Maggie Clemens | Real Estate Corner
The San Diego real estate market is about to shift again!
About a year ago, we saw our housing inventory start to decline and when that coupled with buyers who wanted to take advantage of unprecedented low mortgage rates, we very quickly shifted into a “seller’s market.”
We saw the return of multiple offers, buyers willing to pay cash over appraised values, and sellers reaping profits they didn’t dare dream they would ever see. The average days on market plummeted and it created a perfect storm for sellers.
Now, however, we are seeing the very subtle signs of another shift. What is the root cause of this shift? Mortgage rates.
In the last few weeks the unprecedented low rates are starting to climb. Instead of rates in the low three percent, we are now starting to see rates as high as five percent. There are three ways this shows up in the market:
1. Buyers begin to slow down. Some realize that their purchasing power has been reduced and must now adjust their thinking in terms of the amount of house they can afford. Others falsely believe that rates will come back down. I do not believe that to be the case, as you will see.
2. Housing inventory begins to rise. The result of fewer buyers means that we will see the “average days on market” start to increase. Naturally, with more homes to choose from, buyers will be a little more discriminating in their selection. With homes staying on the market a little longer the inventory will begin to rise.
3. Without the buying frenzy driving prices up, sellers will wait a little longer to get the price they think they should be getting. With more homes on the market we will see a dip in home prices, but this is not a bubble that will bust and cause home prices to plummet. This is a small correction that is normal and expected. I have been advising my clients of this day for a while now.
As the economy builds steam we are seeing the government backing out of purchasing Mortgage Backed Securities. This means we will be relying on the private sector to purchase these securities and this will drive rates up. Many economists believe that rates will move up to the mid-to-high fives by the end of the year.
So, what to do when the market shifts?
First of all, do not panic. This is a normal part of our economy recovering, and that is a good thing. But now is the time to take action.
If you are considering selling your property, do it now! Again, home prices will not plummet, but homes will take just a little longer to sell, and with more competition your home will have to be the best of the best in that price range to sell quickly. Do not wait to talk to a real estate professional – get your home on the market now.
If you are a buyer, buy now! The rates are not going to go back down anytime soon, if ever. Talk to your lender and get preapproved, then talk with a real estate professional to start your home search. Mortgage rates will eventually stabilize, but where that point is no one knows right now.
If you want to keep your property, consider refinancing now before rates get higher. If you were waiting, don’t. Contact your lender and get the process going.
Remember, this market shift is a normal correction. We will start to see a normal supply of homes on the market, which will mean fewer offers on those houses, which will in turn stabilize prices. This is a good thing for the economy, real estate, and the country as a whole.
Maggie Clemens served her customers with distinction for over 25 years in the local auto industry and for the last several years has been a licensed real estate agent with Keller Williams San Diego Metro. She can be reached at email@example.com or at maggieclemens.com.