Can Economic Weakness Help San Diego Home Buyers?


San DIego shares national economic pain. After a bleak holiday shopping season, annual retail sales on a national basis declined in 2008–and likely were not much better in America’s Finest City.

In fact, this report marks the first annual Retail Sales decline since the government started tracking the data 40 years ago.

It also provides some proof to the notion that the U.S. economy is suffering through a deeper recession that originally thought.  A pullback in spending — especially during the heavy shopping month of December further highlights the cautious nature of American and San Diego shoppers these days.

What may come as a surprise for those in San Diego real estate circles, is that this may end up being good news for spring home buyers.

Because Retail Sales are reflective of consumer spending, a dramatic pullback helps to keep the economy in slow gear, countering the inflationary impact of government stimulus and direct intervention.  Inflation, as we know from experience, causes mortgage rates to rise. Therefore, the absence of inflation helps keep mortgage rates low.

Finally,  earnings season is in full swing on Wall Street and weak corporate guidance has spurred a 6-day decline in the Dow Jones Industrial Average.  As dollars leave the stock market, investors are parking them in the safer world of bonds.  This includes mortgage bonds, of course, which further pressures rates lower.

As we’re seeing, economic weakness, at least up to a point, can be the friend of San Diego real estate buyers in need of a new home loan.  For active home buyers in Carlsbad, Encinitas and San DIego, the timing may be the best it has been in years.

(Image courtesy: The Wall Street Journal Online)