If you’ve been holding off on listing your home in San Diego because you’re worried homebuyers aren’t out there, now might be the perfect time to rethink.

After months of high mortgage rates keeping potential buyers on the sidelines, the market is starting to change. Recent economic shifts have already caused rates to dip, and just a few days ago, the Federal Reserve cut the Federal Funds Rate for the first time since their series of hikes began in March 2022. While the Fed doesn’t directly set mortgage rates, this decision creates a favorable environment for rates to drop further, especially with more rate cuts anticipated into next year.

Lower mortgage rates are already encouraging more buyers to re-enter the market. As Lisa Sturtevant, Chief Economist at Bright MLS, puts it:

“A drop in the cost of borrowing will help fuel more homebuyer demand . . . Falling rates will also bring more sellers into the market.”

In San Diego, where real estate activity often depends on mortgage trends, this shift is a significant opportunity. With buyer interest on the rise, it could be an ideal moment to discuss listing your home and take advantage of the renewed market energy.

Falling Rates and the Homebuyers Return

In San Diego’s ever-changing real estate market, there’s a clear trend: as mortgage rates drop, buyer activity picks up. The graph below highlights this connection. The orange line represents the average 30-year fixed mortgage rate, while the blue line showcases the Mortgage Bankers Association (MBA) Mortgage Application Index, which tracks how many individuals are applying for mortgages.

When mortgage rates (green) decline, you’ll notice an upward movement in the Mortgage Application Index (pink). This trend indicates that more potential homebuyers are jumping back into the market. In areas like North Park and South Park, where competition for homes is fierce, these lower rates can significantly impact how quickly properties are snapped up. So, with rates easing, it’s no surprise that we’re seeing more San Diego buyers actively re-engaging in the home-buying process.

What This Means for You

According to the National Association of Realtors (NAR), home sales increased in July, which was a welcome shift after four straight months of declines. If you’re a homeowner thinking about selling, this uptick in buyer activity works in your favor.

More homebuyers means more competition, which can lead to higher offers and shorter time on the market for your house. Edward Seiler, AVP of Housing Economics at the Mortgage Bankers Association (MBA), expects this trend to continue.

“MBA is expecting that slower home-price appreciation, coupled with lower rates, will ease affordability constraints and lead to increased activity in the housing market.”

With more buyers entering the market, now’s the time to start getting your house ready to sell.

Bottom Line on Homebuyers Return as Mortgage Rates Drop

With mortgage rates on a downward trend, We are seeing a noticeable increase in buyer activity and the homebuyers return to the San Diego real estate market. Just today as I write this blog, we have had 3 buyer calls. They are now ready to jump back into the market and buy a home in North Park, San Diego. Experts predict this shift will continue, with rates remaining favorable in the coming months. Now is a great time to get your property ready for this surge in demand. Work together with a trusted local realtor like the McT Real Estate Group to make sure your San Diego home stands out and sells quickly in this competitive market.

More Options With Lower Rates For Buyers In the Fall

Have you ever come across the saying, “Don’t believe everything you hear?” This holds especially true when you’re considering buying or selling a home in today’s housing market. With so much information—and often common misconceptions—circulating, it’s crucial to separate fact from fiction. In San Diego, where the real estate landscape can be both competitive and dynamic, having accurate information becomes even more important.

That’s why now, more than ever, partnering with a knowledgeable real estate agent is essential. They can help dispel common myths and provide clarity by relying on data and research-driven insights. Here are just a few of the top housing market myths they can help you navigate and overcome in the San Diego market.

1. There will be a Better Deal Once the Prices Crash

The idea that you’ll snag a better deal by waiting for home prices to crash might seem tempting, but the reality is different and is a total housing market myth. While market conditions can vary, especially in a place like San Diego, the data overwhelmingly shows that a crash is unlikely. Unlike the 2008 housing crisis, which was fueled by an oversupply of homes, today’s market faces a significant undersupply. This means the dynamics are entirely different, and the chances of prices plummeting are slim.

In San Diego, where demand for homes remains strong, waiting for a dramatic price drop could mean missing out on opportunities. The local market has shown resilience, and with limited inventory, it’s unlikely we’ll see a significant downturn. So, if you’re holding out for a crash, it’s time to reconsider. The data suggests that waiting won’t lead to the deals you’re hoping for, and you might be better off making a move sooner rather than later.

2. I Won’t Find a Home to Buy in San Diego

If the worry of not finding the right home is keeping you from making a move, it’s time to get in touch with a knowledgeable real estate agent. The housing market has evolved, and the supply of available homes has increased throughout the year. According to recent data from Realtor.com, while inventory hasn’t fully returned to pre-pandemic levels, it’s significantly higher than it was last year. This is especially true in dynamic markets like San Diego, where the real estate landscape is always shifting.

If you’re still holding onto concerns based on past media reports of record-low inventory during the pandemic, it’s time to update your perspective and debunk that housing market myth. The market isn’t entirely back to normal, but it’s heading in the right direction. With more homes now available, you have better chances of finding something that fits your needs. So, you can start letting go of this outdated myth—the fear of not finding a home in San Diego is no longer as daunting as it once was.

3. I Need a 20% Down Payment to Buy a Home

One common misconception is that you need a 20% down payment to purchase a home. This belief is still widespread, despite changing realities in the housing market.

According to Fannie Mae:

“Approximately 90% of consumers overstate or don’t know the minimum required down payment for a typical mortgage.”

