The US housing market is strong right now, but a rise in mortgage rates and home prices could sideline some buyers and cause the market to cool, according to Redfin.
“Usually when we see interest rates going up so dramatically, you know, from about 3% at the start of the year to now, which is exceptional from a historical perspective. So normally we would see house prices fall because higher interest rates mean that a mortgage becomes more expensive to service, which would normally dampen demand,” said UCSD professor Allan Timmermann.
The interest rate for a 30-year fixed-rate mortgage is now over 5%.
The hike in mortgage rates comes after the US Federal Reserve announced a rate hike and signaled more rate hikes in the future.
“A typical household is now costing about $500 more every month, and coupled with the fact that gas prices and, you know, people’s grocery shopping are all getting more expensive, inflation affects everyone,” Timmerman said.
According to the San Diego Association of Realtors, the median price of a home in San Diego is now $975,000.
“I mean, almost $1 million for an average house in San Diego. That makes it extraordinarily difficult. You can see these households are being hit from all sides – higher costs to enter the market, higher costs of living due to inflation. So this is a really unfortunate, very stressful situation, even with the future rate hikes by the US Federal Reserve,” Timmermann said.
Some housing experts tell NBC 7 that there are San Diegos looking for homes outside of the borough because of local prices and interest rates.
“With the rise in prices in San Diego and the proximity to the border, I’ve seen a slight increase in people more interested in going into TJ, not even just TJ but neighboring states. I’ve had a couple of homes that were put up for sale because my sellers or my clients decided to go to Arizona or Texas,” said real estate agent Allan Uy.
When that cooldown hits, prospective homebuyers may just have to wait and see.
“I honestly think that and how the market is developing. I still think it will continue as it is. I don’t see the market cooling off until the end of the year. The reason for this is that we have a great demand. There are just too many buyers out there compared to the number of homes we have for sale,” said Uy.