The pandemic led to decreases in the inventory of available homes for buyers. This caused sellers to see a record number of offers on their homes, driving up the price for both the buyer and the seller.
Around mid-2021 the number of offers received on most homes began to decrease. Instead of 15 to 20 offers there were, maybe, seven to 10 offers. Still placing the seller firmly in the driver’s seat.
Multiple offers drove prices up for buyers. If sellers were turning around and buying as well, they faced the same scenario.
Interest rates were still very low, but now the Federal Reserve has announced they will be raising rates. It is a must to help with the overall rising inflation, and forecasters are predicting California home prices will continue to rise in 2022 by 5% or more.
This all sounds terrifying to a first-time homebuyer and a seller who would like to sell and repurchase. But if you look at the history of property prices and interest rates over the long haul, it is my opinion that purchasing property in Southern California is a sound choice.
Here is an example:
In 1969 my grandfather used a Cal Vet loan to purchase a home for him and my grandmother in La Mesa. My grandfather was a civil servant and my grandmother was a homemaker. One income, minimal savings.
The loan for the home was $50,000. This sounds amazing, but it was 1969 and the average annual household income was less than $10,000. The interest rate was 5%, yes, 5%. That is higher than the interest rate of 4% available for 30-year home loans in February 2022.
Thirty years after my grandparents purchased their home, with no remodels or upgrades during those years, it sold for $511,000.
The biggest thing to as you work on buying your home in this market is patience. If you are a first-time homebuyer, breaking into the market is the challenge. Find your Realtor (rrea.org) and let them help guide you through the process. There is a reason that home ownership is considered the American Dream and it is attainable.
Karen Domnitz is a Realtor, DRE 00897503, with Century 21 Award and vice president of the Ramona Real Estate Association
