To sum it up, going into 2023…
I see more buyers looking for completely remodeled homes because of both supply and demand issues. The cost of construction is up!
When interest rates fall and hit 5.5, expect competition! That’s the affordability sweet spot based on this past year.
With mortgage interest rates increasing, inventory will remain an issue until it makes financial sense for a homeowner to give up a low mortgage.
For buyers, be prepared to act quickly and decisively when you find a property you like.
For sellers, consider doing inspections prior to coming to the market in order to ensure a quick, clean and smooth transaction.
The past two years saw record-breaking home price growth, but it’s apparent that the wind has shifted. The Federal Reserve’s persistent interest rate hikes have sparked a change in housing markets across the country, and San Diego is no exception.
Mortgage interest rates have steadily increased throughout 2022, effectively thinning out the buyer pool. As a result, many buyers can no longer qualify for the loan values they once were and are choosing to sit on the sidelines. This financing shift is reducing competition in the San Diego residential market.
With the buyer pool now thinned out, we expect home price growth to slow. Buyers are taking their time when making offers, and the outrageous bidding warms seem to have ended. As of October, San Diego's home prices were up 5.6% from the previous year, with the median sale price at $850,000.
Reduced competition is great news for buyers who continue their home search. These buyers no longer have to fear homes being snatched out from underneath them, as the days on market has increased by 13% from last year, although homes in San Diego are still selling faster than the national average. Furthermore, opportunities for negotiation are increasing, meaning that potential buyers can target lower prices or contingencies in their offers.
While the market has become slightly more buyer-friendly, it's still considered a seller's market. Inventory remains a considerable challenge. Sellers are nervous about listing their properties only to be unable to find a replacement property and then be locked into a mortgage rate that's much higher than their existing loan. Furthermore, interest rates are hitting developers hard, and many are pulling back on their new construction projects. As a result, new construction inventory in the coming years will be impacted.
An important consideration for prospective buyers is that mortgage rates can be refinanced when rates drop, but the lack of inventory in the San Diego market will protect home prices from taking a major hit. Keep an eye on new listings because the perfect property may not become available again. This market might offer the buying opportunity you have been waiting for!
Contact me and we will keep an eye on new listings because the perfect property may not become available again. This market might offer the buying opportunity you have been waiting for IF the right home comes along.
If you’re in the real estate market as either a buyer or seller and looking for more information about your area, get in touch, and let's discuss your best strategy to succeed.
Tisha Cuffee | REALTOR®
DRE#02179215
M: 858.337.0051
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