Home prices and overall sales are on the rise across the country. The West Coast, the state of California, and San Diego real estate itself are all seeing this trend. In some regions, home prices have risen by almost 19% over the past year.
San Diego’s Real Estate Market: An Update for May, 2021
The California Association of Realtors (C.A.R.), one of the largest and most important groups in the industry (at least for our state), released their latest market report for San Diego County (note: for the county, not the city), saying that the median price for homes in the county has exceeded $800,000. According to their data, this is an 18.5% increase from last year. Additionally, this is roughly a 5% increase from just February of this year.
The market, to no one’s surprise, is showing fierce competition among buyers. Homes have been on the market for a median of 6 days, and the typical sales prices is over the listed asking price. Currently, the sales price is about 101.5% of the list price. Only 15.3% of listings have a reduced price.
But there is an inventory problem in the San Diego area, and this issue is reflected in the data from C.A.R. According to their numbers, there were only 1,404 active listings in San Diego County when the report was made, a decline of over 50%. A low inventory means high competition for the few homes that are on the market, which is why we are seeing such high prices and extremely short selling times. It may be a good time to sell, but it’s a rough time to buy. This is impactful, and a major concern for anyone involved in the real estate business, not just buyers. For example, if you are a real estate agent whose income largely (or entirely) comes from home-sales commissions, it’s scary when there simply aren’t enough homes to sell.
While competition is high, it’s still a good time to purchase a house. For one, mortgage rates are still low, so most buyers can secure an affordable mortgage with a low interest rate. Also, there are few signs that home prices will go down, and most believe continued increases are more likely. So while home prices are high, buyers who wait will likely pay even more.
COVID-19: What’s Been the Impact on Our Market?
It’s the big, all-too-obvious elephant in the room: the COVID-19 pandemic. You simply can’t discuss the current nature of real estate, in San Diego or any other city, town, or region, without mentioning this disruption to the economy.
If you simply look at home price increases, it appears the pandemic may have increased prices. Zillow’s data, for example, shows a sharp increase in San Diego real estate prices right around March of 2020, which was when the pandemic really became a factor in this country. Shelter-at-home orders made single-family homes far more attractive, especially compared to small apartments. While there was a short drop in prices, they quickly came back and accelerated after government-ordered shutdowns set in.
What’s Ahead for San Diego Real Estate?
Accurate predictions about the future can be extremely tough, and nothing is ever guaranteed. But to create an accurate forecast, it helps to look at information from some of the leading sources in the industry. Zillow, for example, provides information on past home price and makes general predictions about the future.
Their information shows that in May of 2011 (ten years ago), the typical home price in San Diego was roughly $397,000. That number actually dipped to $383,000 in February of 2012, but then a steady increase began. Over the next ten years, their numbers show typical home prices rising to $766,000 in May of 2021. In just a decade, we have seen home prices increase by nearly double.
Currently, the Zillow platform lists the San Diego market as “hot,” signaling that it’s a good time to be a seller.
The question for forecasting becomes, then, when will the San Diego market stabilize and peak? When will prices start to hold steady? Will they ever? That’s difficult to say, as San Diego has many factors that draw in residents from all over the country.
It seems likely that these trends will continue because the economy in San Diego, San Diego County, and the surrounding region is actually quite strong. Employment is starting to rebound in the area, with a current unemployment rate of 6.9% according to California’s Labor Market Information Division. While unemployment was down to 3.8% roughly year ago, the current numbers are a slight dip from 7.2%, the unemployment rate for February of 2021.
Why does this matter? Because real estate markets depend on a strong economy. Like all markets, it needs people working in gainful employment, earning a strong income so they can purchase homes, take out mortgages, and remodel their properties. Employment numbers are not the only factor, but they are important to real estate.
Because the San Diego market appears to be healing nicely from the COVID-19 pandemic, most people (including us) are positive about the future for San Diego real estate.
Quality Loans for San Diego Homebuyers
If you are interested in purchasing a home in San Diego, contact our team right away.
With so much competion in the market, you need to get prequalified for a loan before you start shopping. Give us a call today and let us help you get the right financing for your next home purchase.