San Diego’s red-hot housing market is beginning to cool off. The latest data says prices didn’t climb as much in April as in previous months.
In March, home prices in the San Diego metro region were up 29.6% over March of 2021 which was an 18-year high.
But the Case-Shiller index which tracks housing, reports they were only up 28.5% in April. That is still a sky-high rate of increase, but a move in the opposite direction is notable. Cross Country Mortgage executive vice president Scott Evans said the main driver behind this is mortgage rates.
“I would say that’s the biggest impact with the slow down is the rise in interest rates, hands down … pretty much 90%,” he said.
The monthly mortgage payment on a $500,000 home in San Diego — a rarity these days — with a 20% downpayment increased by more than 30% compared to the beginning of the year, Evans said.
"So, (a) $400,000 loan, the payment is about $3,000 ... six months ago, it was probably like $700 less," he said.
“Really it’s going back to what it was before the pandemic," said Jeremy Gabe, assistant professor of real estate at the University of San Diego. Gabe said a big effect of rising mortgage rates is keeping people in their homes and lowering inventory.
“Most people who own their houses now have mortgages that are fixed at rates lower than the prevailing interest rate. So that makes them less likely to move up the housing ladder, (or to) move sideways on the housing ladder," he said.
Gabe also noted that the higher interest rates won’t have much effect on people in mid to upper-income levels, rather it will be those on the lower end that will be priced out.
“Say South County, you might see the downward pressure caused by lesser demand in the market being driven by interest rate rises to offset that lack of inventory," he said. "In the rest of the market where interest rates are not gonna be as big of an effect, housing will probably track inflation.:
Glass half empty: It’s now much more difficult for lower-income folks to get into the housing market. Half-full: We’re really just back to where we were before the pandemic, and nowhere near where we were in the 1980s when interest rates were in the double digits.
