“All good things must come to an end,” may be an old adage, but it’s one that’s proving itself true in the San Diego housing market. For homeowners who once benefited from low rates and increasing values, some unsettling financial climate change may be bound for their bank accounts.
The mortgage industry is a complex system which affects all property holders who don’t completely own their real estate. For those who previously rode the market to their benefit with an adjustable-rate mortgage (ARM), these new effects can come as a shock. San Diego plays host to some of the most costly housing markets in the country, but present changes will adversely affect those who moved in when it was most attractive. Purchasing a more expensive home while rates were low, especially in ARMs, seemed more affordable than it had in the past. Now, however, with the cost of monthly premiums skyrocketing and the value of homes decreasing, properties are quickly beginning to squeeze money out of homeowners’ piggy banks. In many cases, a fast home sale may your best option for saving your finances.
Rates on the Rise
A number of complicated market factors are hoisting mortgage rates out of their historic lows, including:
- Selling off. The recent elections bring uncertainty in the US economy. This means makes it more likely for foreign investors to flee our bonds, which is where our bundled mortgages lie. They pull their money out, bond values go down, and mortgage rates go up to compensate.
- Forecast. With the changing administration and the new policies that come with it, many economic forecasters have called for growth. With this assumption, investors move their funds to stocks, where the market should grow, and away from bonds. Like foreign investors pulling out, less demand for bonds equals higher mortgage rates.
- The Fed. On the other side of things, some forecasters anticipate the new administration’s policies will cause inflation. The Fed—the governing body in charge of a key influential rate—will likely combat inflation by raising this rate. Inflation decreases the dollar’s value. Raising interest rates makes money more expensive.
From any perspective, it looks like rates are rising, directly affecting the cost of a mortgage. And this isn’t the only issue afoot for San Diego homeowners.
Falling Values Will Make for Difficulties
In addition to rising rates contributing to a more expensive mortgage, certain regional factors are decreasing the values of homes in San Diego. With a lower appraised value for your home, refinancing to escape future rate hikes weathered by your ARM will hurt you in the form of harsher refi costs. Let’s take a look at why home values are dropping in the area:
- Rates. That’s right, rising interest rates hit you twice. The higher costs of mortgages will have borrowers seeking cheaper properties, outside expensive San Diego. To compete, the San Diego markets will have to drop asking prices, dropping values across the board.
- Economy. You may start to notice a pattern here, that influencing factors of the housing market have many ways of pulling its strings, like an intricate web. As with rates, an administration’s policies affect values. When favoring construction, they can lead to increased housing construction and a plusher market, dropping values by way of supply.
- Debt. Extensive debt has crippled the millennial generation, which is already renting longer before buying homes. Under the new administration, there is a proposal to increase monthly education debt costs in order to pay them off more quickly. While it arguably helps millennials get out from under their debts, fewer will be able to buy homes, which means less demand.
While the final point is less urgent, the other two have already begun impacting home values in San Diego county. All three conspire to spell tapering home values for years to come, starting with today.
What Does This All Mean?
If you thought a more expensive San Diego home was affordable a few years ago because of the low rate provided by an ARM, you may be surprised to find that the new economic climate will fluctuate your rate and increase your monthly premiums. With appraisal values falling and the steadily rising mortgage lending rates, refinancing will prove more costly. So what can you do to alleviate the new financial strain?
A quick home sale is the simple escape from the economic complications increasing your mortgage costs. Instead of trying to play the market that led to your high costs to begin with, a fast home sale takes out the intricacies and puts cash in hand. Moving out of a more expensive mortgage allows you to move into a more reliable neighborhood and a fixed mortgage with a smaller balance. Sell Your House Direct can help you begin this process. Take a look at what we do and see what others have said. We can be your simple, straightforward escape from your hefty mortgage. Contact us today.Views: 6