First Quarter Market Insights

Mortgage Interest Rates

The anticipation for a drop in mortgage interest rates has been palpable. Many hoped rate cuts would start as early as March, however economic indicators suggest we might have to wait until June for any significant changes.

Presently, mortgage rates hover around 7.09%, casting a shadow over the housing market and contributing to a stall in activity.

Buyer Demand Analysis

Below is a chart of pending sales for 2023, 2024, and the 10-year average.

Key highlights:

-Demand in 2024 is starting out very similar to 2023

-Both 2023 and 2024 are well below the 10-year average

When should I sell?

Another question this chart helps answer is, “when is the best time to put my home on the market?”

The season is strongest between March through July/August.

The peak of the season is typically in May. This is based on when school gets out. By June, people are busy with graduations, summer vacation travel and moving.

Median Sales Price

Despite the higher interest rates demand, the median home sales price in San Diego is back up to its peak of $855,000 from May and 2022.

New Listings

The rebound in pricing can be attributed to the lack of inventory.

There is a dwindling number of new listings coming on the market. The high interest rates prevent homeowners from putting their homes on the market.

An astonishing 85% of all homeowners with a mortgage have a rate at or below 5%. Nearly a third, 30%, have a mortgage at or below 3%. Therefore fewer homeowners are willing to part with their low fixed-rate payments in exchange for a much higher mortgage rate and payment.

Considering New Construction

Given the stagnant new listing inventory, it’s pertinent to consider new construction.

In 2022, the city approved 5,314 new homes for construction as measured by the number of building permits issued. Of the 5,314 new construction permits,

-651 (12%) were ADUs

-Eighty percent (80%) were multifamily

This leaves only eight (8%) or roughly 425 single family homes. This would not be enough to drive more inventory for potential buyers.

Conclusion

Rates are still projected to drop and the peak of the season is quickly approaching.

If you’re thinking of buying or selling, contact me to discuss your situation and start planning your options for your next move.

Team Karen DeGasperis

Experience Living in Scenic San Diego