July 6, 2022

San Diego, CA Real Estate Market Trends & Analysis [Updated 2020]

Jump To Another Year In The San Diego Real Estate Market:

  • 2020 San Diego Real Estate

  • 2018 San Diego Real Estate

  • 2016 San Diego Real Estate

  • 2014 San Diego Real Estate

The San Diego real estate market remains at the forefront of the California housing sector. Local home prices are nearly three times that of the national average, and pent-up demand created by the current pandemic has stimulated a healthy amount of activity. Pending sales are actually on the rise, despite historic valuations onset by competition. While demand persists, however, it appears an equal number of sellers don’t yet have the confidence to place their homes on the market. Prices have been increasing steadily over the last year, which is why the slight pullback in home values brought about by COVID-19 may actually represent a buying opportunity. Prospective homeowners and long-term investors may find the latest disruption in the San Diego housing market to be an opportunity instead of an obstacle.

San Diego Real Estate Market 2020 Overview

  • Median Home Value: $679,568

  • 1-Year Appreciation Rate: +6.0%

  • Median Home Value (1-Year Forecast): -0.8%

  • Median Rent Price: $2,750

  • Price-To-Rent Ratio: 20.59

  • Unemployment Rate: 13.9% (latest estimate by the Bureau Of Labor Statistics)

  • Population: 3,338,330 (latest estimate by the U.S. Census Bureau)

  • Median Household Income: $74,855 (latest estimate by the U.S. Census Bureau)

  • Percentage Of Vacant Homes: 7.76%

  • Year-Over-Year Change In New Listings: -20.4%

  • Days On Market: 26

  • Months Of Inventory: 1.4

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San Diego Real Estate Market Predictions 2021

Real estate in San Diego has been at the forefront of the national housing sector since the country started to recover from the Great Recession more than eight years ago. Nearly every market indicator for that matter has seen dramatic improvements, except for one: inventory. While the San Diego real estate market is leading a national recovery, it has yet to realize its full potential. A distinct lack of listings, combined with the ongoing pandemic, has created a unique real estate environment in San Diego, the likes of which have never been seen. Nonetheless, let’s forecast what next year will look like for the San Diego real estate market.

The most likely scenario will witness inventory levels drive home values higher. For the better part of a decade, insufficient inventory levels have increased prices, and 2021 doesn’t appear to be the exception. Before the pandemic, supply and demand were already lopsided; more people wanted to buy than inventory would allow. Now, as we look to turn the page on 2020, the same holds true, but with less inventory than we expected. Since the pandemic prevented many homebuilders from adding to the existing supply, inventory constraints got tighter. Simultaneously, improving unemployment, government stimuli, and historically-low interest rates have catalyzed prospective buyers. When all is said and done, more people are looking to buy in a market where fewer homes are available. As a result, competition will drive prices upwards.

Increasing prices will likely extend beyond the city’s most expensive neighborhoods. In particular, we may see a small exodus from the metropolitan area in 2021. Not only are prices becoming exorbitantly expensive in downtown neighborhoods, but as more and more people work from home, there’s less of a need to live close to an office. As a result, more people could look to trade the small, expensive confines of downtown apartments for their more affordable, spacious suburban counterparts. If that’s the case, there’s a good chance many suburbs across the San Diego real estate market could see an increase in both demand and home values.

2020 San Diego Real Estate Investing

The San Diego real estate market has developed a reputation for providing investors with attractive returns. The unique combination of demand, economic strength, and value catered to real estate entrepreneurs for years. Rehabbers, in particular, have enjoyed a lucrative run since the recovery took hold about eight years ago. However, it is worth noting that years of historic appreciation have trimmed profit margins on respective flips. Acquisition costs have made attractive profit margins harder to come by, which begs the question: Is San Diego a good place to invest in real estate?

Simply put, San Diego is a great place to invest in real estate, especially for opportunistic investors. If for nothing else, it is entirely possible to invest in any market under any circumstances. While prices in America’s Finest City may be high for rehabbers, there are alternative investment strategies worth your time. Long-term rental property owners, in particular, look poised to benefit from the new landscape created by the Coronavirus and resulting market indicators.

Real estate in San Diego has increased in value for years. In the first part of 2020, local real estate reached an all-time high. According to Attom Data Solutions’ First-Quarter 2020 U.S. Home Sales Report, “home prices in the first quarter of 2020 hit new peaks in 17 of the 108 metros (16 percent), including Los Angeles, CA; Phoenix, AZ; San Diego, CA; Orlando, FL and Portland, OR.”

