Is the San Diego Housing Market Finally Cooling off?

With the war in Ukraine and rising interest rates, is the market in San Diego finally cooling off?

Let’s answer the question: what is happening in the San Diego real estate market? Is it finally cooling off because of things like the war in Ukraine, rising interest rates, inflation. How is that impacting the San Diego real estate market? The first thing to keep in mind is to remember that fear sells! There is so much doom and gloom going on right now in the media and real estate, but that’s because it’s all about clicks and getting eyeballs to sell advertising. Keep that in mind when you’re seeing these headlines, not everything you read is necessarily true. And especially when it comes to how it impacts the San Diego real estate market.

San Diego real estate market is certainly not cooling off right now. Here’s what’s actually happening. The median price of homes is now at $975,000. For reference sake, from July through December of 2021, we hovered from $850,000 – $860,000 as the median price.In January, it shot up to $885,000. Then in February it went to $915,000. And now we’re at $975,000 in just three months. We’ve gained from $850,000 to $975,000. That’s $125,000 of equity gain that’s occurred on average in the county in just three months and housing prices are up 14.7%! It’s absolutely incredible!

The sales to list price, which is a big metric we look out to see how far homes are selling over the original list price, is that 106.6%. Last month, it was 105.3%, which was a record breaking number. We’ve never had that high of an average final sales price to list price. And then this month we broke that record and that’s on a higher purchase price. This is showing how much people are overbidding on homes right now to take them down. On hot homes, they’re going for far more than 6.6% over list price. They’re going for 20%, 25%, 30% over list price. I just had a listing that closed in March and it sold for 25% over list price, a $190,000 over the original list price.

The other thing we look at is days on market. That is trending back down but for a while itwas trending up. We had risen24 days on market then it went down to 23. As of March, we’re only at 19 days. Again, this is all the homes in the county so any hot home is selling over the weekend. It’s getting listed on, say a Tuesday, Wednesday, or Thursday, and then it’s sold by Monday or Tuesday the following week, once all the bids come in. It’s only those homes that aren’t maybe so great that are still on the market and drives that number back to the 19. But overall on average, we’re coming down to this 19 days on market. So if you’re looking for a home right now, you still need to be aggressive and go after. If you see it, you got to jump on it. You have to be willing to play the game. You have to be willing to go over the list price. That’s where we come in and we take a look at each specific home and find out what’s really happening.

I came across a home this past week. It actually had fallen out of contract for certain reasons. It was still a great home and there was an opportunity to get under contract for really just essentially at this price because of what had happened with everything. There are opportunities out there. You just have to be looking for them and be working with an agent that can identify those and help you jump on them. But generally speaking, unfortunately, you’re going to have to prepare for spending 10%, 15%, 20% oftentimes over list price and look at things like covering appraisal gaps. That’s a lot of detailed information. We can go over in person, but that’s what’s actually happening in the economy.

With rising inflation, people are pouring their money into real estate. It is the safest place to be in an inflationary environment. Long-term debt actually becomes cheap money in an inflationary environment. A lot of people recognize that, and  that’s why so much money is coming into real estate right now. And especially San Diego! 

San Diego has just 9,500 homes, new units that are being built this year, just 9,500. When we compare that to other cities around the country that are of similar size to San Diego, like Seattle or Orlando, they’re building at least double that amount of homes. We’re very constricted in our space here. As you know, there’s really not a whole lot of room to grow and build in San Diego. And so that’s really constricted supply, especially with the various building regulations we have here. And just lack of permits being issued there just as very little supply.

Overall demand is strong. Is it off the chart strong? Not necessarily, but because supply is so low and new building is so low, it’s driving the prices up very, very high. We did hit 2,000 homes total available finally, as far as inventory, we had been around 1700 homes for awhile. That was extremely, extremely low. 2,000 is still very low, but at least there’s a little bit more options out there for buyers right now. It’s going to be interesting to see what happens in the long-term as interest rates continue to rise and buyers do start to drop out of the market because they just cannot afford it anymore. 

There are going to be fewer buyers, there are going to be fewer offers. Eventually the over bids are going to start to level out a bit. But right now, as we’re seeing in the March data and the February data and the January data before that, that is not what’s happening right now. So we’ll see what happens come April and May. But right now it’s still extremely strong.

If I can help you buy or sell a home, please reach out to me. I’d love to help you have a conversation about that and what that looks like for your specific situation.

Curtis Chism, Realtor
858-281-2568 | Mobile
mailto:info@sandiegohomes.io
Chism Team | DRE #02105113
brokered by eXp Realty | DRE #01878277