If you’re an average homeowner in San Diego County, the answer could be “yes”. The median annual income in the county was $54,703, and in 2021 the average increase in home value was $160,493! San Diego County saw the nation’s third highest appreciation behind only San Jose and San Francisco.
So, what does that mean? Home equity is the largest source of wealth for most U.S. families, so the spike of the last couple of years has been a financial boon, especially for those selling and moving to a less expensive market or for those who refinanced while the rates were so low.
What Comes Next
But where does that leave us mid-year 2022? Are we going to see home prices rise fostering continued bidding wars among buyers? According to one expert, the housing market has peaked and has entered a phase of “correction”.
Mark Zandi, Chief Economist with Moody’s Analytics, explained in an interview with Fortune Magazine that home sales are falling sharply. “Housing demand is coming down fast. Home price growth will go flat here pretty quickly; we will see home price declines in a significant number of markets.” This is supported by statistics from Redfin that show 19% of listings cut their price in the last month.
According to Moody’s , of the nation’s 392 largest housing markets, 96% have homes that are overvalued in comparison to what the local economy can support. It is likely that the markets where homes are most highly overvalued will be the first to see price reductions. These predicted price corrections are all part of a complicated dance orchestrated by the Feds between income, inflation, and interest rates. If the Feds see home prices drop too much, they will simply lower interest rates to help support the market.
And perhaps that’s what happened last week when interest rates experienced their biggest cut in more than two years. Rates for a 30-year fixed mortgage dropped from 5.25% to 5.1%, offering some relief for home buyers. Will we see another dip in rates? My crystal ball is missing, but I say probably not if inflation remains on the rise.
So, my prediction for the San Diego market is that inventory will remain tight over the next 2-3 months, but there will be fewer bidding wars, and a softening of prices in some areas – not a full-scale price decline, but less appreciation and more stable values. I think interest rates will hover around 5.1% for a while which is good news for buyers and sellers alike.
Deep breath. I feel like we are maybe beginning to emerge from the frantic buying run of the past year. Questions? If I can be of service, please don’t hesitate to give me a call.