Data from the National Association of Realtors (NAR) reveals that first-time homebuyers typically put down just 6%, a fraction of the commonly believed 20%. For those concerned about the higher percentage for repeat buyers, it’s important to understand that these buyers often have significant equity in their current homes, allowing them to make larger down payments on their next purchase.

This highlights a crucial point: unless your loan type or lender requires it, a 20% down payment is not necessary. Many buyers secure their homes with much smaller down payments—sometimes as low as 3.5% or even 0%, depending on the loan program. In San Diego, where housing prices can be steep, understanding this flexibility can be particularly empowering for prospective buyers. So, if you’re looking to buy your first home in San Diego, you likely need much less for your down payment than you might have imagined.

Navigating the news about San Diego home prices can be challenging, especially with so many conflicting reports. Some claim a price correction is imminent, but what does that mean? To understand, it’s crucial to grasp the concept of a correction.

Danielle Hale, Chief Economist at Realtor.com, explains:

 “In stock market terms, a correction is generally referred to as a 10 to 20% drop in prices . . . We don’t have the same established definitions in the housing market.”

A correction in San Diego’s current housing market doesn’t signify a dramatic drop in home prices. Instead, it indicates that prices, which have surged over the past few years, are starting to stabilize. Essentially, they’re still rising but at a more moderate rate. While prices can fluctuate depending on the specific neighborhood, a significant decline is not occurring on a national level.

Understanding these nuances helps San Diego residents and potential homebuyers feel more secure about the local real estate market. The city’s desirable lifestyle, including its beautiful beaches and vibrant neighborhoods, continues to attract buyers, which supports steady home prices.

The San Diego Real Estate Market is Normalizing

From 2020 to 2022, home prices in San Diego soared due to high demand, low interest rates, and a shortage of available homes. This rapid growth, however, couldn’t last indefinitely. Today, the pace of price growth has begun to slow, indicating the market is starting to normalize. According to the latest Case-Shiller data, prices are still rising nationally, but not as swiftly as before.

In San Diego, we’re seeing a healthier pace of price growth this year compared to the frenzied market during the pandemic. This change is a positive shift towards a more balanced and sustainable real estate market. Looking ahead, you might wonder what’s next for home prices.

Marco Santarelli, Founder of Norada Real Estate Investments, shares his insights:

“Expert forecasts lean towards a moderation in home price growth over the next five years. This translates to a slower and more sustainable pace of appreciation compared to the breakneck speed witnessed in recent years, rather than a freefall in prices.”

In essence, the future of San Diego’s housing market hinges on supply and demand. Increasing inventory, coupled with limited buyer demand due to relatively high mortgage rates, will likely continue to ease upward pressure on prices. San Diego’s unique charm and desirable living conditions will always attract buyers, but the market is shifting towards a more stable and predictable environment, which is a welcome change for both buyers and sellers.

What This Means for You

If you’re considering buying a home in San Diego, the news of slowing price growth is a positive development. The pandemic caused home prices to skyrocket, leaving many potential buyers feeling priced out of the market.

However, with the current trend of slowing price gains, buying a home is becoming more manageable. It’s reassuring to know that the value of the home you purchase will likely continue to increase over time. This gradual appreciation creates a more stable and accessible market for buyers.

According to Odeta Kushi, Deputy Chief Economist at First American:

“While housing affordability is low for potential first-time home buyers, slowing price appreciation and lower mortgage rates could help — so the dream of homeownership isn’t boarded up just yet.”

This insight is particularly relevant for San Diego, where the housing market has been notoriously competitive. With these changes, more buyers may find the opportunity to make their homeownership dreams a reality in this beautiful coastal city.

Are you wondering if now is the right time to buy a home in San Diego or if you should wait? This is a common question for many people today. While the decision depends on various personal factors, here’s something important to consider. If you can afford to buy at current rates and prices, focusing on the time you spend in the market might be wiser rather than trying to perfectly time your purchase. In San Diego, where the real estate market has shown steady growth, owning a home for a longer period can lead to greater financial benefits. By entering the market now, you can start building equity sooner and take advantage of potential property appreciation in this thriving city.

The Risks of Attempting to Time the Market

Attempting to time the market can often be a less effective strategy, particularly in the dynamic landscape of San Diego’s real estate market. Consider this: For much of the current year, there have been consistent predictions that mortgage rates would decline. Most experts remain optimistic about this trend. However, shifts in economic and market conditions have unexpectedly delayed these changes.

This delay has significant implications for homebuyers who have hesitated, waiting on the sidelines in anticipation of lower rates. As noted by U.S. News, many potential buyers who postponed their purchasing decisions in hopes of benefiting from lower mortgage rates have found themselves at a disadvantage. Instead of decreasing, mortgage rates have remained higher for an extended period, leading to high monthly housing payments. This scenario has resulted in a market where affordability has not improved for those who decided to wait.

“Those who put off buying a home during the past few years as they were holding out for lower mortgage rates have been left out of the market . . . mortgage rates have stayed higher for longer than previously expected, keeping monthly housing payments elevated. In other words, affordability didn’t improve for those who chose to wait.”

In San Diego, a city known for its vibrant neighborhoods and thriving real estate market, the unpredictability of timing the market can be particularly pronounced. The city’s diverse housing options and competitive market conditions underscore the advantages of entering the market when financially feasible rather than waiting for a more ‘opportune’ moment that may not arrive. Therefore, if you are ready and financially able to purchase a home, it might be more beneficial to make a move now rather than attempting to predict market fluctuations.