San Diego Union-Tribune (Sunday)
FALLING MORTGAGE RATES
Expert panel addresses whether the recent decrease will increase San Diego homeownership.
U-T ECONOMETER
ECONOMISTS YES
I wouldn’t put too much emphasis on the quarter-to-quarter changes in those numbers because they’re not measured that well. The fundamental homeownership rate doesn’t change that quickly or dramatically. There was a broad trend down from 2005 to 2015, both locally and nationally. Since then, homeownership has been trending up. COVID may disrupt that, but low mortgage rates are definitely a positive. On balance, I expect the modest upward trend to continue.
NO
Not here. While trending lower, interest rates have been low for some time. The problem now is that underwriting is very restrictive. So while interest payments are low, maybe the down payment is high, and buyers mostly need a very clean credit record. Couple that with San Diego’s notoriously low delivery rate of housing, and even lower rate of delivering affordable housing to middle income families, there is likely to be no impact.
NO
Although low mortgage rates make housing more affordable for first-time homeowners , there is such a significant shortage of housing in the region that even if they could “afford” a house, one might not be available to purchase. Lower interest rates also make housing more affordable for all buyers, and as they compete to improve their housing situations, prices will increase, pricing first-time buyers out of the market.
NO
San Diego saw its homeownership rate drop five percentage points between 2009 and 2016 before edging higher. At an estimated 54 percent, it compares with a national 65 percent average. The mortgage rate drop from the 4 percent of spring 2019 to slightly below 3 percent qualifies an additional 43,000, or 7 percent, of San Diegans for homeownership. This will not be a panacea as job loss or insecurity will deter many, but it should prod the more confident into buying their first home.
EXECUTIVES NO
The historically low mortgage rate is not likely to increase San Diego County’s homeownership rate. The uncertainty of COVID-19 is a major inhibitor. The area unemployment is hovering high — around 14 percent — hitting the middle market hard. Given an uncertain economy, families that might meet the down payment hurdle are hoarding their cash. Though the pandemic yielded some price drop, San Diego area housing prices remain high, keeping affordability an issue.
YES
San Diego has a desirable housing market and if you add in record low mortgage interest rates, it can motivate homebuyers to act now. That said, there is still much economic and employment uncertainty due to COVID-19. Due to that uncertainty, many sellers may hold off on listing their homes. In the near term, this could create a shortage of listings and price wars for homes on the market in San Diego.
NO
The combination of unemployment and an unstable market due to the pandemic will prevent many from entering the home buying market. Interest rates are low but may go lower due to the economy. In San Diego, there is no new construction housing and limited inventory. Ergo, no real movement will occur. If pricing softens and interest rates go down even further, we may hit a tipping point where risk and reward is in balance.
YES
For at least the foreseeable future, the largest employers are relatively stable. Those who feel secure in their jobs and who had planned to purchase a home prior to the pandemic may view declining mortgage rates as a tipping point to enter the market. The challenge in San Diego is that demand is still greater than supply and home prices continue to rise, negating some of the benefit of the lower rates.