Mortgage bonds had a rocky ride this week but still finished at the same level they did last Friday. Wednesday spooked the market and it dropped a half-point, suggesting that rates would rise .125%. Unexpected strength today buoyed the market and kept mortgage rates at their July, 2014 levels.
You can follow the national average mortgage rates at Bankrate.com. San Diego mortgage rates tend to be .125% LOWER than the national average. Average rates as of Ausust 1, 2014:
30 Year fixed conventional average= 4.21%
15 Year fixed conventional average= 3.28%
30 year fixed VA/FHA average= 3.75%
30 year fixed VA/FHA jumbo avg.= 4.125%
5/1 adjustable rate conv. average= 3.53%
CAUTION: San Diego home prices up but the price increases are decelerating. That's fancy double-speak for "you're making money but not as quicly as you did last year". I don't know if that's the beginning of the end of the boom or the beginning of the boom. Let me explain:
Six years ago, I said to pounce on the homes under $400,000 because the median income was well above the amount required to support a mortgage on a median-priced home. I was right; those home are all up at least 20% (which means you would have doubled your down payment investment in 6 years). Today, median income does not support a mortgage for a median priced home. That sends a cautionary signal to me UNLESS....
...there will be inflationary pressures on wages. Wage push inflation is usually the last part of an inflationary cycle. Anyone who eats or drives a car knows that price inflation is real but wages haven't kept up with commodities prices increases. It looks like wages are about to explode. That's good news for real estate prices as it introduces a whole new round of buyers, willing to pay higher prices for homes.
While caution should be shown towards home prices, we could see another 20-25% upside in San Diego home prices, then everything turns to $***. Maybe. Bottom Line: buy what you can afford, live in it, and think long-term in real estate. Flippers will eventually get burned.
