The San Diego Housing Market is Climbing Not Cooling
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The San Diego housing market has a reputation for being a difficult city to find a home in. Currently, the housing market in San Diego is the seventh most expensive city in the United States.
Still, homes were moving very quickly over the past several years, with homes often spending less than 10 days on the market. In San Diego, homes spent an average of 8 days on the market in March 2022. Following the frantic pace of home sales, the San Diego real estate market slowed, reaching a peak days on market of 36 days in January 2023. Yet, the housing market has picked up the pace throughout 2023, with median days on market currently at 13 days.
The quick movement of homes indicates that the San Diego, CA housing market is strong. In addition, housing prices are climbing, despite the rise in interest rates.
Let’s take a deeper look into the San Diego real estate landscape.
San Diego Housing Market Trends
San Diego is a very competitive market. While it experienced a cooling period in the latter half of 2022, the market began to pick up in January of 2023. Since then the San Diego real estate market has continued to climb and is nearing the height of the market experience during the Covid frenzy. In fact, the median sale price of a home has slightly surpassed peak home prices, which were achieved in April 2022.
Are San Diego Housing Prices Dropping?
Home prices in San Diego are not decreasing; it’s quite the opposite. Currently, the median sale price of a home is $930K, up 9.4% year over year. In addition, 48% of homes are sold above the list price.
This is striking given the housing trends of the United States, where the median home sales price has decreased 2.9% since last year. The fact that prices in San Diego have gone against the national trend is significant.
These market trends reveal the strong demand and strong buying power of San Diego homebuyers.
In addition, those looking to sell their home in Southern California, have the power in this San Diego market with a limited housing supply.
Is San Diego a Seller’s Market Right Now?
Yes. San Diego is a seller’s market. Housing inventory is not sufficient enough to meet the demand for homes. Moreover, the number of homes for sale fell 6% from August 2023 to September, further exacerbating the shortage of homes in San Diego.
Given the strong demand and limited supply of homes for sale, sellers can command a high price for their home and often receive multiple offers with reduced concessions.
Buyers Feel the Squeeze
Potential buyers are feeling the pressure of rising interest rates and home prices. The competitive market of the San Diego area continues to boost prices, pushing some buyers into new price ranges. The home that they could afford in 2021, is now out of reach with the higher prices and mortgage rates.
Buyers have the choice of reducing their price range for a home or leaving their home search for the future.
Is it Smart to Buy a House in San Diego Right Now?
Nevertheless, this could also be the perfect time for individuals and families seeking to buy a home. With some potential homebuyers being pushed out of the market in, it reduces competition and may allow buyers to find their dream home along the beautiful beaches of San Diego.
In addition, while interest rates are higher than the past two years, they are still closer to historical averages. Waiting to purchase a home in the competitive market of San Diego, may mean paying a higher home price in the future along with a relatively high interest rate.
San Diego Housing Market: The Uniqueness of Neighborhoods
San Diego is anything but average and has many different neighborhoods and counties. Not only are the locations and local feel different, but also the housing in each neighborgood can fluctuate separately from its neighbors.
San Diego Housing Market: La Jolla Neighborhood
La Jolla, which translates to “the gem”, is a coastal paradise and real estate is desired like fine gems. The high demand for this neighborhood drives up the median price of homes.
The result is La Jolla has the second most expensive homes in San Diego county with home prices averaging $1.8 million. Most people own homes in La Jolla San Diego with a homeowner percentage of 76%.
Over the past year, home values have decreased 18%. However, over the past 5 years, home prices in La Jolla San Diego have increased 31%.
The real estate market slowed in this San Diego neighborhood over the latter half of 2022. Yet, with the start of 2023, things have picked up.
Luxury homes often experience the most significant decreases in value when the market is down, and are slower to pick up again. This has been true of La Jolla.
La Jolla has followed the same pattern of the San Diego area; however, it has not experienced the same level of price increases, nor the same velocity. The median days on market for a home is 22 days, up 3 days year over year. While this is still a relatively short time on the market, it is slower than the average for the area.
Nevertheless, La Jolla will always be in high demand. The beautiful beaches and breathtaking scenic views are what dreams are made of and worthy of luxury prices.
San Diego Housing Market: Del Mar Neighborhood
Del Mar San Diego is a picturesque beach town with incredible bluffs and beaches. This attractive neighborhood hosts high-profile events and contains luxury resorts and a vibrant atmosphere. Home values here reflect the demand and are estimated to be $2.4 million, up 17% from last year.
With this more exclusive neighborhood, single-family homes and other properties typically stay on the market longer than the national average. The median days on market in October 2022, was 42.
Yet, Del Mar has seen an incredible surge in activity lately. Currently, the days on market for a home in Del Mar is 9 days. Single family homes sit on the market slightly longer (18 days on market), but this is still faster than the national median of 30 days.
In this exclusive neighborhood, a limited number of homes are sold each month. The average number of homes sold in 2023 is 8.75 per month.
San Diego Housing Market: Mission Valley Neighborhood
Mission Valley San Diego home values are relatively more affordable compared to the neighboring areas. Typical home prices are $675K with homes staying on the market for approximately 12 days, which is 3 days less than the previous year.
