Clients, friends, and colleagues:
Sales figures are way up for Q1 in San Francisco, but instead of focusing on that recorded data (while it's important and fun to analyze, it represents contracts that were signed more than a month ago), I want to talk about the emerging factor in our market right now: interest rates.
We know the real estate market is impacted by many factors; factors that can change course in a snap and are difficult to predict with high confidence. Since my last market update just over a month ago, interest rates have gone up by a historic margin: from roughly 4% to 5%. This represents a 25% increase in the last 5 weeks or so alone.
It's obvious that rising rates directly impact buyer affordability, but let's do a quick, rough example to help you quantify that impact:
Buyer for $2M home @ 20% down (30-yr fixed):
Principal & interest @ 4%: $7,639/mo
Principal & interest @ 5%: $8,589/mo
Property Taxes: ~$2,000/mo
Total monthly @ 4%: $9,639/mo
Total monthly @ 5%: $10,589/mo
Difference: $950/mo (or 9.8%)
Does this mean prices should come down by 9.8%? No. But I have to believe this presents a significant enough shift in buyer purchasing power to have an impact on our housing market.
Tailwinds that will keep the SF housing market strong: perpetually low supply, local buyer affluency (cash buyers & buyers financing less than 80% LTV), real estate remaining a good hedge against historic inflation, and let's not forget, interest rates at 5% are still relatively low.
For insights as to how I'm helping my clients succeed in the current market, contact me directly.
Recent sales & reviews @ the bottom.
