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Вторник, 21 мая, 2024

Opinion: San Diego’s Housing Market Will Be Unfazed by Rising Mortgage Rates

OpinionOpinion: San Diego’s Housing Market Will Be Unfazed by Rising Mortgage Rates

A house is for sale in Point Loma. Photo by Chris StoneA house for sale in Point Loma in. File photo by Chris Stone

No, buyers haven’t gone anywhere, despite interest rates that are at about 5.5% for a 30-year loan and 4.5% for a 15-year loan.

This is not the early ‘80s when interest rates skyrocketed to 18%, or a potential housing bubble like 2008 when banking institutions manipulated mortgages to unqualified buyers. Today, the world economy is emerging from a two-year pandemic that changed the complexion of supply and demand in so many ways.

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During the pandemic people stopped driving, and the gas prices plunged. Similarly, people left their offices and started working from home. People throughout the world saw the opportunity to work from home in one of the most beautiful cities on earth and flocked to San Diego with cash in hand.

With short supply and enormous demand, housing prices soared. Potential buyers stood in line for new listings throughout the county. In some zip codes, sellers didn’t need to post for-sale signs to get multiple offers. For Realtors, life was good.

People, though, are reactionary. The consumer price index, a broad measure of everyday goods and services related to the cost of living, soared 9.1% from a year ago. That marked the fastest pace for inflation going back to November 1981.

Gas was expensive. The cost of consumer goods rose. Everything from air fare to restaurants and hotels became more expensive than we had experienced the previous two and a half years. Would this be the end of the real estate boom?

Absolutely not. Yes, mortgage rates are a few points above the historic lows we’ve enjoyed for the last few decades. Inflation is higher. The simple explanation for this is that we have more money in our pockets and a pent-up demand for goods and services. The demand has surpassed the supply. No one likes inflation, but this is not the early 80s.

As for the housing market in San Diego, we still have far greater demand than supply for housing. New housing is limited throughout the county, and there’s little evidence that this will change soon. Existing houses get snapped up quickly once they’ve entered the market because supply is so limited.

On the low- and mid-end of the market, which is relative given the cost of housing in San Diego, the rise in mortgage rates does impact some buyers. People see the mortgage index rising and quickly get nervous. It’s unlikely, though, that increased mortgages will dissuade potential buyers enough to significantly lower the asking price of property. In addition, financial institutions tend to become more flexible as the cost of loans increases.

On the luxury end, there are still buyers with cash. These buyers may see the increase in inflation and mortgage rates as a bargaining tool, and the time of multiple offers on every property may become less prevalent.

Overall the price of housing in San Diego is unlikely to dip. There’s simply too much demand and too little supply.

Tiffany Torgan is founder of Prestige Properties of La Jolla.

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