In last month’s column I talked about my home price forecast for 2022. I mentioned that if interest rates started creeping up, mortgage payments would become more expensive which would start filtering out potential buyers. For example, if rates went from 3% on an $800,000 home to 4%, a 20% down, 30-year mortgage payment would increase from $2698 to $3055. Then you add property taxes, insurance, and HOA fees and suddenly some buyers are not qualifying. This, in my opinion, would be the greatest factor in slowing down home appreciation. Well last week, rates started moving up a bit. We will see if that is a long-term trend up or just a blip. Either way, my prediction for 2022 home prices is that they will increase but more moderately than the last couple of years. Stay tuned.
I wanted to mention a few new real-estate laws that went into effect in California on Jan. 1, 2022. Please be advised that what follows is just a summary not to be relied on; if interested further, conduct your own research on these new laws and ramifications. AB491 requires new mixed-income residential properties to maintain common areas and entrances for all residents. In the past, a downtown builder would be required to build some low-income units in order to get a building permit. But what would happen is that the builder would typically build a separate structure on the back of the lot with its own entrance and common areas for the low income folks and then would sell the front units as expensive luxury units. This is no longer allowed. All property owners on the lot must have access to the same entrances and common areas.
I discussed SB10 a few months ago and it has now gone into effect. This law requires local governments to approve up to 10 units on ANY lot in a transit-rich zone (near a trolley stop, busy bus route, etc.). There are some limits based on the size of the lot, but developers can shoe-horn as many units as they are allowed on these smaller lots, up to 10 units. Sacramento has been trying to increase housing density for some time. So over the coming years watch for larger units to be constructed near trolley stops. It is already happening all over San Diego and the trend is expected to increase.
AB345 requires local governments to allow an ADU unit (a second occupancy structure) to be split off and sold separately at the option of the property owner. SB9 also went into effect and streamlines the procedures for homeowners to subdivide an existing single-family R1 residential lot to create a duplex and/or allow for new infill construction. Look for MANY second units to now be built everywhere as there are virtually no limits statewide when there is enough room on a lot for the structure to fit and expect for many of these units to be split-off and sold. Additionally, AB1585 now forces HOA’s to also allow second units to be built on R1 lots within those neighborhoods. Some are saying that is a violation of individual and collective property rights but for now this law is in effect.
Finally SB60 raises the maximum fines for violating short-term rental ordinances from $100, $200, and $500 for first, second, and third violations to $1,500, $3,000 and $5,000. What was happening is that some high-end coastal properties (and elsewhere) were being rented for thousands of dollars per week in violation of the short-term rental ordinance and the owners would just easily pay the fine when caught, still pocketing a tidy net profit on the weekly rental. The fines have now been raised 10-fold which changes the calculus for the short-term rental industry.
SINGLE FAMILY MARKET REPORT: 92115-College Area the December median home price was up 8% from November to $883,000. Home prices surrounding SDSU remain elevated and many second units are being built on one lot. 92119-San Carlos: The median home price increased 5% from November but the number of units sold was down slightly to 19 units. 92120-Allied Gardens, Del Cerro, the median home price jumped 12% from November to $1,051,000 as 92120 remains a very sought after area for buyers.
Give me a call to discuss buying or selling real estate in San Diego. 858-431-6043.
Sarah Ward is a realtor with Fine & Coastal Real Estate.
