Buyer demand has softened as buyers are pulling back, taking their time weighing out their options. Buyers have experienced a rapid seller’s market for the last eight years but now have learned they can look around and negotiate more than in the past. The Chula Vista market has seen prices rise too much relative to income and buyers can’t keep pace. Chula Vista home prices have gone up 55% since 2011. During that same time, wages have gone up only 18%. There is no doubt that sales are slowing. Another factor is the Federal Reserve’s aggressive action against inflation. The Fed has increased short-term interest rates over the past year and likely will continue these increases. This is not all bad news. The Fed is raising rates because the economy is roaring along. Job openings are at record highs while unemployment is at historic lows.
As long as the economy stays strong, home sales could still trend upward even with the increase in loan rates. Home sellers will simply need to put their best foot forward when marketing and listing their homes. Homes need to be priced correctly and be in impeccable condition. Historically mortgage rate increases don’t always push home sales down. In 1984, 1994 and 1999 interest rates went up an average of two points and the housing market stayed flat or even inched upward. Housing continues to be scarce in Chula Vista as evidenced by the continued building of new homes in several developments including Otay Ranch/ Montecito. Buyers are simply looking for good deals.
So while we see buyers stepping back a bit, a new survey by NAR of buyers showed 50% indicated it was a good time to buy which is up from 28% just a few years ago. Most of the home sellers are also going to be buyers and they will see savings they on their purchase even if prices slow on sales. This is a good adjustment for the market and buyers will soon resume their home buying search in earnest.
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