In addition, the median sale price is at it’s highest point in the past 5 years. Unlike most areas, which have not surpassed the peak of the 2022 Spring.
Homes in Mission Valley generally sell at or slightly above their list price and are reflective of a seller’s market. While the increase in interest rates has affected this San Diego county neighborhood, the real estate market has remained strong here.
Typical of many San Diego neighborhoods, the renter percentage is higher than those that own property, with 60% choosing to rent. Yet, buyers can have confidence in a strong investment in Mission Valley. Median prices have steadily increased year over year and have been less responsive to the Federal Reserve changes in mortgage rates.
San Diego Housing Market: Carmel Valley Neighborhood
Carmel Valley San Diego’s housing market is thriving. Homes values average $1.5 million and are up from the previous year. Eighty-six homes were sold in August 2023. While this is down from a high of 201 homes sold in September 2020, it is still a relatively high number of homes sold in San Diego County.
The homeowner percentage in Carmel Valley is 75%. The real estate market is very competive, with homes selling in around 16 days. The median price of homes is up 12% compared to the previous year.
The real estate market in Carmel Valley is relatively stable with home prices increasing over time. This San Diego county neighborhood is a suburban planned community with high-rated schools, wonderful family life and incredible parks. While interest rates will impact the appreciation rate and home sales, the demand for Carmel Valley real estate will likely weather the economic cycle well.
San Diego Housing Market: Tierrasanta Neighborhood
Due to its proximity to the center of San Diego, Tierrasanta is an appealing location. Average home values are $935K. While the real estate market has high buyer demand here, the home values are less than in some of the beach towns.
Housing prices have risen significantly over the past several years. In January of 2020, home values were $662,428. The Pandemic market made this neighborhood even hotter, and median sales prices appreciated quickly. At its peak in August 2022, the median sale price was $1.0 million.
Home prices hit a low in February of 2023, at $845K, but have climbed since then.
In addition, homes are sitting on the market 4 days less relative to last year, for a median of 10 days. Indicating the slight slowdown, has now picked up.
Buyer demand will likely remain strong here. Many families and young professionals live in Tierrasanta San Diego, which offers a suburban feel close to the city center. Additionally, the public schools are highly rated, causing demand for properties here to be maintained.
The Stabilization of San Diego’s Housing Market
We have definitely seen a shift in the market. What it looked like 6 months ago vs. 3 months ago vs. today is dramatic. The market change is so vast because we saw a crazy increase in housing prices and sales over the past two years. Then we saw a decrease in median sales price, throughout the second half of 2022. However, those decreases were short-lived and in 2023 prices started climbing again.
Yet, the price increases are not the astronomical increases that we saw a couple years ago. When selling your home, you need to understand the market. The prices are on the rise, but inflation and mortgage rates have cut into most homebuyer’s budgets. It’s essential to work closely with your real estate agent to determine the perfect prices of a home.
In addition, buyers must rely on the insight of their real estate agent to guide them in negotiating and working quickly to buy a home. In the rapid San Diego market, buyers must be prepared for swift action.
San Diego Housing Market: The Pandemic Years Are Not 2008
The San Diego real estate market was a hot market during the Pandemic years. The ability to work remotely, drove people to demand beach homes with beautiful weather. In addition, consumer spending shifted and some found that they could afford the home they had been waiting for.
The Impact of Interest Rates
Most importantly, the interest rates were historically low, hovering around 3%, which is the lowest interest rate that Freddie Mac measured since 1971.
The low-interest rates allowed buyers to get out of the rental market and into home ownership. Mortgage financing was readily available, and buyers in California could afford to purchase a home.
Yet, it is critical to note that the questionable lending practices in 2008, did not occur during the Pandemic years. In addition, the supply of homes, especially in San Diego, is nothing like 2008. In fact, San Diego faces a shortage of inventory, which will keep prices stable and likely increasing.
While the mortgage interest rates are increasing, they are still at relatively low levels. Interest rates in the early 2000’s averaged 5-7%. The generation before faced the highest interest rates; 1981 experienced interest rates of 16%.
Therefore, the real estate market will slow down, which is what the Federal Reserve intended.
Yet, the strong buying power of San Diego has bolstered home values and and made the market resilient.
San Diego Housing Market: Forecast Slow Growth
Over the past two years, the high demand for San Diego homes has given rise to a heated market. The number of buyers increased, yet there were no listings available.
There is roughly 3.9 weeks’ worth of supply in the San Diego housing market. A balanced market would typically have a supply of about six months. Thus, San Diego remains a strong seller’s market.
The decline in new listings over the same period last year is mostly linked to homeowners’ reluctance to engage in the market themselves. Due to the unusual combination of low supply and high demand, sellers have been able to raise their prices.
As long as supply and demand are so lopsided, prices will probably keep slowly increasing or leveling out.
Find an Expert Real Estate Agent
If you are interested in learning how the market will affect your buying or selling experience, reach out today, and a local real estate agent will help guide you through the process.
