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Lower Mortgage Rates, Softer Market: Time for Buyers to Get into the Game

By Richard Barrington
Local Lender Columnist
Apr 30, 2008
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Potential home buyers who held off from entering San Diego's housing market over the past couple years probably succeeded in avoiding paying peak prices. However, if you are following housing data looking for a dramatic drop as a signal for when to jump in, you may want to test the market first-hand instead. Indeed, with mortgage rates down and housing demand soft you may be pleasantly surprised by what you find.

Median Housing Data Can Mask True Rate of Change

If you are waiting on the sidelines for a dramatic drop in prices, you may be frustrated by what you are seeing. Through August, the median home price in San Diego had declined only 0.6% from a year earlier. While this is more encouraging than all those years of double-digit rates of increase, it may not represent the bargain you were hoping for.

Look behind those numbers, though, and you'll find that home sales volume in San Diego declined at a much steeper rate--a 17% decrease over the same period. This suggests that the market might be softer than the median price suggests.

One possible reason is that home sellers are offering buyer incentives which can have substantial financial value, but which are not subtracted from the prices of homes sold. Another possible reason is that as the pool of first-time buyers has diminished, fewer and fewer low-end homes have sold. This skews the median home price upward.

Test the Waters Yourself

With mortgage rates having fallen to levels that are low relative to historical mortgage rates, buyers already have one factor in their favor. With housing data suggesting the market might be softer than median home prices suggest, this might be a good time for San Diego home shoppers to test the market themselves.

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About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.