It’s natural to worry or panic when the housing market slows. You will question whether it's a good time to sell and if you will get a fair price for your home. Let us help put your mind at rest. Now is not the time to jump to worry or jump to conclusions about the impact of rising interest rates and inflation. Here’s why.
It’s still an extremely strong sellers market.
While the market has slowed a little this spring, it's important to look at the big picture. The San Diego market has been insane since the pandemic and is calming from its out of control pace to a normal sellers market.Think of it as cooling a little.
What if there is a recession?
The current economic environment has increased worries with stories of surging interest rates, high inflation and a volatile stock market. Whilst this will have an impact, it does not mean that the bubble is about to burst, particularly in a City like San Diego with a buoyant economy and high employment. In fact, a number of high profile businesses are looking to expand their operations in the County, Apple being the most notable, bringing wealthy buyers looking for homes. The biotech, health and military sectors are also strong, again bringing committed buyers.
What is different today compared to other times when home prices dropped?
When experts talk about a potential recession, everyone immediately recalls the situation in 2007. Today’s market has an extremely strong foundation with years of tight lending qualifications, large down payments, fixed rate mortgages, plenty of nested equity, and limited cash-out refinances.
This month's slow down is not the same as the 2007 recession which saw a glut of homes for sale against low demand. Consequently home values plummeted. In 2007, there were nearly 120,000 homes available for sale in Southern California, compared to the 19,000 homes available today, over six times more.
Today’s missing ingredient that would lead to falling home values is supply. The number of homes on the market today is far below average.
How have rising interest rates impacted sales?
We saw a drop in sales in Spring this year, a time we would normally see it increase. In response to rising interest rates and property prices, demand has cooled as homeowners delay moving to see what will happen. You can find out more in our recent blog.
However, after initially dropping slightly, demand has stabilized and flattened in the past couple of weeks. The housing market has already digested 5% plus rates and there are still plenty of buyers looking to purchase at these higher rates.
Will it take longer to sell my home?
Demand is a little slower compared to the market insanity we saw over the past couple of years.
The time taken from the date of listing to escrow has increased from 18 days in March to 30 days today. Anything below 60-days is considered a Hot Seller’s Market.
With competitive pricing your home WILL sell.
What’s going to happen going forward?
As home inventory rises and demand remains stable, it will take a little longer for home owners to find buyers. Sellers will no longer be able to overprice their homes. For buyers, you will have more room to negotiate and less chance of entering into a costly bidding war.
We hope we have put your mind at rest. The San Diego housing market is in the midst of transitioning from an insane market to a more normal steady pace. Have any questions? We would love to help answer them. Please reach out.