Ice beginning to thin in San Diego residential real estate market

The ice is finally starting to thin in the San Diego residential real estate market.

Mortgage rates have drifted lower for five consecutive weeks and this is likely the strongest factor that explains real estate activity.

Back in November, mortgage rates peaked in the low seven’s and that really took the air out of the market combined with the slower winter months. But now with some mortgage rates in the high five’s, buyers are coming out and looking for a home. Well priced properties are selling fairly quickly and with multiple offers.

The most difficult issue currently is a lack of inventory. Historically, the inventory of available homes for sale is near an all-time low. When a nice property comes on the market, priced reasonably, the open house will be busy, multiple offers will come in, and that property will likely be in escrow within a week or two.

San Diego has a strong job market with many young and highly paid skilled workers in the tech, biotech, and health industries along with other supporting industries. Many of these workers have the down payment and income to easily qualify for a purchase. My phone is currently ringing off the hook with buyers ready to purchase. But the inventory is quite thin so what I do with my buyers is to get them fully approved for a purchase so that we can write a strong offer quickly and with a short escrow period. We are not quite in the craziness of 2021-2022, when mortgage rates were in the 3’s and when a well-priced property would quickly receive ten to twenty full priced offers. But today’s market is definitely warming up.

I talk frequently with my escrow officer and this market is seeing quite a few all-cash and mostly cash transactions occurring.

Some people are downsizing, selling their larger home, and then able to purchase a lower priced property with no mortgage or a very low mortgage. Another factor is that currently $500,000 of primary home capital gain appreciation is tax-free for married couples on their federal tax return. Some are selling to capture that tax benefit and then resetting the clock on another tax-free gain in maybe 10 years, if prices continue to rise of course.

Check with your tax advisor but this strategy may make sense especially if a home owner no longer needs a larger home. If you are thinking of selling, call me for a no obligation walk-through as I am very good at identifying minor improvements that would be worth undertaking to make a home more salable and I have a professional team of trusted contractors that are available for work if needed or desired in order to get more money for a property.

NOTE: during more normal real estate markets, the number of homes for sale in a zip-code would typically be 50 to 75 homes for sale at any one time.

MARKET REPORT (Single Family): College Area (92115): median price down 2.7% year over year to $900,000 and with only 19 homes for sale. San Carlos (92119): median price down 14% to $950,000 and with only 15 homes for sale. Del Cerro/Allied Gardens (92120): median price down 9% to $1,008,000 and with only 19 homes for sale.