San Diego County’s housing market is getting back into what many said is a balance, with neither sellers nor buyers having a distinct advantage compared to the frenzied market of the past two years when buyers faced bidding wars and sellers were getting multiple offers – often thousands of dollars above listing prices.
Single-family home prices rose 11.9% in June – typically the time of year when prices start to peak – with the median price rising from $985,000 to $987,225, according to the Greater San Diego Association of Realtors while the median price of attached homes – condos and townhomes – took a hit in June, dropping 4.8% from $670,000 in May to $638,000 in June.
“People are going to adjust their prices, which were inflated anyway,” said Frank Powell, president-elect of the Association of Realtors.
Given the interest rate increases of the past month, Powell said he wouldn’t be surprised if median home prices dropped in July. “We’re not going to see massive decreases,” he said. “People are just going to keep their house on the market a little longer.”
Alan Nevin, a director of research with the Vertex Companies in San Diego, predicted “a relatively quiet period for the next couple of months while people decide what they should be doing, “should they wait, bite the bullet, or maybe negotiate a better deal?”
“The market isn’t going to stop. It’s just going to slow down a little bit,” Nevin said.
While the rise in interest rates may have given San Diego’s housing market a jolt, Nevin said lenders, particularly credit unions, have plenty of cash to lend.
“These lenders are still paying 1% to 2% on savings accounts,” he said. “They still have a lot of cheap money at their disposal.”
Nevin said higher interest rates are likely here to stay.
“When I look at the history of interest rates, the reality is, with rare exceptions, we’ve always had interest rates of 5% or 6%. The last couple of years were really an anomaly and there was no reason to believe that 2% or 3% interest rates were going to be around for a long time,” Nevin said. “It will take a few months for the market to come to the conclusion that 5% or 6% interest rates are going to be around for a long time.”
David Goswick, director of research at House X Lab, a housing marketplace, said the housing market of the past two years “was a runaway train.”
“It’s shifted to the point where it’s a really good time for someone to go out and shop for a home verses compete for a home,” Goswick said. “I don’t think it’s going to be significant but I think prices are going to drop and I think homes are going to sit on the market a little bit longer.”
To soften the effect of higher interest rates, Goswick and Nevin predicted that new home builders will offer more incentives to prospective buyers, possibly by buying down interest rates to a lower level for a set period of time.