San Diego Real Estate

San Diego’s housing market is one of the nation’s worst for buyers, but also one of the best for sellers. The supply of homes for sale in the county is down 30 percent over the year. Supply is especially limited in those valued under $400,000 which is bad for first-time buyers. Additionally, low inventory in the middle and upper range of homes is hurting the ability of existing sellers to trade up.

The low supply has pushed home values up 4.6 percent over the last year to a median $479,100. The lack of inventory benefits sellers, with multiple offers bidding up home values. 

$685,375 North Park 

3 Beds, 2 Baths, 1,208 Sq. Ft.

San Diego has low supply for three reasons. First, there are still people underwater on their homes, 8.6 percent of property owners in San Diego owe more on their mortgages than their homes are worth (a normal market would be 5 percent). Secondly, some homeowners are skittish when it comes to trying to move up because of the competitive housing market, so they’re sitting out. Finally, some feel their homes are still appreciating and don’t want to sell and miss out on further gains.

The amount of supply had been growing, but an increase in sales in recent months has eaten up those gains, with virtually no replacements. San Diego averages two months of supply, when most analysts consider six months to be normal.

In San Diego, inventory dropped 49.4 percent in the bottom third priced homes from June 2014 to June 2015. It fell 29.3 percent in the middle range of homes, those valued between $406,450 and $627,350, and 20.2 percent for the most expensive, or those valued above $627,350. The county joins Charlotte (down 39.7 percent) and San Antonio (down 31.3 percent) as the toughest in terms of supply.

$656,000 Rancho Bernardo 

Beds 3 Baths 2,275 Sq. Ft.

Supply is growing the fastest in Austin, Texas, where inventory is up 30 percent over the year and values rose 6.7 percent to $230,500.Some parts of San Diego's real estate market are entering bubble territory and could pop in the next recession.

The trend in San Diego and a few other cities where the market is being driven by high valuations of tech stocks counters what's happening around the country, which is far from being in a bubble. Denver, Miami and Portland, Oregon, plus Bay Area cities like San Francisco, Oakland, Berkeley and San Rafael, are also showing signs of being in a bubble.

Median household income, the value of the U.S. dollar against foreign currency, a demand for housing in coastal regions with limited supply and a dependence on low interest rates as significant contributors to localized price bubbles in the seven markets.

San Diegans who are between 25 and 30 years old may be graying by the time they can save enough to buy a median-priced home here. It will take 18 years for a San Diego household of college-educated young professionals earning the median income to afford a median-priced home in the county.

$605,000 Carmel Valley    2   Beds 3     Baths 1,276   Sq. Ft.

$605,000 Carmel Valley

Beds 3 Baths 1,276 Sq. Ft.

More specifically, a household earning $89,000 per year that can save 10 percent of its income for 18 years would then have enough money for the standard 20 percent down payment on a median-priced home of $589,000 in the county. San Diego ranked as the nation’s fourth most difficult city to save to buy a home.

Rents in the county have been rising about 3 percent per year, with the average expected to reach more than $2,000 a month by 2020. Wages have not kept pace, rising about 2 percent annually, continuing to eat into potential savings.

San Francisco is the most difficult place to save for a down payment, with a median-priced home costing $1.74 million. There, it takes 29 years to save for a 20 percent down payment if a household has a college degree. San Jose and Los Angeles round out the top three. It’s easy to save for a 20 percent down payment in Detroit, where it would take four years to save enough for a median-priced home of $103,890.

California is often seen as a barometer for the rest of the nation's housing market. If that is the case, then housing this fall is not looking good. Southern California home sales fell to a three-year low in July, with San Diego leading the way.

Prices came a long way in a couple of years, and now a lot of would-be buyers just can't stretch their finances enough to buy in today's more conservative lending environment. That's not the only reason price appreciation is easing, but it's one of the main ones.

$575,000 Pacific Beach    2 Beds, 2 Baths, 1,012 Sq. Ft.

$575,000 Pacific Beach

2 Beds, 2 Baths, 1,012 Sq. Ft.

A big reason price gains are easing is because there are fewer investors and all-cash buyers in the market. The number of foreclosures and distressed home sales has been falling steadily; absentee buyers in southern California, largely investors, fell to the lowest level since 2010 in July. Cash buyers accounted for 24.5 percent of the market in July, the lowest share in more than four years.

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Real Estate Overview for San Diego