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San Diego homebuyers backing out of contracts due to rising mortgage rates

home for sale sign
Posted at 4:41 PM, Jul 27, 2022
and last updated 2022-07-28 13:36:08-04

SAN DIEGO, CA (KGTV) -- For the last couple of years, San Diego's home prices were skyrocketing, sellers were getting multiple offers well over their asking price, and 'for sale' signs were quickly removed.

"We could sell a property in a weekend. Do a quick open house and we’re done, in escrow," said Sheri Jones, broker/owner of local S.A.K.K Realty.

"Interest rates were in the two percent, easily, lender credits- a buyer can get pretty much whatever they needed, and a seller could get top dollar. I'm saying we were seeing $100k over asking, $200k over asking."

But recently, there's been a noticeable shift, and Jones has seen it firsthand.

"With interest rates, we're seeing anywhere from 5 to 6 percent on Conventional or FHA, we're seeing homes stay on the market longer, we're seeing prices drop," she said.

"Interest rates have almost doubled since the beginning of the year," said Erik Bildman, vice president and GM of Sundae marketplace. "Mortgage rates are up, and we have inflation, housing has become less and less affordable for potential homebuyers."

Bildman says nationwide, many buyers are also backing out of contracts last minute.

"In June, almost 15 percent of all contracts were canceled by the buyer, and comparably pre-pandemic the highest number ever on record was 11 percent," he said.

"When they started looking they had locked in a certain mortgage rate, and as those continue to increase, it's becoming less affordable for them."

It's something Jones is experiencing in San Diego.

"I actually had a meeting with my lender this morning and she gets a phone call, 'buyer's pulling out'," she said.

"And I'm seeing that as well, buyers are getting cold feet, and buyers are saying 'I'm going to wait, and see what happens'. I know I lost a lot of buyers because they were already at the top of their budget and to see a huge increase like that, they just couldn’t afford it anymore."

But it's not impossible to sell or buy, Jones says people on both sides are getting creative. Buyers are able to negotiate, "Sellers are offering credit for closing costs, and then also they're offering to pay for their buyer's buydown to have a cheaper rate for them," she said.

Jones said she's telling sellers to be patient, and not price their homes too aggressively.

"Let's do maybe $30 to $50k under and also expect to get a lowball offer," she said.

According to Redfin, San Diego still has a very competitive housing market. While homes are staying on the market a bit longer, just last month home prices were up 13 percent compared to last year.