I just got a question from a reader:
Q: I just heard that mortgage rates might be heading upwards. Do you think prices in San Francisco will keep falling?
Well – first thing to note, is that prices have actually stabilized and in some neighborhoods, are actually rising, albeit slowly. So the term “keep falling” may not apply to SF at all.
Some say that the low interest rates that we see now will be a thing of the past in just a few more months. The Fed is keeping short-term rates low, but rumor has it, will be buying fewer mortgage-backed securities, which would cause rates to rise.
This would definitely decrease the purchasing power of home-buyers and may have an impact on prices, but with San Francisco, it’s hard to tell since we have consistently bucked the trends that the rest of the country seems to experience.
In fact, right now, multiple offers over the asking price are fairly common in SF.
So, unfortunately, there’s no crystal ball in real estate, especially in San Francisco real estate. Since we’re not even sure that rates will increase soon, we have too many unknown variables to even make an educated guess at to what 2010 will bring.
Readers, do you have any thoughts? If so, email me, or drop a note in the comments.
Eventually rates will go up, but I don’t think this will happen for at least 5 or 6 months, and when they do go up, it will be gradual.
Right now rates are at their all-time lows and many more people are able to afford to buy in San Francisco than in the past few years. Low rates, along with lower prices, have made this possible.
If rates go up, of course that could slow sales. Then again, it could also create a sense of urgency in buyers and prompt more sellers to put their homes on the market before rates go up too much.
I don’t think interest rates have such a huge impact in San Francisco as they might elsewhere, because are salaries are good here; the issue is more one of down payment funds. It’s really hard to save up even a 10% down payment in San Francisco. There are just too many fun ways to spend those paychecks!