I believe another thing contributing to the demand in real estate, in San Diego, is that returns on savings is low. So some people (especially professional immigrants from China and India who like to buy in the new developments with good school districts) who are savers see real estate as a tangible asset, a home for their family a store of value.
Once the return on savings increase (say 5% or above on CDs), the demand for real estate will drop as people will turn to store their nest eggs elsewhere.[/quote]
Bingo, Brian.
Most people are thinking of low rates ramping up spending/buying power because it makes a higher price more “affordable.”
What many people are not considering is the effects of lower rates on cash holders. If you can make 3% (net) on a rental after paying all cash, OR you can make .03% in liquid savings, guess which one the “investor” will choose when the Fed keeps rates this low for such extended periods of time?
