Home prices & sales are rising across the Southern California housing market and San Diego is no exception. In Southern California, the median home price has risen by double digits for eleven consecutive months. Homes on the market are selling at a fast pace, often fetching multiple offers well above what the sellers are asking. Homebuyer demand is expected to remain strong in 2021, but it will be tested by increasing mortgage rates.

According to a recent report released by C.A.R., the Southern California region remained reasonably strong in Sep 2021 with a slight decline in year-over-year sales growth. The median price was $755,000, which is a gain of 15% over last year but a slight decline of -0.7% over August's median price of $760,000. The same trend can be seen for San Diego County. In San Diego County, the median home price for single-family homes climbed 15.6% year-over-year to $850,000 while sales were down by 10.6% year-over-year.

Inventory is low, prices are rising, and pent-up demand alongside low mortgage rates has the San Diego housing market flooded with homebuyers. The housing demand in San Diego has also been driven by the desire for additional space as people spend more time at home. Housing prices in San Diego County have risen dramatically in 2021 due to lower mortgage rates which allow buyers to put more of their monthly payment towards the principal. The record-low interest rates in 2020-2021 fueled San Diego's high house prices, increasing consumer purchasing power. In Q3 2021, interest rates began to increase, leveling buying power and reducing homebuyer urgency.

The latest data by Realtor.com shows that San Diego is a seller’s real estate market. In other words, there are roughly more buyers than there are active homes for sale.

• In September 2021, the median list price of homes in San Diego County was $775K, trending up 12.3% year-over-year.
• The median sale price was $760K.
• The median listing home price per square foot was $493.
• Homes in San Diego County, CA sold for approximately the asking price on average in September 2021.
• There are 67 cities in San Diego County.
• La Jolla has a median listing home price of $2.3M, making it the most expensive city in San Diego County.
• Spring Valley is the most affordable city in San Diego County, with a median listing home price of $649K.
• The median listing home price in San Diego City was $799K, trending up 11.7% year-over-year.
• There are 100 neighborhoods in San Diego.
• East Village is the most affordable neighborhood in San Diego, with a median listing home price of $509K.

Southern California Housing Market Trends 2021 (Describes September)

Here's how individual counties of Southern California are setting or matching price records as compared to September 2020 (Data released by C.A.R.). San Bernardino County led the pack with the highest price increase of 21.4% over last year. Still, it is the most affordable with a median price of $437,000 for existing single-family homes. Orange County is the most expensive real estate market in Southern California with a median sales price of $1,100,000. In all the counties, sales have shown declines except for Los Angeles.

• In Los Angeles County, the median price rose 15.7% to $886,050 in September, while sales increased by 1.6%.
• In Orange County, the median price rose 20.2% to $1,100,000, while sales decreased by 14.4%.
• In Riverside County, the median price rose 18.8% to $570,000, while sales decreased by 14.8%.
• In San Bernardino County, the median price rose 21.4% to $437,000, while sales decreased by 9.5%.
• In San Diego County, the median price rose 15.6% to $850,000, while sales decreased by 10.4%.
• In Ventura County, the median price rose 3.5% to $815,000, while sales decreased by 10.6%.

San Diego County Housing Market Trends

San Diego County median home price has topped the $850K mark. The current median price holds at $850,000, which is a gain of 15.6% over last year and 1.8% over August's median price, according to C.A.R.'s Sep 2021 resale housing report. The report also shows that existing single-family home sales dropped by -2.1% MTM and -10.4% over last year. San Deigo's condo market saw a sharp increase in the median price as compared to last year. The condo's median price is $563,750 with a gain of 16.2% YTY and 1.6% MTM.

Months Supply of existing single-family homes is very tight, currently holding at 1.6 months. It is a good indicator of whether a particular real estate market is favoring buyers or sellers. Typically, a market is considered balanced if it has 4 to 6 months of inventory of homes on hand. A lower number means that buyers are dominating the San Diego housing market and there are relatively few sellers.

Is it a good time to buy a house in San Diego?

Mortgage rates are still low as compared to last year. The 30-Year Fixed-Rate in August 2021 was 2.84% while in Aug 2020, it was 2.94%. The supply is very tight and with all of these factors considered, at this time, it is unlikely that the San Diego housing market will see a price decline in 2021. So, buyers should act now and take advantage of low mortgage rates before they rise to pre-pandemic levels.

• The median price of a one-bedroom house is $437K. If you put 20% down, monthly payment = $1,947
• The median price of a two-bedroom house is $600K. If you put 20% down, monthly payment = $2,673
• The median price of a three-bedroom house is $775K. If you put 20% down, monthly payment = $3,453
• The median price of a four-bedroom house is $1.19M. If you put 20% down, monthly payment = $5,302

Greater San Diego Housing Market Trends

In the Greater San Diego region, the decline in existing home sales coincides with rising sales prices, which have continued to soar into fall, with the median sales price of existing homes up 15.9% compared to last year, according to the Greater San Diego Association of REALTORS®.