That’s not to say rehabbing isn’t still a viable exit strategy in the San Diego housing market (it can still be incredibly profitable to flip real estate), but rather that today’s most prominent market indicators suggest it may be better for investors to consider long-term strategies.

In addition to high valuations, the new landscape created by the Coronavirus has tilted the investing landscape in favor of long-term investors. That said, here are some of the new San Diego real estate market trends benefiting rental property investors:

  • Interest rates on traditional loans are historically low

  • Years of cash flow can easily justify today’s higher acquisition costs

  • Inventory shortages will increase rental demand

As of June, the average rate on a 30-year fixed-rate loan was 3.16%, according to Freddie Mac. June also represented one of the lowest average mortgage rates ever, and the Fed announced its intentions to keep rates low for the foreseeable future. As a result, lower borrowing costs have brought down acquisition costs for those looking to add to their passive income portfolio. At their current rate, mortgage rates will save today’s buyers thousands of dollars, and real estate investors will be able to pad their bottom line.

Lower borrowing costs will help absorb today’s high prices, but it’s the cash flow potential of real estate assets that make the prospect of owning a rental property even more attractive. With a median rent price of $2,750, it is possible to simultaneously rent out an investment property while having someone else pay down the mortgage. That way, investors could build equity in a physical asset and collect cash flow each month with the right long-term investment.

According to the Greater San Diego Association of REALTORS’ Housing Supply Overview, condos increased in price the most over the last year, as “prices increased 3.6 percent to $437,000.”

Despite the increase in condo prices, San Diego real estate investors still stand to make a profit on newly acquired rental properties. Let’s say, for example, an investor was able to acquire a condo for $437,000 (SD’s median price) and put down $87,000 (about 20.0%) at signing. After accounting for things like a 3.16% interest rate, property taxes, and a few other costs, the monthly mortgage payment would come out somewhere in the neighborhood of $2,180. If the investor was able to receive $2,750 a month in rent (the median rent price), they could come away with about $570 a month.

If that wasn’t enough, the lack of available inventory will force many residents’ hands into renting, even those intent on buying. America’s Finest City had already been facing an inventory crisis for the better part of five years. Still, the introduction of the Coronavirus has shaken seller confidence and removed many listings from the market. As a result, the city’s 1.4 months of available inventory is well below what a balanced market traditionally looks like. The lack of homes for sale will inevitably force more people to rent for the foreseeable future, which creates more demand and allows rental property owners to increase rental rates.

Investors are lucky to have several viable exit strategies at their disposal. Still, none appear more attractive than building a proper rental property portfolio in the wake of the pandemic. Too many important market indicators are pointing towards becoming a buy-and-hold investor to ignore.

2020 Foreclosure Statistics In San Diego

Compared to the national average, the city’s foreclosure rate is relatively high. Whereas the foreclosure rate for the entire country is a modest 0.6% (one in every 14,691), the foreclosure rate in San Diego is 1.0% (one in every 9,972). It is worth noting, however, that while SD may have a foreclosure rate that is nearly twice that of the national average, its market has made significant improvements in a short period of time.

Over the last year, real estate in San Diego saw a drastic reduction in foreclosure filings. As recently as June, in fact, the number of properties that received a foreclosure filing in SD was “65.0% lower than the same time last year,” according to RealtyTrac. The decrease in San Diego foreclosures was encouraging, but it is worth pointing out that the national rate dropped 81.0% over the same period of time.

While SD has made improvements, the city still has some ground to make up in the foreclosure department. That said, the distribution of distressed homes in the local market can work to investors’ advantage. If for nothing else, distressed homes are more likely to be acquired at a discount, which is exactly why local real estate entrepreneurs should pay close attention to pre-foreclosures.

Pre-foreclosures currently make up about 48.8% of the city’s distressed inventory. As their names suggest, pre-foreclosures haven’t officially been foreclosed on but are instead at risk of being foreclosed on; their owners have neglected to keep up with mortgage obligations and are on the brink of filing for foreclosure. Nonetheless, these homeowners are more likely motivated to sell, as they would rather not have to file for bankruptcy, too. That’s where San Diego real estate investors come in. Local investors have the opportunity to help financially strapped homeowners avoid bankruptcy and acquire a deal with potentially attractive profit margins. Therefore, in marketing to homeowners who are currently behind on their mortgage payments (the information is made public at local courthouses), San Diego real estate investors can increase their odds of locating their next deal.

