San Diego Housing Market Forecast June 10-16, 2022

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Curtis Chism

June 21 at 7:34 AM  · Shared with Public

Interest rates jumped because the Fed raised rates…

or DID rates ACTUALLY jump?

The Fed raised rates by 0.75% this week and interest rates actually DROPPED by 0.25%.

How could this be?

The market priced in the rate hike before the Fed raised the rates in anticipation of it happening. Most interest rates actually aren’t directly tied to the Fed but it does still impact rates.

Once the Fed did as expected the market calmed down and rates fell two days in row back to about 6%.

The normal indicator of interest rates is the 10 Year Treasury but NOT in a high inflationary environment.

In a high inflationary environment the LEADING INDICATOR of where interest rates are heading is INFLATION.

Banks have to lend at higher rates than inflation or their losing money.

Inflation is likely to go higher in the coming months because of how Inflation is measured.

Right now it’s dropping off relatively low inflation months in May, June, July of 2021 and will start adding higher inflation months.

We likely will see inflation hitting 10% area in the next few months and Mortgage rates will continue to rise accordingly.

But as Inflation starts to come down, perhaps in 3-6 months then mortgage rates will begin falling again to keep pace with falling inflation.

So in the short term, I think we will definitely see a rise in Inflation and a correlated rise in Mortgage Rates.

However, if Inflation does start falling, rates will fall accordingly. Home prices will flat line or fall in the short term.

Once Inflation ebbs, rates fall, and the correction is complete, home prices will begin their upward climb again.

How long all this will take, and how much of a correction is the big question.

I won’t pretend to know the answer that question.

This is where the saying “Marry the House, Date the Rate” comes into play.

If you’re considering buying a home it still may make sense for you to buy if you:

Found a home that works for your needs
Plan to live in it for 5-10 years
Can afford the monthly payment
Have stable employment
Have a solid down payment

You will ride out the coming increase in interest rates and the housing correction.

If you are trying to time the market or only looking to own the home for 1-4 years this is probably not a good time purchase.

Once rates drop, you can refinance into a lower rate.

If they never fall below your current interest rate you’re still ahead because you’re building equity and avoiding increased rent payments (assuming you’re renting).

One thing is almost guaranteed, Rents will rise, especially during a housing correction.

More people will be looking to rent and there already is a severe rental shortage.

This happened in 2008 – rental prices spiked due to the flood of people needing rentals.

If you are looking to sell a home right now, you need to be hyper aware of what is happening around your neighborhood and the qualities of your home.

Over pricing a home is not a winning strategy as their are buyers that are now looking for deals.

However there are still homes that are getting in bidding wars. At the same time there are price reductions occurring regularly.

Pricing it correctly and letting the market drive the price back up is going to be a far better strategy.

Curtis Chism, Realtor
858-281-2568 | Mobile
mailto:info@sandiegohomes.io
Chism Team | DRE #02105113
brokered by eXp Realty | DRE #01878277