Are Rising Rates A Problem?

Interest Rates/Loan Limits | Jim's Take on the Market | Market Buzz | Market Conditions | North County Coastal

November 15, 2016

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Are rising rates that big of a deal?

Maybe – and only if they mess with the buyers’ psychology.

We have been spoiled with rates in the mid-3s for the last six months – including jumbos – and our local market has been cooking. Buyers have been hoping for any break, but if they find the right house at a decent price, will an extra 1/2% on rate stop them?

Probably not – we are lucky to live in a very affluent area, where the majority of houses sell for more than $1,000,000:

NSDCC Detached-Home Sales, Jan-Oct

Year	Total # of Sales	Median SP	Sales Over $1M	% of Total
2012	2,619	$825,000	907	35%
2013	2,820	$946,944	1,272	45%
2014	2,427	$1,022,000	1,243	51%
2015	2,578	$1,089,450	1,430	55%
2016	2,536	$1,160,000	1,548	61%

Some buyers will dig in just on principle – if they have to pay a higher rate, logically the seller should be more flexible on price. But if the right house is found, and wifey kicks you in the shins and says ‘buy the house’, the extra half-point isn’t going to matter.

Especially in these areas:

Percentage of Detached-Home Sales Over $1M, Jan-Oct, 2016:

La Jolla, 92037 = 97%

Del Mar, 92014 = 97%

RSF, 92067 = 100%

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