Introduction

Chad Dannecker: Hi, I’m Chad Dannecker with Dannecker & Associates at Compass, coming to you with your late June San Diego County housing market update.

Interest Rates

So right now in the news, we’ve got our 30-year fixed-rate mortgages that have been really kind of fluctuating. From about mid-May, they jumped up to about 6.5%, and they’ve been fluctuating between 6.75% and sitting at about 6.53% today.

When our 30-year rates get up into that 6.5% range, generally we see some buyers start to slow down because it makes the affordability a little bit less available to most people. Most people don’t have access to our home prices and affordability as rates push up towards 7%.

I will say we’re seeing some great success right now. We’ve been helping clients find ARM products, or adjustable-rate mortgage products, like a 5-year, 7-year, or 10-year ARM that are fixed for 5, 7, or 10 years. Those interest rates in most cases are between $1.25\%$ to about $0.75\%$ lower. We just had somebody get locked into a 5-year ARM—so a 5-year fixed loan—at 5.25% versus going in at that 6.75%, which is about a $1.25\%$ difference. That really helps them out with the payments and just puts them into a great home.

Median Home Prices & Market Dynamics

Surprisingly, what’s kind of interesting here is we’re seeing the median home price across the county is kind of just tricking up a little bit. So, just heading up a little bit on the median home price.

We’re finally starting to see the “K-shaped” economy show up with homes. We’re starting to see cheaper homes, especially attached homes and condos, even in the lower price ranges, just sitting right now in many cases. Obviously, premier locations, properties in really good condition, and properties that have HOAs with healthy reserves that are well-maintained—those buildings and those condos are selling. But many other ones are sitting.

On the other end, we’re seeing some of our $3, $4, $5, $6, $7 million and up product starting to sell right now. So again, we’re seeing that K-shaped economy where the lower end of the economy is getting hit harder than the wealthier 1% that have more money. It’s kind of interesting to finally see that show up in the housing market.

New Fed Chair Key Takeaways

Outside of that, I don’t have a whole lot more for you this week, but our new Fed Chair was installed. There were no rate changes at the meeting last week, which is good, but everything they’re talking about sounds like rates could go up anytime soon.

The market is calling the new direction very hawkish—much like the predecessor, very hawkish. Here are the key takeaways from the new Fed Chair:

• No More Forward Guidance: The new Fed Chair doesn’t like the forward guidance that previous chairs were giving, where every investor and person out there sat listening and hanging onto every word, causing the market to rally or crash based on that language. They are saying, “We’re not going to give forward guidance; we don’t think that’s our role here to try to predict the future.”

• Regime Change Via Task Force: They’re talking about how the way we’ve been looking at the economy and measuring things is antiquated. They’ve put together a number of task forces to look at how we can get better, faster, and more relevant data to make the calls on inflation and whether to raise or lower rates. Remember, the Fed’s only real tool is to either put money into the market or pull money out of the market. When they raise rates, they’re basically pulling money out because fewer people will transact.

• Tough on Inflation: They’ve said they are going to handle inflation, which means they’re not going to lower interest rates while inflation is going up. Much like the former Fed Chair, they’re going to stick with a similar position on that.

• Brevity is the Soul of Wit and Monetary Policy: They’re really going to work to clean up communications and keep things as short and concise as possible. This is super good because we’ve all seen the former Fed Chair go on for 45 minutes to an hour answering lots of questions, and sometimes people read into the tone too much. If he used one word that put people on edge, the market would rally or swing the other way.

Conclusion

That’s really all I’ve got for you guys today. I hope you’re enjoying some World Cup action!

The market seems pretty stable in San Diego. We’re lucky because there’s not a ton of single-family detached homes on the market, especially in our coastal areas, and we still have consistent demand.

Hope you have a great Fourth of July if I don’t talk to you between now and then. Thanks so much, I’m Chad Dannecker. Catch you later!