To narrow the search down even further, here’s a list of the neighborhoods with the highest distribution of foreclosures:

  • 92121: 1 in every 1,892 homes is currently distressed

  • 92120: 1 in every 3,992 homes is currently distressed

  • 92106: 1 in every 4,098 homes is currently distressed

  • 92113: 1 in every 4,629 homes is currently distressed

  • 92128: 1 in every 5,359 homes is currently distressed

Decreases in foreclosure filings have contributed to a very healthy real estate market for the last couple of years. However, investors should expect to see an influx of local foreclosures. The introduction of the Coronavirus is expected to cause a surge in filings sooner rather than later. The U.S. has already seen foreclosure filings increase 5.0% month over month. The San Diego real estate market, on the other hand, saw its high valuations contribute to a 41.0% increase from May to June. The increase is directly correlated to the financial hardships left in the wake of “shelter-in-place” orders and skyrocketing unemployment numbers. As a result, it’s safe to assume investors who line up financing and position themselves for success at this time could be in line for a busy second half of 2020.

2020 Median Home Prices In San Diego

The median home value in San Diego reached record highs in the first quarter of the year, and now sits around $679,568. At its current valuation, the median home value in SD is well above the $248,857 mark set by the national average. However, it is worth pointing out that today’s home values result from years of historical appreciation. The median home value in America’s Finest City, for example, bottomed out around $384,000 in the first quarter of 2012 (when the Great Recession showed signs of a reversal).

Since then (more than eight years ago), real estate has made up a lot of ground. Thanks, primarily, to an improving national economy, positive sentiment, and (ironically) a distinct lack of available inventory, real estate has appreciated by as much as 76.9%. Over the same period of time, the national average increased somewhere in the neighborhood of 54.5%. The latest increases have people asking one question more than anything else: Is it a buyer’s or seller’s market in San Diego? There’s no doubt about it: San Diego is a seller’s market. The amount of available inventory, combined with a lot of demand, easily places the advantage in sellers’ hands.

Over the last year, local real estate has appreciated faster than the national average—6.0% and 4.1%, respectively. The difference may be attributed to the city’s lack of inventory, which has simultaneously increased competition and prices. There aren’t enough homes on the market to satiate buyers, as evidenced by local inventory levels.

“Market-wide, inventory levels were down 44.6 percent” year-over-year, according to the Greater San Diego Association of REALTORS’ Housing Supply Overview for June. “That amounts to 1.4 months supply for Single-Family homes and 1.7 months supply for Condos,” which is considerably less than a balanced market typically calls for. As a result, competition has served as the catalyst for robust appreciation in a relatively short period of time.

Due to supply and demand discrepancies, these neighborhoods have become the most expensive in San Diego (according to NeighborhoodScout):

  • La Jolla Blvd / Nautilus St

  • Nautilus St / Muirlands Dr

  • Alameda Blvd / Palm Ave

  • Easter Cross

  • Cardeno Dr / La Jolla Scenic Dr S

  • La Jolla Blvd / Camino De La Costa

  • Via Posada / La Jolla Scenic Dr N

  • La Jolla Shores Dr / N Torrey Pines Rd

  • Via Cuesta Verde / Circa Oriente

  • La Jolla

Appreciation is nothing new to the San Diego housing market. Home values have increased for the better part of a decade. However, the pandemic is already disrupting eight consecutive years of price growth, which begs the question: Will housing prices drop in San Diego? The simple answer is yes, prices will drop. The lack of activity onset by the quarantine has already dropped prices slightly. However, the drop won’t last long, and is only expected to be temporary before rising again.

Despite local inventory shortages and rapid price increases, buyer activity remains intact. Today’s buyers appear comfortable buying at what looks like the market’s peak. When sellers gain more confidence in the San Diego real estate market, however, inventory pressure should alleviate and bring prices down, albeit slightly. For all intents and purposes, real estate appears as if it will be a hot commodity come summer, no different from any year that has come before.

San Diego Housing Market: 2018 Summary

According to San Diego real estate news, the local housing sector was firing on all cylinders in 2018. The city’s inclusion on Realtor.com’s “hot list” at the time tells investors everything they need to know: the San Diego housing market thrived off a lot of activity for years, and it doesn’t appear to be slowing down anytime soon. Not surprisingly, however, the same inventory shortage that stopped the city from reaching its potential in 2018 is still in effect today.

Appreciating as much as 10.0% over the previous 12 months, homes in San Diego had a median value of $608,200, according to Zillow. If that wasn’t impressive enough, industry experts and pundits were convinced San Diego home values were just getting started. Median home values were predicted to reach $665,000 in 2019, and they did.

