Right now, mortgage rates for Coronado Real Estate, and San Diego (as in the rest of the nation) are higher than they’ve been for 15 months—a trend that’s likely to continue, but will it affect real estate prices in Coronado? We have to wonder about the impact higher Coronado mortgage rates will have on Coronado area home sales in the coming year.
First, some perspective. If mortgage rates do increase in 2014, it’s no ‘done deal’ that home buyers will be put off—nor that a wave of foreclosures in Coronado will follow. The reason? By past standards, interest rates will still be low, even at the 5½% predicted by the N.A.R. Any hike in mortgage interest rates are coming off the historical 3.52% set in the spring of last year. Consider: most of us were paying mortgage rates between 7 – 8% throughout the 1990’s! 5½% looks like a fire sale compared with those.
Factor Two: surprisingly, a projected rise in interest rates is not predicted to dampen the enthusiasm for acquiring property for sale in Coronado. The Mortgage Bankers Association predicts that home sales will increase nationally by 10% in 2014. I have no doubt that some Coronado first time homebuyers could be waylaid by rising interest rates—after all, a 1% increase in mortgage rates equates to approximately a 10% rise in monthly payments. But overall, buyers who can meet the current lending standards should still be able to afford to own. Given the cost of the renting alternative, they may decide they can’t afford to pass up the right house at the right price. It is important to note that though for the Coronado Real Estate Market, a majority of home sales in Coronado, are cash deals.
Additionally, there is a strong argument that the principal effect of rising interest rates is less likely to be on San Diego home sales than on refis. The Mortgage Bankers Association predicts that refinancing demand will drop by half in 2014 (when you chart that kind of number, it looks like a cliff!). Many Coronado and San Diego homeowners will already have locked in last year’s interest, so they certainly won’t be interested.
Any drying up of the refinancing business may have yet another effect. There could be a follow-on effect as lenders start loosening their lending criteria to attract new business. First time buyers that have been locked out of the market until then may (we are now two after-effects later, so this has to be a ‘may’) find themselves suddenly eligible for a home loan.
Given the healthier economy and falling unemployment, the outlook for the San Diego and Coronado Real Estate housing market in 2014 has reason to look positive. Thinking of selling your home in Coronado this spring? Now’s the time to call me as your Coronado Realtor to discuss timing!