The last two years has been one of the most turbulent yet interesting times for the real estate industry. In San Diego, homebuyers, sellers, and real estate professionals have seen skyrocketing offers, diminished inventory, short times on the market, and a near halt to new construction, all while demand remained relatively unchanged, possibly higher than usual.
After a summer that continued the red-hot trend, where does the San Diego market sit at the beginning of September?
While the market continues to remain hot, and buyers are still facing challenges, there are signs that we may see a stabilization.
San Diego Real Estate Market: A Stable September Expected
In General, More of a Stabilization from the Market
Overall, we are not seeing the massive, arguably outrageous offers that we saw earlier in the year and in 2020. It’s no longer typical for homes to sell at $70,000 or $100,000 above asking price, which makes the housing market much more accessible to numerous buyers. Good homes, to be certain, will still receive offers above the listing price, and many purchases are above the appraised value, but a general stabilization in prices seems to be taking place.
We can see this trend, which we have witnessed, in statistics from Redfin, one of the largest home-listing sites. According to their numbers, the median sale price for a San Diego home in July was $785,000. This is certainly a massive number, but it’s actually lower than what we saw in previous months; in June the median sale price was $799,450.
The spring and summer of 2021 saw large increases in the median sale price, at least according to Redfin’s numbers. In just three months, we saw the median sale price go from $700,000 (March) to almost $800,000 (June). But in July we saw a slight decline. Will this trend continue? It will be interesting to see what the August numbers bring.
Inventory Remains Short, But Getting Better
The three-month increase of $100,000 was driven by many factors, including low inventory. When inventory is low and demand stays the same or goes higher, basic economic theory holds that prices will go upward. We certainly saw this in San Diego (and across the country); the price increase seemed to coincide almost perfectly with a decline in available homes.
Overall, the inventory appears to be getting better, which could explain the reduction in prices. There was actually a large reduction in inventory that began around July of 2019, well before the pandemic, which has been largely blamed for low inventory, took hold.
In July of 2019 there were over 7,000 active listings in San Diego County according to the St. Louis Federal Reserve Bank. Throughout the fall of 2019, inventory declined sharply but never recovered once COVID came to the U.S. There have been small increases, but nothing approaching the levels we had before.
Active listings bottomed out at about 3,100 in February and March of 2021, but we have seen steady gains ever since. The latest numbers (July) show over 4,000 active listings in San Diego, so while we are not at the levels we would like, there appears to be a trend in the right direction.
New construction could also provide relief for the market, reducing the inventory shortage while giving buyers more options for their purchase. When inventory is low, new homes are often seen as a way to relieve some of the pressure, but unfortunately home construction was limited over the past year and a half.
While current numbers for the San Diego market are hard to find, we do have national data. Although it’s not specific to our market, this can provide some background and insight. Across the country, housing starts appear to be trending upward. In July, there were roughly 1.5 million starts, a 7% decline from the month before (June). However, April, May, and June all saw increased numbers for housing starts. When these homes become available, there should be some relief. It’s possible that many of the homes have already been sold, which could have eased market pressure, contributing to the stabilizing prices.
What About Time on the Market?
One of the most frustrating factors for San Diego buyers has been time on the market. It seems that many homes are sold just a day or two after they are listed; if you want to buy, the competition is so fierce that you basically need to purchase sight unseen and make an offer above asking price.
The typical time on the market, while still low, appears to have bottomed out. Once again, we can turn to Redfin for perspective. According to their data, the median time on the market over the past five years reached a high of 49 days. As demand increased and inventory declined, time on the market diminished to 14 days in September of 2020.
By March of this year, it was a mere 9 days on the market. It stayed steady at 9 days throughout the summer.
Now we have a good-news/bad-news situation. The good news is the median time on the market increased in July of 2021; the bad news is that it only increased to by 1 day! That’s right, the latest data shows a median time on the market of 10 days. Not great for prospective buyers, but it’s a step in the right direction.
As a buyer in the San Diego real estate market of 2021, you have to take whatever positives you can find!
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