San Diego remains a red hot seller’s market. Mortgage interest rates remain fairly low while housing prices surge. Right now, it’s the perfect storm of situations, but are sellers really benefiting?
Low Housing Inventory
Probably the biggest factor to look at is the lack of inventory. New homes aren’t being built fast enough to meet the demand for housing in San Diego County. Despite political pressure for increased hew home development in this area, 2017 actually saw a 4 percent decrease in building permits issued.
The good news is that things definitely picked up in the fourth quarter of 2017 and there actually was an increase in single-family home construction in San Diego County. The overall reduction was caused by a decrease in apartment and condo construction.
Reasons Why Homeowners Aren’t Selling
Low housing inventory happens because homeowners are staying put for the most part despite such strong buyer demand. Why? There are several reasons to consider:
Waiting for Max Return – Some homeowners will wait for the price increases to slow down or level out before selling in order to maximize their equity.
Nowhere to Move – It’s great to sell your house super fast for an excellent price, but you need somewhere else to move to. Most people want to apply their equity toward moving up to a bigger home. Yet, the prices of those bigger homes have also gone up proportionally, so a move up also requires a favorable combination of circumstances.
Refinancing – Rather than selling, many homeowners opted to refinance and take advantage of low interest rates and increased equity. Whether it’s a cash-out equity refinance that gives them money back or just a standard loan refinance, this may be the best option to stay in a house while taking financial advantage of current market conditions.
How Buyers Can Prepare
Now, a housing shortage doesn’t mean there aren’t still homes out there for sale within your price range, especially given current interest rates. Usually, one affects the other. If interest rates rise again, home prices will level out accordingly and the market essentially self-corrects. However, we don’t know when that will happen. It’s important for buyers to act while they can.
If you are looking to buy a home in 2018, you need to be prepared. Work with a mortgage professional to get pre-approved for a loan (not pre-qualified) and to understand how much you can afford. You will stand a better chance when making offers if you are pre-approved and it will make for a much smoother escrow and final loan approval process. Plus, it will help keep you from overspending, which is a major mistake many first-time home buyers make.
Considering a Home Refinance
Homeowners who wish to stay put will want to look at the current market conditions and consider a refinance. You may be able to secure a better interest rate, lower your monthly payments or increase the principal-to-interest ratio of your payments. You also may be able to cash out some equity to use for other important expenses if your situation allows.
For all your home loan and refinancing needs in San Diego County, count on the team at Transparent Mortgage. Give us a call at (619) 929-0199 or email me at firstname.lastname@example.org with any mortgage questions you have or to schedule a personal consultation.