rates up or down, to fluctuation of our Gross National Product, the price of oil, and the situation with the supply chain.
For people in the market to buy or sell a home, the 24-hour news cycle can prove overwhelming. Is it a good time to buy or sell? Are we at the top of the market or should we wait for the market to adjust downward. How do we deal with rising mortgage rates?
According to Redfin, in July San Diego home prices were up 10.7% compared to last year, with a median price of $875,000. On average, homes in San Diego sell after 15 days on the market compared to 10 days last year.
Even though 885 homes sold in July, down from 1,583 in the same month last year, the San Diego housing market remains competitive. Redfin noted that homes in San Diego receive five offers on average and sell in around 14 days. The average sale price per square foot in San Diego is $649, up 12.5% since last year.
Meanwhile, according to Freddie Mac, the current mortgage rate for a 30-year fixed loan is 5.66%. A 15-year loan is 4.98%, and a 5-year loan is 4.51%. This is a marked increase from the extreme lows of the past few years.
But the 30-year fixed rate remains historically low. When Freddie Mac began tracking rates in 1971 the average was just below 9%, and in 1981 a record high 18.63% was recorded.
Have we become spoiled over the last decade watching the value of our homes rising exponentially, receiving multiple offers that may even exceed the asking price the moment a home goes on the market? As a Realtor I’ve had the challenge of calming sellers when their homes do not have a throng of buyers at the door the moment the house goes on sale.
That was our world a few months ago. Buyers and sellers get nervous over market changes, compounded by news reports or rising rates and falling values.
In San Diego, the price of a home may fall slightly, but this is not 2008, which saw a dramatic decline in housing prices in some parts of San Diego due to questionable lending practices. This is not the case with today’s market.
For example, if a $1 million home dips 2%, that’s a drop in value of $20,000, and Realtors can work with buyers and sellers to make adjustments advantageous to both parties. We need to remember we have a major housing shortage in San Diego with no short-term solution. In a world of supply and demand, the demand for homes throughout our county is as enormous as the supply is limited.
I encourage buyers and sellers to keep calm and remain patient. Don’t panic if you list your home and offers don’t pour in overnight. We’ve experienced market adjustments due to inflation and interest rates before, and we have come out stronger. We will again.
Tiffany Torgan is founder of Prestige Properties of La Jolla.