There aren’t enough flame emojis on the Internet to describe the San Diego housing market. In October 2022, the median home in San Diego County sold for $850,000, a 5.6% jump year-over-year. Yowza. 🔥
Despite some seasonal adjustments this winter, prices are cooling in some areas — but heating up in others. For those hoping to dip their toes in the home buying waters soon, it helps to know what trends to expect. Put on your sunglasses, and let’s hear what a couple of bright, local experts predict.
Kindness is in the air.
Photo via @yellowmanbb
Look out for mortgage rates
Realtor Tiffani Tu expects San Diego to continue to be a hot market, but if you’re seeing prices go down, you’re not seeing the whole picture. Mortgage rates in the county have increased — now averaging 6.5% for a 30-year, fixed interest loan — and may continue climbing. Realtor Jessica Tangen sees the trend too, and acknowledges these rates add complexity to the buying process.
Mortgage rates may make homes more expensive in the long run, but they can present opportunities when making a purchase. Both Tu and Tangen mentioned a possibility for buyers to receive credits for interest rate buydowns, closing costs, or repairs needed on the property.
Don’t give up on San Diego
Some national outlooks for 2023 paint a fairly grim picture, like Redfin’s projection of falling housing prices. But when Tu considers projections from professional organizations, she anticipates prices to be fairly flat in 2023. Tangen also continues to see homes being sold at asking price — sometimes even above.
In Tu’s opinion, San Diego is one of the last California Coast gems, and sees developments being built in the city as tech companies like Apple will bring more jobs to the region. Meanwhile, Tangen knows the city has appeal and recalls the market bouncing back faster than other US markets during the 2007-2008 housing decline. While the metro area is not immune from the impacts of the real estate trends, it’s clear that people want to live in San Diego.
As for the style of home — that depends on the buyer and their purchasing power. Tu and Tangen have seen buyers make compromises when making their first purchase, and first-time buyers may purchase homes they anticipate selling in roughly five years. But this could change. As price growth slows, buyers will have more power when making a purchase.
Worth it to wait?
Both Tangen and Tu don’t think there’s a need to wait if the individual is in a position to buy. Tangen has seen people wait only to watch prices go up, inventory decline, or mortgage rates climb. Meanwhile, they lose the opportunity to own a property that appreciates in value. But buying a home is a big commitment. People who are not prepared for the financial implications may want to consider renting.
What about renting?
Both Tu and Tangen note that rents have really gone up in 2022 — but know the decision to buy a home is entirely dependent on individual circumstance. According to Zumper, San Diego is the sixth-most expensive metro market for single renters in the US, when looking for 1 BD, 1 BA units. The city still has more renters than owners, so demand is high despite the high costs.
Eyeing places east
Buyers hoping to find areas with more space will likely want to head east. Tu has seen homebuyers looking for single family homes in the La Mesa and Santee areas, while Tangen has seen buyers looking as far as Julian. With many people working from home, both realtors see families looking for space for add-ons like accessory dwelling units (ADU).
Despite this, East County has seen home prices decline slightly. Based on Marketwatch data shared by Tu, the area saw a 4.2% decline in home sale prices in November 2022 compared to a year earlier, while all other areas of the county saw increases during the same time frame.
Meanwhile, if you’re looking at condos or townhouses, Tu says the right option depends on individual needs, but she feels North Park is a hot spot due to its proximity to restaurants, stores, and nightlife — but she’s also seen a number of available condos in downtown communities.
The supply + demand problem
Both Tu and Tangen have seen home sales slow in 2022 compared to 2021, but Tu mentions she can’t apply this to all of San Diego County because demand differs by area.
The number of pending home sales in November 2022 declined 44% when compared to November 2021. This aligns with Tangen’s data, which says San Diego County has seen 26,851 homes sold in 2022 so far, which puts it behind the pace of sales in 2021, when a total of 36,699 were homes sold (excluding off-market sales).
Tangen has seen more people inquire about VA + FHA loans, and both Tangen + Tu have worked with local down payment and closing cost assistance programs. However, this funding can have restrictions and is limited, so recipients need to be ready to move quickly if they qualify.
Other trends to watch for 2023: Older adults moving in with their children. Tangen mentions that the cost of retirement has increased, and parents aged 70+ may not want to live in senior communities or view them as a practical investment. Instead, she has sold properties with extra space so families can invest in an ADU in the future.
Tu sees a lot of potential in homes with unconventional designs, especially if they provide the potential for rental units. For example, she recently sold a 630-sqft property in Normal Heights for $975,000, but it included two studio apartments and canyon views.
