Expect the vacation rental debate to continue

I attended a Fourth of July party last week in La Jolla and asked the host what the loud music was coming from next door. She said it was a vacation rental.

I asked how often she experienced the noise and she said it was a regular occurrence especially during the summer nights. It was quite an annoyance; a full blown party with 10 or 12 people talking loudly over music. My friend experiences this throughout the summer months in what was just recently a fairly quiet neighborhood in the Muirlands of La Jolla.

Having now experienced the inconvenience of an adjacent vacation rental first hand, I now have a better understanding of what homeowners have been saying for years; vacation rentals can clearly be disruptive to a neighborhood. I expect the vacation rental debate will continue.

Where are mortgage rates headed?

I am often asked by my buyers about the direction of mortgage rates; I follow the trends and regular articles on that topic.

Last week, mortgage interest rates spiked up to a near six month high. Mortgage rates are market rates affected by a myriad of factors especially the levels of government debt, the interest rate on government debt, as well as the strength and direction of the economy.

One difficulty is that mortgage rates are closely related to government budget deficits and overall debt levels. Only 15 years ago, our federal debt was a manageable $10 trillion. Next year we will reach $34 trillion in federal debt with an annual increase expected of $2 trillion. This is one of the strongest factors affecting inflation and interest rates.

Unfortunately, when I look at the difficulties in Washington D.C., I don’t see a slowdown ahead in the government debt increase, particularly because the annual interest requirement on the debt contributes to the deficits and general government spending continues to increase.

Thus my summary is that I do not see mortgage rates decreasing significantly over the next few years.

I think 6% to 8% mortgage rates are the new normal for the foreseeable future. Clearly, higher mortgage rates could have a dampening effect on home sales and prices in the short-term although the vibrant service economy as well as the lack of available home inventory is keeping home prices stable. Also, inflation over time increases home prices. I believe the only factor that could bring rates down from current levels is a significant slowdown in the economy, and currently that is not occurring.

One option for buyers is to take out an interest-only loan and if rates dip, to refinance.

The interest only payment is just the minimum due and typically additional principle can also be paid monthly. I have had some recent buyers choose this option in order to get into a property. If you are a potential buyer or seller of San Diego real estate, please don’t hesitate to call me if you have some questions or concerns, or just want to chat about your options going forward.

MARKET REPORT (Single Family): College Area (92115): median price up 6% year over year to $906,000 and with 33 homes for sale. San Carlos (92119): median price down 9% to $1 million and with only 7 homes for sale. Del Cerro/Allied Gardens (92120): median price up 4%, year over year to $1,150,000 and with 25 homes for sale. Most homes sell within 30 days.