Buying Real Estate today, conventional wisdom often dictates that lower interest rates are a boon for homebuyers. After all, who wouldn’t want to secure a mortgage at a historically low rate? However, when it comes to buying a home in San Diego, aspiring homeowners should actually be rooting for the opposite – higher mortgage rates. (Crazy right?)
Let’s break it down. In a market like San Diego where demand for housing consistently outstrips supply, lower interest rates only serve to increase competition among buyers. Picture this: with interest rates at rock bottom, droves of buyers flood the market, driving up home prices and resulting in “Bidding Wars” that push offers well above the list price.
Problem is – when buyers find themselves paying over the list price to clinch a deal in a low-interest-rate environment, they may unwittingly jeopardize their chances of qualifying for a loan. How? Enter the realm of realtor commissions. These commissions, when factored into the equation, can inflate the loan-to-value ratio, potentially throwing a wrench into the mortgage approval process.
So, what’s the alternative? Embrace higher mortgage rates. While it may sound counterintuitive, elevated interest rates tend to reduce the buyer pool, leading to less competition and more reasonable offers on homes. That means, higher rates create an environment where buyers have a better chance of snagging their dream home without resorting to inflated offers.
Moreover, higher mortgage rates compel buyers to act decisively. In today’s market, procrastination can prove costly, as waiting for rates to drop further may result in missed opportunities. Instead, seizing the moment and locking in a home purchase now can yield substantial long-term benefits.
And here’s the silver lining – if refinancing becomes a viable option down the road, buyers who secured a mortgage at a higher rate today may find themselves pleasantly surprised by the potential savings. So, to all the prospective homebuyers in San Diego, remember this: when it comes to mortgage rates, sometimes the best strategy is to hope for a hike.
Michael Frey Realtor© DRE#02069869, Berkshire Hathaway HomeServices California Properties La Jolla Office DRE#01317331, Equal Housing Opportunity.