What’s happening in San Diego’s real estate market?
San Diego County home prices have exceeded the peak prices in 2007, and are now at the highest they have ever been. Ask any new home buyer, especially someone who is new to the area, and they will tell you “prices are crazy; the market is crazy”.
But, is it? I would say instead that it is terribly imbalanced and frustrating for buyers, but not sure I would call it crazy, as in frothy or bubbly like in 2006-2007. Sellers are still enjoying multiple offers, though they too are feeling the pain when they have to sell and then buy a home themselves.
The current market is not “hot” like in 2012-2015, when prices were increasing in double-digits in those years. During that time period, it really was crazy, because there were multiple offers on most homes AND prices were constantly increasing. By a lot. In 2012, when home prices started to rebound, much of the extra inventory that resulted from the 2008 financial and real estate market crash, had been absorbed by institutional investors and professional flippers who gobbled up all of those homes that were in foreclosure or were experiencing other forms of financial and personal distress, like owners going through short sales, bankruptcy, etc. So in 2012-2015, we had (1) low inventory and (2) rising prices. Everyone agrees, sellers, buyers, REALTORS, investors, and lenders, that the real estate market in San Diego during that time period was truly crazy.
But now, in March 2018, we are seeing the effects of critically low inventory more than anything else. The state of California has even passed laws to make it easier and cheaper for builders to build new homes. Right now, buyers are battling multiple offers on every home, perhaps more than in the recovery period, but NOT seeing that much of an increase in prices. (To be clear, certain individual homes are selling for higher than average prices, but I am referring to San Diego County’s trends overall.).
The green bar graph above shows that Median Sold Prices for single family homes in all of San Diego County have been almost perfectly flat since May 2017 (sitting at $610,000). Yes, prices increased 9% year-over-year (February 2017 to February 2018) according to the graph, but those increases stopped about 10 months ago. Economists like to say that trends an be observed after about 6 months of the same market dynamic – in this case, prices remaining flat. It seems like a trend to me. At least for now. The lined chart above shows more of the data details from the green bar graph.
The two questions are (1) will this trend last? and (2) how can prices be flat when there are still offers selling over the list price?
To the first question, of course it is hard to predict, although one website that predicts prices in San Diego suggests that prices will only increase 1% by next year, so basically flat. Wages in San Diego have not kept pace with home price increases, and mortgage interest rates are continuing to rise. These things will put downward pressure on prices, so it is possible, even likely, that prices will remain flat for the next 12 months.
To the second question, this is even harder to answer. There are listings that sell over the list price, but these listings often come on the market with artificially low list prices to attract lots of interest; so, when they sell considerably over the list price, those prices are not that much higher than they would’ve been if they were priced closer to actual market price at the outset. We are in mid-March and the Spring selling season is getting underway. We will see what happens with prices and inventory as the months roll on, and we will report more on this blog over the next few months.
Want to get your geek on and see more bar graphs and charts? Check out the full market update report for San Diego county.
Confused or frustrated with the real estate market? Contact us for some good data and some guidance on how to succeed in this market, especially if you consider it “crazy” out there.
-Kevin & Diane