San Diego Housing Bubble News and Analysis

There are a few schools of thought on this, the optimum is to buy for a lower price while rates spike up, then get lucky to catch the rates on the decline while you are in escrow just before you lock or refi down the road. Most people buy on payment, especially in the middle of the market. If rates go lower, they bid higher, if rates go higher, they pay less, either way they shop for a 2k mortgage as opposed to certain price or rate. Low rates tend to flood the market with buyers but they end up paying more in price, wiping out any payment benefit.

Cash buyers or those with big downs should shop when rates are high.

In your situation, I don't know if rates should be the fundamental that you base your "yes/no" vote on, rates are a factor but not a fundamental. Not knowing your market, figure out what it's 2003 price was (or a similar property) and it's 2001 price and try to get closer to the 2001, combine that with the rate and more of it is in your favor than against.

I think you'll find the opinion on the boards is that the million+ coastal market, still has some to give and hasn;t reverted to it's pre bubble pricing, but I'm guessing since I haven't looked at your market.

This Q comes up regularly.

Given an equal payment, it is better to buy at a low price, high interest rate than a high price, low interest rate.

You have more flexibility in the first condition - a forced sale due to a job move, job loss, divorce, etc does not hurt as much and you can possibly refinance the rate down later.

Cash buyers (like me) should wait. I don't honestly know what leveraged buyers should do.

Yep. For those who are borrowing much of the money, it's probably best to buy now (which is why there is so much activity, IMHO).

For those who have 50% or more down, it's probably a good idea to wait for higher rates.

Not a bad strategy CAR. I think it is one of those to each his own. I agree that rates will move up but not the kind of movement that will be the Holy Crap movement that we will need to crater pricing. I don't think that kind of movement will come for awhile now. To the extent they move up so that they do inhibit some sales, yeah I could see that happening into the fall and such but again, I don't see the big event happening for a few years.

In the price range you are looking at, my advice is to wait because high end sales are flat right now. (Even with record low rates) And the economy isn't getting any better...prices will continue to drop in the high end no matter what the mortgage rates look like later this year. But, if you find a property that you really love, who am I to stop you from buying. LOL...Just make sure you get it below list price.

Independent of interest rates, Point Loma, being on the high end may still be defying gravity a little. I have not been tracking there as carefully as places like Clairemont/Bay Park because I suspect the bottom hits these communities well before Point Loma. But, the other dynamic is that except for Liberty Station, many parts of Point Loma have become more of an old-money long-time resident area, especially Sunset Cliffs.

I think CA Renter has the right approach wrt how oleveraged you will be. The more leverage (lower down payment) the sooner you should buy.

But, interest rates spike if you go into Jumbo Jumbo land (above Jumbo-conforming).

If you can comfortably afford to live there at these prices and interest rates ... ?

Tough call, but the penalty for waiting another year or so is not likely to be severe.

I would agree with Bob and FSD to the extent that there may be little if any penalty to waiting it out, and there may be a nice payoff if values deteriorate and rates don't spike - and I agree with SDR that rates probably won't go vertical any time soon.

I know there are many different ways to track the market and many different factors you can look at to try and predict what is going to happen. I am tracking the $1 million-plus market in some of SD's best neighborhoods as I plan to move up when I feel we are close to a bottom in that neighborhood. Pt. Loma/OB is one of the areas that I am watching though not likely to buy there.

My latest data shows 64 $1 million-plus listings with only 12 $1 million-plus closings this year. I know we have not entered the so-called buying season yet but even with an anticipated increase in sales volume there is still alot of inventory at the high end. And with the "buying season" typically comes more listings, of course, which would offset an increase in sales volume.

I personally feel the high end ($1 mil plus) has quite a ways to fall yet. I'm guessing we will not start seeing the higher end neighborhoods bottoming out until 2011-12.

DaCounselor -

I agree with you.

I have been monitoring the Pt. Loma market for 18 months. Basicaly La Playa, Sunset Cliffs, and Fleetridge. Market sellers exist in these areas who have owned their homes for a long period of time, and I feel deals can be made at a 30% discount from 2005. Probably another 10% to go, but extreme barriers to entry exist in this market.

"Extreme barrier": What would that be, hammer?