Airdeed Homes has analyzed the San Diego housing market the produced the following report. The San Diego real estate market is currently experiencing a contraction like the rest of the United States after the Covid Pandemic growth years. As you’ll see in the diagrams and graphs below, the home value in San Diego has dropped roughly $50,000 in the past 6 months of home sales data. Which has helped with housing affordability but also created fear of another housing bubble like 2008. We’ll examine the current state of the real estate market in San Diego, including trends in home prices, home sales activity, and inventory levels, as well as factors that may be impacting the market. Whether you’re a potential buyer, seller, or investor in real estate, this article will provide valuable facts about the San Diego real estate market.

The San Diego real estate market has seen some fluctuations over the past few months. According to Federal Reserve Economic Data research, home values in the area have dropped since peaking in June 2022, when the median price for new home listings reached $948,250. However, in July the median price for homes started dropping slightly and it continued to decrease in July with a median home price of $899,900. The median home price in San Diego hit a low of $884,000 in November of 2022 but did rebound a bit in December which is the last list price data point. This suggests a downward trend in the San Diego real estate property market over the past few months. However, it may have started to level off and we will get a better idea if this has happened during the early months of 2023.

The Good news is that many San Diego residents have built up a lot of home equity with the last 2 years of the housing price surge. This is especially true for single family homes as they have seen some of the biggest home price gains. If market prices shift there is still plenty of equity from the last two years to avoid sweeping foreclosures or bankruptcies.

The San Diego real estate market has had some major changes in the number of housing listings over the past few months. According to the St Louis Fed data chart above, the number of property listings peaked in October of 2018 at 7880. However, that has fallen off significantly and in February 2021 the number of active real estate listings dropped to 2215. In July 2021 it jumped up and the number of home listings increased to 3151, but it decreased again in January 2022 to 1484. It jumped up again in August of 2022 but it decreased again in December 2022 to 3220. This suggests that the San Diego real estate market has been relatively volatile over the past few months and years, with movement in the number of active property listings fluctuating up and down.

Housing Market San Diego Forecast Factors

1. Historical Home Trends: Look at the historical trends of the real estate market and use them to assess the future performance of the market.
2. Economic Factors: Consider factors such as GDP growth, unemployment, inflation, and other economic indicators when evaluating the real estate market forecast.
3. Housing Supply & Demand: Analyze the supply and demand dynamics in the area to determine the potential for future growth or decline in the real estate market. Following real estate news websites and topics is key to understanding the future.
4. Demographic Trends: Analyze the demographics of an area, including population growth, age, income, and education levels, to determine how these factors may influence the real estate market.
5. Housing Location: Location is typically a key factor in determining the value and performance of the real estate market. Evaluate the current and potential future locations of the market in direct comparison to the national average.

San Diego Historical Index

Observations to watch in the San Diego real estate market are the house listings’ median days on the market and the homeownership rate. Currently, the median days on the market in San Diego have increased to a 5-year high from the average which is a major detail to watch. Looking at the 5-year home trend we see that this is normally followed by a home price drop due to it becoming a buyer’s market but interest rates need to come down or that trend may not match history. We have also seen an upward trend in San Diego homeownership since 2016 which helped increase prices as there was more competition for the same supply of homes.

San Diego Economy Statistics

The economy in San Diego is going strong as you can see in the data charts above with the unemployment rate returned to the normal pre-pandemic rate, per capita income has continued to climb and the Real GDP in the county has recovered from the dip in 2020. The references also show employment numbers have also returned to close to pre-lock down levels. All these are strong indicators for the San Diego real estate housing market to not see a huge decline in 2023 unless a major recession hits the United States. The key info to look at for an indication that a home price drop is coming would be if the unemployment rate starts rising close to the 5% level.

San Diego House Supply

The important signal to look at here is the new property listings on the market and as you can see from the data chart above, San Diego real estate market is at a 5-year low of new real estate listings coming on the market. This currently is balancing out the decrease in demand due to interest rates rising over the past year. However, as we can still see this hasn’t stopped the San Diego home prices from falling as there has been an almost 8% decrease from the high home value in May of 2022. If interest rates don’t drop in 2023 the only hope for prices to remain stable is for the new listing count to remain low.

San Diego County Demographics

Since the pandemic started in 2020, there has been a large number of Californians leaving the state and moving east to states such as Florida and Texas. San Diego hasn’t been immune to this having lost almost 100,000 people within the past several years. Normally this would likely hurt housing markets with less demand, but San Diego real estate is lucky to have a large Military presence which brings a steady supply of new residents every year looking for a home. This has been a saving grace for housing markets since the Federal Reserve started raising rates. Make sure to always keep government output in your mind when analyzing the San Diego housing market.

30 Year FHA	6.48 %
30 Year VA	5.838 %
10 Year Fixed	5.55 %
15 Year Fixed	5.463 %
30 Year Fixed	6.256 %
5/1 ARM	6.236 %
7/1 ARM	6.111 %
20 Year Fixed	5.933 %

Source: AirDeed Mortgage Interest Rate Calculator

Interest rates have been a big home loan talking point in the last few years as the Federal Reserve has increased rates significantly since the beginning of 2022. The Fed was forced to drive up interest rates to try and slow the economy as inflation was out of control. Inflation has started to cool off many due to the fear of a global recession, and many are hopeful that the Federal Reserve will stop raising interest rates in 2023. If this happens we can expect to see interest rates return to below 5%. However, always remember that you can refinance your home loan at a later date when mortgage rates return to normal levels. Also, keep in mind that your credit score is a major factor in what interest rate a mortgage lender will offer you. A score above 700 could greatly help you and your financial situation with a lower monthly payment for your home.

If you’re a real estate entrepreneur or looking to start your rental business, San Diego real estate would normally be a great investment location as it has a massive amount of beach access which makes it a very popular vacation rental destination. However, the cities in the San Diego area have started to regulate Airbnb properties more. In addition, the high real estate prices make investing in vacation rentals in the area a more complicated financial decision. We don’t suggest currently buying a house for Airbnb or VRBO unless you are mainly buying for a personal vacation home and will only rent on the side.

In conclusion, the San Diego real estate market is one to continue evaluating throughout 2023, if new home real estate listings coming on the market jump above the 5,000 level and the unemployment rate starts moving up, you can expect a significant impact on housing prices in a negative way. As more homes become available, prices may drop, while a high unemployment rate can lead to a decrease in demand and a corresponding decrease in prices. Having said that the San Diego real estate market is much but capable to handle a downward trend than other markets. Be a well-informed buyer or seller by looking a the new data coming out. However, if the U.S. is able to starve off a major recession, San Diego real estate should avoid a major housing bubble and prices should remain flat or slightly up for 2023 and home loan rates should start decreasing. Also remember to consult your real estate agent or local Realtor to get the most up to date information.

Citations:

Freddie Mac

St Louis Federal Reserve

Housing Finance Policy Center