By Kathy McSherr

Hello Kathy:

I live in the Origen community of Civita in Mission Valley. The value of my home has gone up over $130,000 since my original purchase in 2013. Recently, home mortgage rates have been rising and indications are that they could continue to rise. Will rising interest rates slow down or even decrease the appreciation in home values that we have experienced in 2016?  

—Edward P.

Hi Edward:

If I had a nickel for every person that has been questioning interest rates since the election, I would be rich. I even thought of going into the crystal ball business as it’s apparent that everyone wants one.

Interest rates have risen since the election, and the talk is that the Fed is expected to raise rates a quarter percent on Dec. 14, 2016. That being said, slightly over 4 percent is still half of the national average since World War II.

Appreciation is how much your home is worth in comparison to what you paid for it (assuming you are in the black or not negative).

Although rates are woven into the same housing fabric as value, this is a two-part question; interest rates and values going up or down.

Interest rates affect one’s affordability to purchase a home. (Again, assuming we are talking about buyers for your home as your question refers to the equity and value of your current home.) And, when selling your home, the type of market — buyer’s market or seller’s market — determines the supply and demand. This is a major contender in establishing that value.

If there are several homes that are fairly similar to your home on the market, then the supply is great and it becomes a buyer’s market and you may not net as much as when everyone wants your home due to no supply and greater demand.

When interest rates are low it makes borrowing money more affordable to purchase a home. In addition, developers can borrow money at lower rates to build more homes. Sales typically rise as more people tend to borrow at a time when it will cost them less. Low rates can increase the demand for housing which could then push up prices. However, if pricing gets too high, then they can cool down and pricing can decrease. Rising rates could hurt buying power even more than rising prices, as they will affect your overall qualifying for the loan.

Depending on who you ask or which article you read there are a few schools of thought moving forward after an election.

Below is a great excerpt from an article on mymortgageinsider.com:

“A movoto.com study of the California real estate market reveals that home prices usually rise 1.5 percent less during an election year than in the year before an election, and they rise 0.8 percent less than in the year after the election. However, a recent study by the California Association of Realtors (CAR) disputes this conventional wisdom. ‘Transitory political events such as presidential elections don’t drive the housing market,’ said CAR President Pat Zicarelli. ‘Market fundamentals such as housing inventory, affordability, interest rates, job growth, and consumer confidence are the real factors that influence the housing market.’

The CAR study found no evidence that elections have a negative impact on home sales or prices. In fact, the study discovered that growth in home sales at the end of an election year — at least in California — actually outperforms non-election years by 7.1 percent.

The authors of the movoto.com study speculate that election years may be stressful for many Americans, making them less likely to purchase high-ticket items — like houses. Because an election’s results can affect their personal finances, fewer home buyers are willing to take the plunge until the dust settles and the new president’s policies become known.”

Here in Mission Valley, and particularly Civita, the supply is limited. Two new developments are scheduled to open in 2017. Until then, if you want to live in a great master-planned community in the heart of San Diego with parks and a future recreation center, community gardens, special events, and new retail expected, then you can only purchase resale which would make it a great time to sell — thereby maximizing the value in your current home. The fortunate thing for you is that there are still several years of planning and growth slated for your community which conceivably will add to your home’s value even more. In my opinion, you are in a great spot. In my opinion, there will always be value in San Diego real estate.

—Kathy McSherry is a Realtor at Coldwell Banker Residential Brokerage. Email your questions to [email protected] or call 702-382-9905.