The pandemic at the start of 2020 led the housing market to see an increase in housing prices. In November of 2020 according to S&P CoreLogic Case-Shiller National Home Price NSA Index, house prices rose about 9.5%.
In turn, mortgage rates have been decreasing.
According to the National Association of Realtors (NAR), experts have predicted that the economy will bounce back post-pandemic. At the NAR’s second annual Real Estate Forecast Summit, the leading economists predicted that job conditions will improve, home prices will increase, and stable interest rates will permeate in 2021.
Now let’s take a more in-depth look into how house price, interest rate, and mortgage rates all play a role in the home buying process!
House Price vs. Interest Rate
Having low house prices sounds pretty sweet, right? You might want to consider the interest rate as well.
The interest rate is the percent of the principal (the loan) that the lender charges the borrower.
A low-interest rate can make all the difference when it comes to the payments a home buyer will make over time. Not to mention, a lower rate can allow for a bit more purchasing ability, thus allowing a buyer to possibly afford a bit more square footage than anticipated!
It is arguable, however, that interest rates don’t matter too much. As long as a homeowner can consistently afford their payments, there should be no problem.
There may still be a risk in ignoring interest rates considering that house prices are always subject to change.
On the other hand, low house prices give buyers the ability to minimize their initial down payment. Additionally, if it seems likely that rates (assuming they’re high) will go back down, a buyer could refinance their home to get a lower rate on a loan.
It is also important for buyers to be conscientious of what their down payment will come up to. Having a down payment within their bracket can mean the difference between what neighborhood they end up in or if they can even afford to buy a house.
The chart demonstrates how regardless of whether the house price is high or low, their interest rate does have an impact on how much a homeowner will have to pay.
Essentially, neither a low house price nor a low-interest rate guarantees your best financial interest. It ultimately depends on the buyer’s circumstances and their ability to use them to their advantage.
Mortgage Rates
Mortgage interest rates determine the rate at which interest will be charged to a mortgage. Rates vary based on the lender, the borrower’s credit, and the effects of the homebuyers’ market.
With the state of the current market, house price has increased. There has been a steady demand for homes because people have been trying to take advantage of the falling mortgage rates.
Last year mortgage rates hit a record low and this made it more enticing for people to access the real estate market of 2020. The momentum is expected to be carried out throughout 2021.
Source: Vox
As you can see, in 2000 the rate was about 7.5% and within the last year, it dipped to about 3.5%.
House Prices in San Diego
The current real estate market is booming! The demand for houses shot up to the highest it had been since 2005 and this trend is expected to continue as the market gets increasingly competitive.
San Diego is no exception to this trend. As people spend more time at home, they have been seeking more space, thus, contributing to the frenzy of home buying.
What if you are in California and want part of the action, but instead of buying you are looking to sell? You might have some questions as a first-time home seller or home buyer that New Venture Escrow can guide you through.
Overall, San Diego is experiencing high house prices and low mortgage interest rates. Home buying is looking really attractive for 2021.
First Time Home Buyer or Seller?
Let New Venture Escrow guide you through your home buying or selling process today! This escrow company is transparent and committed to helping their customers.
For more information about escrow or buying a home in California feel free to reach out to New Venture Escrow!
