Few markets exhibit as much dynamism and potential as the San Diego housing market. Since the pandemic-stricken 2020, housing prices in San Diego have been up and down, leaving buyers and investors uncertain. But the trend has been mostly upward.
As we approach the end of 2023, a decline in mortgage rates has become the new trend. San Diego’s home values have also reached a peak of nearly $1 million, as recorded in July 2022, before a sharp decline took over until March 2023. This has sparked a concern for a housing bubble, leaving buyers and investors more confused.
To ease the confusion, we have compiled a data-driven San Diego real estate forecast for 2024 and beyond.
Understanding San Diego Real Estate Trends
According to data from Zillow, San Diego’s median home price was $955,846 in October 2023. That represents an increase of 4% over the past year.
However, a sharp decline was recorded between July 2022 and March 2023, with prices dropping by 7.2%. San Diego’s median home price per square foot is currently $660, a 6.2% increase from the previous year.
California’s median home price was $746,473 in October 2023. This was up 0.9% from October 2022. This shows that San Diego’s real estate market is outperforming most of California’s cities and towns in growth and home values.
Sales Volume
San Diego’s sales numbers justify the fear of a retrogressing housing market. According to the California Association of Realtors, sales volume has dropped incredibly since August 2021.
The latest month-over-month declines are staggering; September’s sales were down 23.6% from August, while October’s dropped by a considerably lower 6.5%.
The sharp decline in home values between July 2022 and March 2023 was met with drastic decreases in monthly sales volumes, ranging around 40%.
Decreased affordability of homes as they reach peak values is one of the major causes for this worrying San Diego real estate trend.
Deciphering the Inventory Levels and Demand Dynamics
The demand-supply dynamics are heavily skewed in the San Diego real estate market. Demand has been outpacing the available inventory, causing a red-hot seller’s market.
According to Rocket Homes, San Diego County’s homes for sale were 5,616 in October 2023. The number of homes sold was 1,559 homes in the same month. By computation, we are looking at a 3.6-month supply, which is way below the six-month supply that is considered balanced.
A distinctive feature of all seller’s markets is homes sitting on the market for an incredibly short time. In San Diego, the average home goes to pending in 10 days, according to Zillow. The sale is completed in about 18 days, considerably lower than last year’s 27-day average.
Analyzing the Impact of Interest Rate Hikes
Like other metropolitan areas across the U.S., the housing market in San Diego is subject to changes in interest rates.
The Federal Reserve has been increasing interest rates since March 2022 until very recently. Freddie Mac’s interest rates for a 30-year fixed-rate mortgage went up to 7.79% in October, while the 15-year fixed-rate mortgage peaked at 7.03%. These were the highest rates in over 20 years.
The high mortgage rates have reshaped the dynamics of the San Diego housing market in 2023 by making borrowing expensive. This has priced out a large portion of prospective buyers. Cash purchases are also out of reach for many buyers, given the high housing prices in San Diego.
The decrease in demand has been instrumental in slowing down the pace of real estate transactions.
Exploring Geographic Variations Within the Market
In San Diego, different neighborhoods exhibit different growth rates and demand levels. This is reflected in their home prices.
Factors such as location, access to amenities, and proximity to downtown influence this. For example, coastal communities such as La Jolla and Pacific Beach feature luxury living, commanding a premium.
The following are other San Diego’s upscale neighborhoods and their median home prices:
· Tierrasanta: $1,046,641
· Serra Mesa: $960,333
· Clairemont Mesa East: $945,077
· Allied Gardens: $921,451
· Bird Land: $903,437
· Kearny Mesa: $807,689
San Diego also has affordable neighborhoods. These include Mountain View, City Heights, Paradise Hills, Oak Park, Encanto, and San Ysidro. The median home prices in these neighborhoods are often below $500,000.
Unveiling the San Diego Real Estate Forecast for 2024
The San Diego real estate market holds much promise for aspiring real estate owners. Despite many questioning the sustainability of its growth, it is still posting impressive numbers. The question remains: Is San Diego’s housing market headed for a crash?
While no one can tell for sure, experts believe not. In fact, a positive outlook is projected for the next year. Wallet Investor predicts a 2.55% growth in San Diego home values next year.
The growth will likely be more pronounced in suburban areas. The growing interest in these secluded enclaves is due to the pandemic-driven lifestyle changes. More people are now working from home and looking for more living space.
Key Factors Driving Price Appreciation
San Diego is one of the most desirable places to live in California and the United States. Warm climate, beautiful beaches, and booming job market are key factors for this San Diego real estate trend. These will drive demand.
However, inventory may continue to be a challenge due to zoning issues. This will cause a shift in the balance of power between buyers and sellers. The result will be increased competition and home values.
