End of year Median Home prices can’t estimate buyer’s or seller’s market
At the 2004 year end, San Diego’s median home prices hit a record high of $459,000, making San Diego County among the nation’s five most expensive housing markets. The inflation that rose since year end 2003 put home prices on an increase of $281 a day over the last year. With its 9th straight year of rising prices, San Diego is awaiting some sort of leveling off that, depending, who is asked, may or may not happen.
The year’s low interest rates tell us that many buyers have afforded homes based on adjustable rate loans and low cost introductory rates. In the coming year, interest rates are predicted to rise from 5.9 percent up one full percentage point, making large loans more difficult to attain, and weeding out buyers who just can’t afford the down payments that are required of this market. Experts are finding that local buyers are using savings investments to buy rather than relying solely on salaries and wages. Income hasn’t risen to keep up with the rise in housing costs, which tells us that buyers’ down-payments are coming from elsewhere, including presumably from family members.
Many sellers are cashing out on the market’s 9-year inflation and buying up, increasing supply for lower end buyers. And since the summer’s drastic rise in price and reduction in days on the market, trends have hit a year-end lull and are paving the way for buyers to get into homes again, without the seller holding all the cards.
If condo conversions continue and interest rates begin to rise, we should see a trend of increased supply and decreased demand. Some buyers are waiting for this transition to occur; others are chomping at the bit to get locked into low interest rates. Only the next year will reveal what the market will inevitably do.
