Skip to content


  1. gzz
    March 10, 2023 @ 6:48 AM

    Happy to see the prices stable despite 7% mortgage rates.

    We may avoid further nominal price decreases because so few people want to sell. I just saw a chart showing existing first lien mortgages by rate. Half of the US is locked in at 3.5% or lower, and another 20% 3.5-4.0%.

    The economic loss of giving up a $500k mortgage locked at 3.5% when rates are 7% is at least $300,000! Think about it, the additional interest is $17,500. The precise way to get a PV of that depends on a lot of assumptions like future rates and remaining loan term. But 300k is going to be in the right ballpark.

    When you factor in the loss of a low property tax valuation, and then also add in capital gains taxes, it is just crazy to sell appreciated California homes with locked rates unless you are truly desperate.

  2. gzz
    March 10, 2023 @ 6:57 AM

    Looking at the market for mortgage points, my 300k estimate is too high. The cost to buy down a 7% zero point 500k purchase loan down to 5.5% is $21,000. That’s about as low as you can go, as the cost increases exponentially. There’s also a wonky reason that the point market underestimates value: the market for 5.5% prime loans is more liquid and preferred to the brand new 7% prime loan market. There’s also a still a decent chance you do an early payoff of a 5.5% loan, but much less than for a 3.5% loan.

    175 or 200k is probably a more reasonable estimate than 300k.

  3. sdrealtor
    March 10, 2023 @ 7:51 AM

    May prevent nominal declines? Have you not been paying attention to the data Rich and I have been posting the last several months? That’s exactly what has happened

    • gzz
      March 13, 2023 @ 10:48 AM

      If you look at what I said, it was “may avoid further nominal price decreases” not a denial that such declines have already occurred.

      • sdrealtor
        March 13, 2023 @ 12:11 PM

        gotcha and I dont think it is a may avoid going forward either. Sellers have already demonstrated on masse there will be no large scale liquidation. There will always be sellers (pretty much every new listing in MM lately is because someone died) but going forward we have to live with a lot less of them. There could and should be some more nominal declines but as I opined many months ago most of the nominal damage was swift and sudden last year with not much more to follow. I beleive that more than ever today. This Fall the window of opportunity should be close to the best we will see for the next few years.

  4. bribrah
    March 11, 2023 @ 4:03 PM

    I think with financial institutions starting to fail, interest rate hikes having to end in sight, and the beginnings of increasing unemployment, its only a matter of time before a load of current homeowners that bought on the edge of their budget are forced to capitulate. I read that the median income of buyers dropped sharply during the pandemic, so there are for sure a large amount of people that bought houses that they can barely afford IMO. Unemployment spiking could be the match that lights the fuse of a major downturn in prices…

    • John S.
      March 11, 2023 @ 8:25 PM

      Yep, next week should be interesting. We will see if ZeroHedge’s prediction that layoffs begin as soon as Monday at startups that banked at Silicon Valley Bank (SVB) comes to pass. What a shock, to suddenly have no access to your company’s cash. I was CFO at three medical device startups, and banked solely at SVB; I cannot fathom the worry and pain those startups are facing, overnight.

      • JPJones
        March 12, 2023 @ 10:17 PM

        Well, Yesterday Yellen said there will be no bailout and this is a one-off. Today, a second bank failed (3rd largest in history, SVB is #2, WaMu #1) and the feds are now guaranteeing all deposits for SVB customers.

        “Oh no not again.” -a bowl of petunias, probably

  5. gzz
    March 14, 2023 @ 8:04 AM

    30 year rates peaked at 7.1% on March 2. Now 6.57%.

    Good deal for lenders, that’s 3 percentage points higher than 10 year treasuries.

    I haven’t looked at OB/92107 sales lately, but just did today. Wow, the market is still very strong. One pretty average meh house after another above $1000/sf.

    While we technically are below peak prices, the peak was so brief it didn’t really sink in or establish a lot of comparables. So it still feels like peak pricing and much higher than 2020-21.

  6. sdrealtor
    March 17, 2023 @ 10:01 AM

    It really is astounding. I keep checking the days expecting inventory to start flowing in. I expected sellers to dig in but what is happening far exceeds what I thought possible. Looking at data around the country it’s happening all over but SD seems to be leading the charge more than anywhere else.

Leave a Reply