Back in 2000 I purchased my first condo in San Rafael for $238,000. It was all that I could afford at the time. Two years later the prices had risen to $290,000, which I thought was insane. There didn’t seem like any possibility the market could keep going up.
Next up, I rented another condo in Novato, and due to loosening lending standards and exotic loans the market kept going up. I ended up buying that condo from the owner for $315,000 and then selling it for $435,000 right before the market stalled and then crashed. The person I sold to obtained a stated income loan, didn’t have great credit, and lost the condo to foreclosure.
People have been buying and selling condos like I did for a long time, using the money they made to purchase single family homes (SFR). It took me a while, but eventually I was able to buy an SFR. Now that interest rates are up, I’m doubting we will have as much buying up, as people love their historically low interest rates.
Why is this dynamic for the condo market? With less people moving up, that means there will be less inventory. With less inventory and demand driven by a strong labor market and economy, we should see rising prices and competition among buyers.
Mortgage interest rates are still in the mid to high 6’s. Once the Fed starts cutting the prime lending rate, mortgage rates should fall into the 5’s. When rates finally return to the 5’s, hopefully the sooner the better, be on the lookout for more buyers and a hotter market. Currently demand is strong, and it should only get better.