San Diego Realtor Andrew Canavan discusses the effect the increase in interest rates is having on the San Diego Housing market.

Is it a Good Time to Buy in San Diego with the Rising Interest Rates?

You may or may not have heard by now, but the feds just recently increased interest rates. My name is Andrew Canavan. I'm an agent here at Whissel Realty in San Diego, And if you stick around, I'm going to explain exactly what those interest rate increases mean for the market as a whole, and for you specifically as a home buyer. A simple co I like to use when interest rates rise is to assume that a 1% rate increase means a 10% decrease in buyers’ purchasing power.

For example, if a buyer is able to purchase a property for a million dollars at a 3% interest rate and the rates go up to 4%, that same buyer is now able to afford a property for around $900,000. Now that sounds like a tricky situation, but I'm going to explain exactly how these rate increases actually help the real estate market and homebuyers specifically. Now you may be thinking if the interest rate increases make it so home buyers have to purchase less property, then why would the feds raise rates at all? Well, the reason they do it is to equalize supply and demand in the real estate market. Recently, we've been seeing an ex extremely low supply of homes for sale and exceptionally high demand of buyers looking to purchase these properties especially here in San Diego.

This rebalance of supply and demand is extremely vital not only for the real estate market but for the economy as a whole, because of the low supply and high demand in the market recently, homebuyers have had to compete with other buyers when purchasing properties. There are multiple offers on nearly every single home and most properties end up selling well above their list price, meaning that home buyers have to submit offers of hundreds of thousands of dollars, sometimes, above the asking price just to get into a property. This is something that's obviously not ideal for home buyers, and it's definitely not good for the real estate market long term. This is where interest rate increases come in to save the day. As I said, raising rates create an equilibrium in the market, lowering demand for home buyers meaning that one, they won't have to compete with as many other offers when purchasing properties, and two, they won't have to submit offers hundreds of thousands of dollars above list price, plus an arm and a leg in to just get into a property.

I hope I was able to shed some light on the current state of the real estate market. And if you are specifically looking to purchase a property here in San Diego, then I would love to sit down with you and have a conversation about how the real estate market is currently looking, what you're looking for, and how the rising interest rates specifically affect you and your home buying journey.

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