Interest rates are finally rising and may continue to do so in 2017. How will this affect the San Diego market for homebuyers and sellers?
Today I wanted to address rising mortgage interest rates and how they affect homeownership in 2017. How will they affect homebuyers and sellers?
I would say we have benefitted from artificially low interest rates for the last four or five years. The Federal Reserve has already raised rates once and said they will do so three more times. This is probably in alignment with the trajectory of the economy overall. Heading into the fourth quarter last year and the first quarter this year, the economy has shown signs of strengthening, but talk of inflation entering the market has caused the Fed to make that adjustment.
It takes a bit of time for that adjustment to trickle down into mortgage interest rates, but if they go up this year, I don’t think it will have a detrimental effect on the San Diego market. The reason why is because if you’re thinking of buying a home, a slight increase in interest rates might actually slow the market’s rate of appreciation here in San Diego.
Appreciation rates in San Diego have steadily gone up since rates have been so low as a function of low supply and high demand. Personally, I think rates going up will actually benefit the market, level the playing field, and bring out more inventory. Buyers might not find themselves in multiple offer situations like they may have over the last couple of years.
On the other hand, if you’re thinking about selling a house, it means you’ll have more competition if the market starts to slow a bit. That’s why it will be so important to prepare your home well for the market and have the right professional who understands the shifts in the market representing you.
Overall, I think rising rates will help level the playing field. Job and wage growth makes me think we’re in for a good year.
If you have any questions about the San Diego market or you’re thinking of buying or selling a home, don’t hesitate to give me a call or send me an email. I’d be glad to help.