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Across the country and here in San Diego County, the housing market has gone through a lot of change in the last few years. Between the pandemic, inventory shortage, and quickly rising interest rates, many speculated we were headed for a housing crash similar to 2008.

But despite a slight cooldown at the end of 2022, things seem to be heating back up again, signaling that Q4 was the bottom of the recent real estate market cycle. Many homeowners have mortgages below 3% and this has created a strain on inventory. Despite higher interest rates compared to a year ago, homes below $2.5M have seen a significant increase in activity and competition. In my personal experience, the first quarter of 2023 has brought back multiple offers on almost every home our clients were interested in purchasing. In many cases, buyers waived their inspection and appraisal contingencies, and homes sold for over asking price. In fact, I’d say if these trends continue we will be back to a strong seller’s market in most areas of the county.

Even in the face of recent bank closures, we haven’t seen the drastic ripple effect we’d normally expect when it comes to real estate lending. As you’ll see in the coming pages, some submarkets saw a slight uptick in cash transactions and others saw a small decrease, but the split seemed relatively well-balanced despite bank collapses and higher interest rates compared to 2022, though still low on the overall historical spectrum.

In the latest on interest rates, the Federal Reserve does seem to be taking a different approach in 2023, raising rates at a slower and more deliberate pace. Caught between the tug-of-war between high inflation and financial/price stability, we ended the first quarter with the 30-year fixed rate at 6.3%. But Forbes reported that they expect 30-year mortgage rates will end 2023 at 5.2%.

The market peaked between Q1 and Q2 last year, so it’s not unexpected that this year’s statistics are lower when comparing year to year. While home appreciation has cooled slightly since then, it will be interesting to see if pent-up buyer demand will move prices back up to peak pricing if rates continue to decline. Either way we see strong indicators that we are in for a busy and successful San Diego summer.

You can read even more about how the North County market performed in Q1 in the following pages, and as always, if you have any questions about your specific market, we’re here to help.

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