I was working with a graphic designer the other day who said, “I want to buy a property in San Diego but I am waiting for a crash in prices.” I have heard this exact same phrase from many potential buyers over the last 10 years. But I am not sure that is the best strategy.
The downturn of 2007 was a perfect storm of a recession hitting after many years of easy money mortgages. It was the federal government actually that decided in the late 1990s that everybody, regardless of credit, deserves to own a property. While this was a noble goal, it was a recipe for an economic disaster. This government objective was the catalyst that built the house of mortgage cards. Banks were mandated to issue some mortgages to people that were likely unable to pay back the mortgage over the long-term. The government hybrid institutions would then guarantee the mortgages and buy them up into pools. Banks and brokers would originate the mortgages and sell them off, with a government guarantee. Then a mild recession hit and millions of people stopped paying their mortgages, leading to homes being dumped on the market and prices significantly dropping.
But we do not have that false structure currently in the market. Over the last 10 years, mortgage underwriters have been pretty strict in qualifying for a mortgage. The vast number of mortgages issued over the last 10 years were granted to credit-worthy homeowners. Thus we are unlikely to see a severe drop in home prices anytime soon. Also factor in the high demand for San Diego real estate from the thousands of tech workers pouring into this county as well as thousands of international buyers that arrive here annually. Also keep in mind that San Diego is landlocked, bordered by Camp Pendleton, the Pacific Ocean, Mexico to the south, and the Anza-Borrego desert to the east. The supply of buildable land is fixed and the demand for local housing continues to increase. Another interesting issue is that compared to coastal Los Angeles, San Jose, and San Francisco, San Diego home prices are still significantly discounted! There is no doubt in my mind that San Diego home prices will continue to trend up over the long-term based on very strong demand and a lack of meaningful new construction.
So when is the best time to buy San Diego real estate? I would say right now! Mortgage rates are back to all-time lows. It will just take a small leap of faith by a buyer to jump into this market. Lastly, I recently ran into an old buyer of mine who purchased a Santee property five years ago in the mid-300s. She told me it is now worth close to $500,000 and buying that property was one of the best decisions her family made. If you are a buyer, call me for a free, no obligation meet-up to look at what you could afford and various location options. In the long-term, I strongly believe it will be one of the best decisions you will ever make.
Housing market
The U.S. Federal Reserve lowered the benchmark interest rate for the first time in a decade, resulting in mortgage rates dropping and approaching historically low levels not seen since 2016. Although consumer confidence in housing is increasing, lack of affordable inventory continues to distress first-time homebuyers and limit increases in new sales. For the 12-month period through August 2019, single-family home prices increased 2.4% to $645,000. Condos-townhomes also increased 2.4% to $425,000. Market-wide, inventory levels were down 17%. There continues to be a serious housing shortage in San Diego and with the lack of new construction, that scenario is expected to only worsen. Prices over the long-term are highly likely to increase.
92115 overview
The number of closed sales year-to-date has stayed steady at 259 closed sales from 255 last year at this time. The College Area 92115 single-family median home price increased 4.3% year-over-year to an even $600,000. Going forward, I would expect a flat median home price over the short-term and, as I said above, a steadily increasing home price over the long-term.
—Sarah Ward is a Realtor with College Area Realty. Reach her at [email protected].
