San Diego Real Estate

Fed Rate Hikes: What It Means for Buying a Home in San Diego

By San Diego Real Estate No Comments

In this article, let’s talk about the Fed and how it affects buying a home in San Diego. I’m sure you heard the news story that last week (March 15th), the Federal Reserve raised short-term interest rates by a quarter of a point (0.25%). this is the third increase since December 2015, and more are most likely coming.

When the Fed raises the Fed Funds rate (which is the rate banks charge other banks for short term loans), it has a cascading effect throughout the rest of the economy.

You’ll start to see interest rate increases on all sorts of consumer finance options such as credit cards, auto loans, home equity lines of credit, and yes, mortgage rates.

But, what does the Fed’s move mean if you’re in the market to buy a home in San Diego?

Source: Freddie Mac, 30-Year Fixed Rate Mortgage Average in the USA, retrieved from Federal Reserve Bank of St. Louis

30-Year Mortgage Rates are Up

If you’re considering buying a home in San Diego, then listen up.

30-year mortgages have been climbing starting in November 2016. Back then, rates nationally were around 3.5%. With the latest Fed increase, rates are now 4.21%.

Here’s what it means for you.

Let’s assume you’re going to buy a Mission Valley condo for $500,000 with 20% down. You found this awesome place in Escala Mission Valley and you’re ready to go!

In November, with a 3.5% interest rate, your estimated monthly principle and interest payment would be about $1,800.

Now, with the higher 4.21% interest rate, your estimated principle and interest payment would be $1,960.

That’s about a $160 difference, or an extra $1,900 a year.

More Fed Rate Increases Are Probably On The Way

The Fed has signaled a gradual rate increase over the next year or two. In my view, we could see several hikes that may add three-quarters to a whole percentage point to the rate.

That means that same home that costs $1,960 today would cost almost $240 more each month in the future.

How This Affects Your Plans on Buying a Home in San Diego

How do you beat these rate increases? Consider buying a home in San Diego sooner rather than later.

First, make sure you are pre-qualified by a lender. This pre-qualification will lock in your rates while you are house shopping.

(If you need some advice on getting pre-qualified, give me a buzz. I’m happy to help you out!)

Second, work with a competent Realtor who will help you find the right property.

Third, if you find your perfect home, be ready to pull the trigger. It’s a hot market with fairly limited inventory right now.

In summary, rates are probably going up. When you’re buying a home in San Diego, be sure to plan ahead and get the right deal.

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Learn More About Buying a Home in San Diego

Contact Mia today for a no-obligation assessment of selling your home, or to get information on buying a home in San Diego. I’ll show you the latest, hottest properties that just became available.

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