SAN DIEGO — Home prices across San Diego are dropping fast. Prices dipped 2.5% from July to August. But what does this really mean for buyers and sellers? Is the price of paradise finally coming down for home buyers?
Unfortunately, home prices are down because interest rates are now double what they were this time last year. So, don't be fooled by the headlines. First time home buyers and economists we talked to said San Diegans mortgage prices are now even more expensive.
That means the price of paradise for home buyers is going to cost even more.
Dara is a potential first-time home buyer whose been looking since January of 2021. "It's scary. At the end of every day, it's like 'Crap! Should I be doing this? I don't know," he said.
Dara, his girlfriend and a lot of homebuyers are feeling anxious right now. Home prices being down is a bit of good news because Dara says when he first started looking, "Every house I went in, there were probably 10 offers. And all of them were way more than I can afford."
Now that interest rates are higher and home prices are down, Dara says it’s done little to get him closer to his dream being a homeowner. “It's been tough because people are still expecting to make a lot of money on their house but buyers like myself can't really afford it because interest rates are 6%, 7% maybe even 8%." he said.
The Fed raised interest rates to slow the red hot housing market. Mortgage buyer Freddie Mac says this week, the average 30 year rate is up to 6.94% from 6.92% last week.
In some cases, that's adding an extra $1,800 to a mortgage payment.
Jeff Tucker, and economist with Zillow said, "It's looking like a $4500 mortgage payment for the typical home in San Diego after putting 20% down. That's a lot of money. Frankly that's more than what a lot of people in San Diego are even paying for rent so that's the biggest hurdle."
Tucker said those prices have eliminated a lot of buyers out of the running, especially in expensive markets like, San Diego.
"There's room to negotiate and those negotiations don't only go up like they did in 2021," Tucker said.
Dara said, he’s actually seen this work in buyer’s favor. "Before whatever they listed it as is what they get. Now there's houses sitting on the market for 30 days. They're sitting on the market for a month and a half. They have to drop their cost and I'm like, okay, I can talk to these people now."
But when it comes to being able to afford the home he actually wants, Dara says, they’re getting creative. "If you have people that you can trust and you can live with in a property that you own, that's a way of making it work. I'd rather work harder and pay into something I own and then refinance in a few years when interest rates go down."
Tucker says time is on your side if you're looking to buy a home so no need to rush. And for folks looking to sell their home, Jeff says it's not going to sell itself anymore.
He advises home sellers to ensure the house looks appealing to buyers and the big tip: it must be priced right.
WATCH RELATED: San Diego home prices are dropping at a record pace (Oct. 2022).