Seven is a Lucky Number for San Diego Home Sales
You have to go all the way back to August, 2005 to beat the number of San Diego homes that were sold this August. An article, based on a KPBS Radio News story, entitled, San Diego Home Sales Hit Seven-Year High, brought the great news to light. According to Data Quick, a company that tracks real estate sales activity, 3,981 homes were sold in August of 2012.
Looking a little further into the seven-year high for home sales in San Diego, it becomes increasingly clear that low mortgage rates have stimulated activity in San Diego and the six-county Southern California real estate market. August 2012 sales were up more than 10 percent over the sales generated in August of 2011.
How come mortgages can be had, for qualified borrowers, at less than four percent? Mortgage rates are at or very near historic lows. The main reason behind the historically low interest rates is the stimulative policies of the Administration and, in particular, the Federal Reserve’s stated goal of keeping interest rates, that they charge for banks to borrow money, at less than one percent. Home buyers can thank Fed Chairman Ben Bernanke for such favorable mortgage interest rates.
When the going rates on savings accounts are only slightly greater than zero and the ten year Treasury bill is hovering at slightly less than two percent, banks can afford to offer low interest rate mortgages. To be certain, lenders are making money on the mortgages they service, even at such low rates.
Home buyers are also getting what could be the deal of a lifetime. For every $10,000 in mortgage debt, a homeowner pays approximately $100 in principal and interest. For example, on a $200,000 mortgage at 6%, the monthly payment would be roughly $1,200 in principal and interest. Taxes and insurance, which are usually added to the monthly mortgage payment, are in addition to principal and interest.
Based on the above example, it is easy to see how a drop in the mortgage interest rate can make any home more affordable. On a $200,000 mortgage, at four percent, the principal and interest payment works out to about $800 instead of $1,200 (interest at 6%), for the same exact house.
Data Quick research revealed that the average price of a San Diego home this August was $345,250. That figure compared favorably to the average selling price in August of 2011 and represented an average increase of $25,000 on each home sold.
In addition to favorable mortgage rates, the increase in San Diego home sales was spurred on by more buyers who wanted to move up to a better, and usually, more expensive house. Investors also entered the market in a big way, buying up homes, for cash, at very attractive prices.
While one month does not make a trend, San Diego should be allowed to celebrate this great news. Real estate professionals should be encouraged. Anyone thinking about buying a home in San Diego should act soon, before the prices go up.
For more information, visit: http://www.patrickbelhon.prudentialcal.com