Anticipated Impact of the Decline in Mortgage Rate
Since peaking in late October, mortgage rates have taken on a declining trend. The Federal Reserve is expected to retain the current interest rates during its next announcement in December. This means that mortgage rates may continue to decline or remain steady. This will give buyers a reason to smile as they foresee comfortable mortgage plans with affordable rates.
However, this may change the San Diego housing market dynamics in the grand scheme. It will incentivize first-time buyers who have been on the fence to jump into home ownership. But it may not cause an avalanche of new listings as many think, especially if the rates don’t drop too low. Many existing homebuyers still have low-interest rates on their homes and would prefer to keep them.
Strategies for Buyers and Sellers in a Dynamic Market
In such a vibrant and dynamic real estate market, having an informed strategy is critical to successful transactions. Whether you are a buyer, seller, or investor, the following strategies would prove handy:
· Conducting thorough market research
· Working with an experienced San Diego real estate agent
· Keeping an eye on external factors such as interest rates and economic trends
· Being prepared to act quickly
Peering Into the Future: Insights for 2024 and Beyond
The long-term forecasts for the San Diego real estate market are also encouraging. According to Wallet Investor, home values may rise by 11.79% by 2028. There will be a shift in the current year’s San Diego real estate trend, where growth is mainly due to low supply and high demand. In the long term, it’ll also be driven by economic and job market growth.
Potential Scenarios Influencing the Market’s Trajectory
The tech industry is the primary factor that will drive the long-term growth of the housing market in San Diego. The city is now a hub for tech startups and established companies. This is drawing in a huge workforce and driving housing demand.
Government policies on housing could also impact the market in the long term. The Biden administration wants to address the housing affordability crisis through various proposals. If implemented, the proposals could increase the supply of affordable housing in San Diego, thus slowing price escalations.
Migration Patterns and Their Impact on Demand for San Diego Real Estate
In recent years, California has seen a significant exodus of residents moving to states with lower housing costs, particularly Texas, Nevada, Arizona, and Oregon. During the pandemic, California recorded its first population decline since 1850.
As one of its major cities, San Diego wasn’t spared. It recorded a 1% population decline between 2019 and 2020, its largest in history, but has since started to re-stabilize. This trend has eased demand and contributed to a slowdown in price growth, but may reverse as migration patterns change.
Is It Wise to Buy a House in San Diego Right Now?
Now is an excellent time to buy a house in San Diego, provided you find a home that fits your budget and meets your needs. Buyers may be tempted to wait for further mortgage rates and price declines. However, this strategy may fail as the market is unpredictable.
Remember that buying a house in San Diego is a wise decision. While the market may have ups and downs, it has strong economic fundamentals and demand. And while the short-term San Diego real estate forecast may not speak to much appreciation, the long-term San Diego real estate forecast does.
Navigating the San Diego Housing Market in 2023 As a Buyer or Seller
As complicated as it is, navigating the San Diego real estate market is still manageable. Buyers, investors, and sellers must stay on top of the latest San Diego housing market trends and adjust their strategies accordingly. They can quickly adapt to the ever-changing San Diego real estate market by staying informed. Below are other helpful tips for buyers and sellers.
Practical Advice for Buyers Entering the Market
Buyers should have a budget and a list of what they want in a house. Extensive market research should follow, covering trends and extending to less popular neighborhoods showing promise.
Strategies for Maximizing Return on Investment for Sellers
Sellers can maximize ROI by timing their sales. We are in the holiday season when buyer activity is usually low. Sellers will have to be more strategic to get the attention of the few interested buyers.
They can also consider renovating their homes or making cosmetic improvements to increase their value. These improvements should align with current San Diego housing market trends and buyer preferences. Marketing and listing should also be top-notch.
Importance of Experienced Real Estate Professionals
Navigating the San Diego real estate market can be complex for buyers and sellers. This is where an experienced real estate professional can provide invaluable guidance.
They bring in-depth knowledge of the San Diego housing market trends, neighborhoods, seller strategies, and homebuyers’ behaviors and preferences. They can also help with negotiations and provide a network of clients or helpful contacts within the industry.
Continuing Growth of the San Diego Housing Market in 2024
San Diego is a classic example of a modern city. One thing that all modern and major cities have in common is a hot housing market. True to this, the San Diego housing market trends have been impressive so far.
The real estate trends in San Diego should remain positive in the remaining part of 2023 and beyond. Buyers and investors should capitalize on these investment opportunities.Housing prices in San Diego are at a record high, meaning it’s an excellent time for sellers to list. But with the great rewards come risks. Being strategic and enlisting an experienced San Diego realtor will help mitigate these risks.
