Real Estate Marketing & Beyond
The San Diego real estate market is being hit with a triple whammy. According to Bloomberg, the U.S. will be in a recession before the year’s end. All the jockeying back and forth about this seems to have been market or political play before the mid-terms. The national outlook is grim, but in places like San Diego, where a two-year real estate boom has elevated property values, competition for sales will undoubtedly heat up now. One of America's most desirable places to live, may seem even more out of reach soon.
The experts say inflation and higher interest rates won’t drop anytime soon, further exacerbating the situation. Meanwhile, record home values in cities like San Diego are set to turn a bull market into a raging bear. Throw in the high cost of living in this sunny southern California city, and the situation looks pretty bleak. Nationally, interest rates are at 7.32% for a 30-year fixed mortgage and 6.43% for a 15-year fixed mortgage. This figure is up 15 basis points over last week. Of course, in San Diego, a lot depends on which zip code you intend to purchase a home in. But interest rates are only part of the problem.
Considering that the average home price in the area has skyrocketed to $950455, or by 12.3% in the past year, you begin to get a glimpse of what’s happening. Consider that even if a buyer were to secure a 15-year fixed loan at 6.675% from San Diego County Credit Union, the monthly mortgage payment would be $6,673 per month (Bankrate). Now budget a cost of living index of 160.4, and it becomes clear that something has to come down. That something is going to be home prices. Greg McBride, the chief financial analyst for Bankrate, offered this concerning the situation nationally:
“Interest rates are going up faster than most of us have ever seen in our adult lives, and with the amount of global debt out there, this makes for a troublesome combination. Volatility and uncertainty are to be expected, but we’re getting to the point where it pays to expect the unexpected. This is a special time.”
The market is seeking equilibrium, but extreme volatility because of uncertainty makes a mess of analysis and prediction. Nationally, existing home sales are plunging. In the western states, they are down over 30% year on year. That’s the worst dropoff of any region. San Diego is fifth (-5.5%) in the United States behind San Jose, San Francisco, Seattle, and Denver in home price reductions since the peak. The only good news is that the rest of the country is not far behind.
There aren’t any clear-cut answers to the obvious question, “How far will the market fall?” As a home buyer or seller, a lot will depend on the micro-market in San Diego, I guess. The cost of living, interest rates, home prices, and other factors depend on where you live. If you live in Rancho Santa Fe, for instance, your market outlook is going to be a lot different than Santee or Oceanside.
Still, no matter how you slice and dice the situation, San Diego's demand and prices are headed south for the foreseeable future. Politics and rose-colored glasses aside, according to all sane analysts, the U.S. entered a recession in the summer of 2022. And given the naysaying on top of trembling volatility (some San Diego agents claimed there is no market recession), I am sorry to join those painting a gloomy picture. San Diego will be harder hit than many places simply because the bubble got bigger there. The best numbers for recovery I could come up with are 2026-2027, according to firsttuesday.