San Diego Real Estate Investing 2018

In 2018, America’s Finest City was nothing short of a seller’s market; there was a lot of demand for the number of available homes. That meant homeowners could increase asking prices—that is, if bidding wars didn’t beat them to the opportunity. As a result, fewer people could afford to buy a home in San Diego. Nonetheless, those who couldn’t buy at the time needed a place to call home, which helped the San Diego real estate investing community focused on long-term rentals. Rental prices increased in the wake of home appreciation, and landlords reaped the rewards.

San Diego Housing Market: 2016 Summary

  • Median Home Price: $467,900

  • 1-Year Appreciation Rate: 0.3%

  • 3-Year Appreciation Rate: 8.1%

  • Unemployment Rate: 4.5%

  • 1-Year Job Growth Rate: 5.3%

  • Population: 1,370,000

  • Median Household Income: $63,400

San Diego Real Estate Investing 2016

Nestled along the West Coast, the San Diego real estate market was one of the country’s hottest in 2016. The median home price during the first quarter was almost double the national average, resting at $554,300 compared to $215,767—and it wasn’t done growing. As one of the most expensive markets in the nation at the time, SD continued to appreciate at unprecedented levels, including outpacing the national average by a wide margin. San Diego real estate investors were prepping for a lucrative run at the time, and they are still doing so well into 2020.

In addition to skyrocketing home prices and appreciation rates, the city was enjoying a healthy economy. The unemployment rate was about 4.7%, compared with the national average of 5.0%—and 0.7% lower than the previous year. That said, the one-year job growth rate was 2.8%, or 0.8% higher than the national average. According to the National Association of Realtors (NAR), that trend was expected to last for the whole year, and it did.

Homeowners paid approximately 22.0% of their income to monthly mortgage payments, while the national average paid 14.5%. Despite improving its historical average of 26.1%, local affordability remains an issue, even in 2016.

San Diego Housing Market: 2014 Summary

  • Median Home Price: $504,200

  • 1-Year Appreciation Rate: 7.5%

  • 3-Year Appreciation Rate: 32.9%

  • Unemployment Rate: 6.1%

  • 1-Year Job Growth Rate: 2.6%

  • Population: 1.4 Million

  • Percent Of Underwater Homes: 10%

  • Median Income: $50,900

  • Average Days On Market: 45 days

San Diego Real Estate Investing 2014

As one of America’s most desirable cities to live in, SD will always captivate potential buyers. Perhaps more importantly, the San Diego housing market has had a healthy demand for many years, and 2014 was just the beginning. In 2014, Zillow projected a 1.7% increase in housing prices over the next 12 months. Everything pointed to SD having an extremely healthy market that favored neither buyers nor sellers. Despite rapid appreciation, the city was heading in the right direction.

Due to low inventory levels, even in 2014, those looking to sell were in a great position. Despite increases in inventory over previous years, highly desirable properties continued to sell quickly, forcing buyers to act faster and pay more. That said, the San Diego real estate investing community had plenty to work with, even with prices as high as they were. The local housing market was incredibly hot, and investors had several exit strategies at their disposal.

According to San Diego real estate news at the time, the median home price was about $504,200, more than twice the national average of $212,267. Over the previous three years, prices increased a staggering 32.9%, essentially removing the market from post-recession price weaknesses. However, the previous 12 months witnessed a more modest 7.5% increase. Homes in other parts of the country were not the beneficiary of such rapid appreciation rates.

The San Diego real estate investing community really took the recovery and ran with it. Foreclosures, in particular, remained a very prominent piece of the investor industry. In the midst of a very healthy market, foreclosures were down 12.0% at the time. However, the discount on distressed properties encouraged investing. Non-distressed homes—those that were not at the risk of foreclosure—sold for an average of $432,000.  Subsequently, distressed properties had an average sales price of $350,000, or 19.0% lower than their non-distressed counterparts at the time. That was a savings of nearly $82,000.

San Diego County Map:

San Diego Real Estate Market Summary

The San Diego real estate market has been nothing short of extraordinary since the recovery began in 2012. In that time, nearly every fundamental indicator worth tracking has improved significantly. Nonetheless, a distinct lack of inventory has prevented the local market from realizing its true potential. Additionally, the introduction of the Coronavirus has made the market pullback, albeit slightly. It is the pullback, however, that should have real estate investors in San Diego excited. The temporary drop in prices isn’t an indictment on the local market but rather a window of opportunity to buy before pieces rise again.

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