In California, about 70% of the outstanding mortgages have a mortgage rate below 4%, which means it’s unlikely that many of those homeowners will move if they have to qualify for and accept a much-higher rate. Plus, about 30% of local homeowners don’t have a mortgage.
Who is left? Anyone?
Home Buyers Who Will Keep Looking:
- First timers
- 1031 exchangers
- Parents buying with/for kids.
But with an all-time low inventory of homes for sale expected in 2023, we won’t need the same demand as we’ve had in the past. Let’s look at the annual sales counts.
San Diego County Annual Sales of Detached-Homes
2022: 16,086 through three quarters.
The impact from higher rates kicked in during the second half of this year. Up until then, the frenzy carried buyers to the finish line even though they were getting rates in the 4s and 5s. Once rates went over 6% in June, the sales started declining, and it looks like there will be approximately 7,500 sales in second half of 2022. Add to the 10,469 sales from the first half, and the total annual sales will be around 17,969 this year.
Higher rates will probably persist, and the annual sales next year will likely be under 17,000 in San Diego County – an area of 3.3 million people.
The number of listings in 2022 is running about 11% lower than last year, and if there is another 11% decline next year (likely), it will leave us with roughly 22,654 homes for sale in 2023. If only 60% of those actually sell, then sales would be 13,592 for the county, which will be roughly 24% fewer than in 2022, and 45% fewer than in 2021.
The only thing that could change the outcome is if we have the Big Capitulation, where both sellers and buyers give enough to make more sales happen.
There’s nothing that price won’t fix!