San Diego Home Prices Reverse Trend in March 2023

 San Diego home prices have reversed the trend of falling prices and had a massive jump in prices. What caused this and will prices to continue to rise? Or is it just a blip? Watch this video to find out,

There is a lot of volatility in the US Housing Market right now.

But in San Diego, the market has reversed the trend from falling housing prices and is back on the climb.

I began seeing stabilization in prices occur a few months ago, then a sharp drop in December and January - traditionally when housing prices fall anyway.

In February, home prices jumped up 6% for single-family homes from $849,000 to $900,000. Condos also jumped 4.4% from $5900,000 to $616,000.

We also so the Final Sales to the original list price climb significantly for both single-family homes and condos. Interest rates had fallen from a high of 7.2% down to 6.4% in January which helped fuel this latest buying spree. Interest rates shot back to 7.2% but have fallen off again to just under 6.9%. So we're a half percent higher now than a month ago. 

This may cool the market a little, but read on to see why it may not due to a lot of pent-up buyer demand. 

We’ll have to see what the Fed does, but they’re indicating that they’re going to keep ratcheting up interest rates. Inflation came in lower last month, but still higher than expected, so the Fed didn’t like that. 

It still seems that buyers are still understanding this is the new normal, buyer activity was very strong this past month. And the data points I’m seeing right now is pending sales that are continuing to increase. 

Inventory still remains very low which is helping to buffer price decreases.
 
Sellers are not coming out in force like a normal spring market. This is likely due to high-interest rates relative to their current interest rates which is preventing them from “trading” up or down,

It’s difficult for folks to give up a 3% interest rate on their current home to exchange it for a 7% interest rate.

I’ve been saying that buyer activity likely would pick up in the Spring if rates remain where they were in the low 6%. We are seeing Buyer activity pick up despite the recent uptick in interest rates. 

It does not appear that rates will be falling by Summer like many thought they would which would have really increased the buyer activity.
 
The best case scenario in my opinion now is that rates stay where they are now at 7% or MAYBE fall slightly. I think a more likely scenario in the next couple of months is rates climb another ½% to 7.5%. 

I’ve been predicting that the window of opportunity for buyers to remain in the driver's seat is closing. It appears that we are essential, we are in a Balanced market at this point.

If a home is highly desirable, marketed well, and priced right, buyers have lost most of their leverage in obtaining credits or repairs.

If a home is overpriced, sitting on the market, etc then buyers still have leverage on those homes to extract concessions.  

Where is all this demand coming from? As I mentioned in the last report, there is a lot of pent-up demand, especially from Millenials who not only delayed getting married and starting families and as a result their home buying.

But now they’re getting married, having babies, and realizing they need to buy a home. Now, these millennials are shopping for homes. 

Here is the problem though. Many sellers are essentially locked into their homes because so many either purchased or re-financed into 3% interest rates over the past 2-3 years.

If they move now (without buying cash), then they’re signing up for a 6% interest rate and much higher monthly payments than what they are paying now. This is causing inventory levels to decline as we head into a spring market when inventory normally increases.

The confluence of these two events, more millennial buyers (more demand), and fewer people selling (less inventory) I think will cause home prices to stabilize soon across the nation soon and as we're seeing here locally - they're on the rise.