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How Interest Rates Affect affordability of San Diego Condos

By in August 2013|Downtown San Diego Real Estate|Downtown San Diego Real Estate Market Analysis with 0 Comments

How Interest Rates Affect affordability of San Diego Condos

When I first sit down with a client interested in purchasing a San Diego Condo, we always have to address the issue of affordability.  After all…no matter what you like in terms of personal preferences…the value of San Diego Condos will always be tied to it’s affordability.  For the last year and a half…interest rates have been artificially low in the mid to low 3% range.   Currently, the interest rates have “jumped” up a bit and are now in the mid 4% range.   Many of our lending partners like Alexandra Harbushka at Gaylord-Hansen Mortgage are calling the 4% interest rates the “new normal”.   She and other experts expect the rates to continue in the 4% range for quite some time now in order for the housing market to continue to support national economic growth. See more of what Alexandra has to say in her weekly video blog about rates attached below.

So…the higher rates are here to stay.   What does that do for buyers who are still interested in investing in San Diego Condos?  Many experts believe that the higher San Diego condo prices (as the market increases) will have more of an effect on affordability than interest rates:   Higher home prices drive down housing affordability during second quarter, C.A.R. reports

When calculating the monthly payments on a 30 Year loan, often times higher rates will only increase the monthly payment by only $100’s of dollars rather than the $10’s of thousands that values will increase.   For this reason,  I like to tell buyers that looking at monthly “scenarios” are the best way to get started.   As brokers we like to look at the larger value of San Diego condos for the negotiations…however, we maintain that the “real” price is in the monthly payment.   Afterall…being able to make this monthly payment with a smile or no stress is what a comfortable  investment should represent.   A monthly scenario for San Diego condos should include: Mortgage Interest and principal, complex HOA’s, Property Taxes, and interest.   All of these numbers added up will reveal the “true” price of the home.   A monthly payment scenario formulated around different purchase prices with different loan programs will allow a buyer to work backwards in their search for San Diego condos.   Knowing your monthly affordability will go a long way in providing the foundation for the range that you search.

If you are interested in investing in San Diego condos and would like some more information on potential “monthly scenarios” let me send you Alexandra’s way.

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