The Federal Reserve has given us a Christmas and year-end gift by deciding to leave interest rates unchanged for the third straight meeting. They noted the progress being made toward their 2% goal for inflation but emphasized the need for more progress. Members of the Fed committee signaled that as many as three rate cuts could be coming in 2024!

Coming out of this meeting, the question seems to be when, and not if, the Fed will cut rates in 2024. Inflation is definitely slowing, likely due to lower energy costs. The Consumer Price Index (CPI) was released on Tuesday, showing that inflation slowed to an annual rate of 3.1% in November. This is still much higher than the target 2% rate but shows improvement. Although I do forecast rate reductions next year, the big question is when.

In other good news, the new conforming loan limits are now in effect for San Diego.

The new conforming loan limit is $766,550, up $40,350 from the previous year's $726,200. The high conforming loan limit is $1,006,250, up $28,750 from the previous year's $977,500.

Conforming loans, underwritten and backed by Fannie Mae and Freddie Mac, offer the best rates. Any loan amount over the high balance conforming loan limit will be considered a jumbo loan and come with more stringent guidelines and, most likely, higher rates.

Let's consider the current effects of rates here in San Diego. The median home price sold in San Diego County is $882,500, which in November is up 3.4% over the prior year.

Now, let's take a home purchase of $900,000 with a 20% down payment of $180,000. The loan would be $720,000.

Let's look at the effects of two different rates:

  • 7% loan last month: Principal and Interest Payment of $4,790
  • 6% loan currently: Principal and Interest Payment of $4,317, for a difference of $473. I know everything is relative, but that's quite a difference in payment in 1 month or less!

Is now the time to buy? I believe the key answer is that if you can afford the total payment and housing expense, it could be a good time to buy. Inventory is still low, and I don't expect it to pick up substantially next year. One thing I can bet on is that there will be even more competition for homes next year due to lower rates. So, if you choose to buy earlier rather than later, you can minimize your loan costs, even if the rate is higher, with the expectation that you will have the opportunity to refinance down the road!

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As a seasoned professional in the real estate and mortgage industry for over 30 years, I have navigated through various market fluctuations, witnessing both ups and downs. If you have any questions or need clarification about the information shared in this email, feel free to reach out to me anytime. I'm here to assist you.

Alexander Pfleger
Mobile: 619-339-7334
Email: homes@alexanderpfleger.com