[quote=SK in CV][quote=bearishgurl]
At present, a good portion of buyers are making all-cash or mostly-cash offers.
It is the heavily-leveraged buyer who will find themselves shopping in successively lower tiers of homes as interest rates rise.
In coastal CA counties, the best areas to live in are the ones which are the least interest-rate sensitive. This is why highly-leveraged buyers’ choices will lessen even more in the wake of higher MIRs.[/quote]
Do you know this or are you just guessing?
It seems unlikely to me that a good portion of buyers are coming in with all cash or anything close to it in the higher priced neighborhoods, unless you’re talking about La Jolla or RSF. In the 10 years I lived in Carmel Valley, I never knew a single person whose house was paid off. Most had big mortgages.
Is this just speculation on your part?[/quote]
The areas I have been following (in Central SD and select areas of South and East County) are older than Carmel Valley, SK. They range from upper mid-tier to lower-mid tier. Most the sales are all cash. I haven’t been following any of the newer tracts, where young workers have been attempting to upbid each other so am not familiar with the typical terms there. Younger workers tend to be highly leveraged.
I understand Carmel Valley is pretty well-established, but didn’t you say you left there in 2007 or thereabouts? Of course, between 2004 and 2007, when mortgage money was very easy to get as long as one had a pulse, most buyers were mortgaged up to 100% LTV. Are you sure that’s still the case up there today?
If you resided in SD in the early eighties, certainly you must remember the ’81-’83 spike in interest rates. I believe FNMA fixed conventional rates were up to 15.5% at one point in either ’82 or ’83. Do you recall RE prices falling precipitously between mid ’79 and ’83 as fixed mortgage interest rates rose from about 8.5% to 12.5% and beyond? I don’t. I don’t remember prices going down at all. What I DO remember is sellers carrying back seconds and also offering financing. During ’88-89, the local market was on fire and fixed MIRs prevailed at 10-11%. Even from about ’97 to ’03, the local market was on fire and fixed MIR’s fluctuated between 6.5% and 7.5%.
Nothing has changed. During all those periods, a prospective homebuyer had to be decisive and make offers and hope they would be countered and/or accepted or the property would be gone within days, unless it had structural problems or was a heavy fixer, which took a little longer to sell.
I lost out on eight offers I placed (due to excessive overbidding) and cancelled one escrow (due to severe plumbing problems which the seller wouldn’t fix) before successfully closing escrow in 2001 on my current home.
The prevailing fixed MIR at that time was 6.75%.
I don’t understand what all these fence-sitters are waiting for. This isn’t Kansas. Do they understand how many 59.5+ year-olds everywhere have access to hundreds of thousands of dollars in cash?? This group understands as well as appreciates the value they see in properties as most of them have seen a few of these cycles in their lifetimes.
