San Diego’s housing market has taken a toll on bank accounts with affordability as the median home price has sky rocketed to an extremely high $699,000, while real estate in San Diego is at its lowest selling point since 1988.
The Federal Reserve has tapered the economy off with low interest rates starting this month, according to the San Diego Union-Times. Experts feel that this reduction is due to the lackadaisical growth globally rather than the Feds starting a stimulus. Although the short-term status of this new drop is still unknown.
As we know, higher rates would damage the home buyers, but the mortgage payments that have increased heavily might have been enough to cease the price growth on real estate in San Diego
A new mortgage in San Diego County has jumped 47 percent to $1,695, while in February 2012, the low was at $1,150.
According to the San Diego Union-Times, the home price in San Diego bolstered to 38 percent in a mere two years. Interest rates have jumped to 4.5 percent – up from 3.5 percent posted in the summer of 2013. TO keep the rates low, the Feds plan is to surely drop bond purchases the central bank to keep rates low – which began in September 2012 according to Federal Reserve Chairman Ben Bernanke.
Although even though the taper was implemented, experts still don’t know what is in store of the housing market in San Diego
“I would tell people not to panic on interest rates; they aren’t going to be going up very much,” said Christopher Thornberg, founding partner of Beacon Economics in Los Angeles to the San Diego Union-Times. “We have a world that is awash with capital, and not much demand for it for a variety of reasons.”
Although Bernake added that the feds will be stimulating the economy effectively until it ceases purchasing bonds fully and starts to increase short-term interest rates, probably not until 2015 or later.
However what many experts do agree on the Federal Reserve’s ending of its rising rates and market manipulation is a signal that the economy is getting better and more Americans will have jobs and incomes increase. This will help not only buyers but sellers in the housing market.
But in the meantime, the ability to get permits faltered, and construction of new real estate in San Diego has fallen to extreme levels. Builders have had a low amount of buyers which has become difficult in financing of new projects.
First-time buyers have nearly been taken out of the picture, while cash buyers have had the upper hand in buying San Diego real estate. With the smaller amount of foreclosures as well as low inventory of homes, median price may still raise to higher amounts.
“Investors have retreated as prices increased, but in 2013 most sales went to affluent or foreign buyers,” said Leslie Appleton-Young, chief economist of the California Association of Realtors to the Union-Times. “Tight supplies may keep prices rising this year. (Her) forecast is for the stateside median to rise six percent.”
“If you think about the California economy, and what is holding back growth right now, it has to do with a high number of people leaving the state because housing is unaffordable,” Thornberg said to the Union-Times.
SO even if the tapered interest rates stay low for several years, borrowers in the long run will see higher costs, and the loan options will be few. Although the uncertainty around the market and the dropping of interest rates still obtains question marks.
“That kind of heavy government regulation is not good no matter what anyone says,” said Mehran Aram, president of mortgage broker The Aramco Group in Carlsbad to the U-T. “The market has been quite good in regulating itself in recent years.”