The percentage change is shown year-over-year for September 2021.

• Closed Sales decreased 16.1 percent for Detached homes but increased 0.7 percent for Attached homes.
• Pending Sales decreased 12.6 percent for Detached homes and 10.6 percent for Attached homes.
• Inventory decreased 42.6 percent for Detached homes and 60.1 percent for Attached homes.
• Days on Market decreased 19.2 percent for Detached homes and 20.0 percent for Attached homes.
• Months Supply of Inventory decreased 47.1 percent for Detached homes and 66.7 percent for Attached homes.
• The Median Sales Price was up 15.9 percent to $860,000 for Detached homes and 16.5 percent to $565,000 for Attached homes.

San Diego Housing Market Forecast 2021-2022 (Latest Predictions)

What are the San Diego real estate market predictions for 2021 & 2022? Let us look at the price trends recorded by Zillow (a real estate database company) over the past few years. Since 2012, the typical home value in San Diego has appreciated by nearly 118.75% — ZILLOW HOME VALUE INDEX. ZHVI represents the whole housing stock and not just the homes that list or sell in a given month.

The price of low-tier housing in San Diego County skyrocketed after the latter half of 2012. 2015 experienced another price increase, due to the boost given by decreased mortgage rates throughout 2015 and 2016. San Diego’s high home prices continued to find fuel from increased buyer purchasing power. Although there has been a steady housing price growth from 2012 to 2018 the housing market did cool off from March 2018 till mid-2019. In 2018, home price growth sharply declined in reaction to slowing sales and rising interest rates, which began in late-2017.

The chart clearly shows the flattening of the home price curve in that period. Home prices have since turned back up and the forecast is also positive. The typical value of homes in San Diego County is currently $809,206. It indicates that 50 percent of all housing stock in the area is worth more than $809,206 and 50 percent is worth less (adjusting for seasonal fluctuations).

San Diego's home values have gone up 26.5% over the past year. NeighborhoodScout.com's data also shows that in the past ten years, San Diego real estate appreciated by 95.65%. This amounts to an annual real estate appreciation of 6.94%, which puts San Diego in the top 10% nationally for real estate appreciation.

During the latest twelve months, San Diego's appreciation rate has been around 9.31%. In the latest quarter, the appreciation rate has been 4.01%, which annualizes to a rate of 17.04%. Overall, there exists a limited supply of homes in San Diego, and buyers are forced to compete often resulting in higher prices and/or quicker sales that tend to benefit sellers.

San Diego County also comprises the San Diego-Chula Vista-Carlsbad, CA Metropolitan Statistical Area, which is the 17th most populous metropolitan statistical area. The San Diego-Carlsbad, CA Metropolitan Statistical Area is conterminous with San Diego County in Southern California. According to Zillow, the typical value of homes in San Diego-Carlsbad Metro is $809,206. The forecast for 2021 is that the shortage of supply and an increase in the demand for housing from millennials will push the prices higher in the next twelve months.

As of now San Diego home prices have reached the highest level in years and upward pressure is expected to continue into the next year even if there is a marginal increase in homes for sale. The inventory can dwindle in 1.5 months if no homes are listed. Low mortgage rates will bolster the home buying market and continue pushing up home price growth.

• San Diego-Carlsbad Metro home values have gone up 26.5% over the past year and Zillow predicts they will rise 22% in the next twelve months.
• San Diego County home values have gone up 26.5% over the past year and will continue to rise at a similar pace in the next twelve months.
• San Diego City home values have gone up 25.9% over the past year and will continue to rise at a similar pace in the next twelve months.

Both home prices and sales have both risen in recent months, despite the turmoil in other areas of the economy. Low inventory and steady demand are two of the key driving factors affecting San Diego’s housing market outlook for 2021. The constraint on available inventory and a decline in new listings is keeping the San Diego housing market skewed to sellers.

The decrease in the number of active listings also indicates that inventory will be very tight over the coming months. It's an opportune time for sellers to list their properties on the market as the sales to list price ratio is almost 101.1%. However, when you consider the current supply-and-demand situation, it’s easy to see why San Diego's real estate market forecasts are mostly positive for the year 2021.

There aren’t nearly enough homes listed for sale to satisfy the current level of demand from buyers. Despite the COVID19 pandemic, San Diego and the entire metro area market is so hot that it hasn't shifted to a buyer’s real estate market. In a balanced real estate market, it would take about five to six months for the supply to dwindle to zero.

In terms of months of supply, San Diego can become a buyer’s real estate market if the supply increases to more than five months of inventory. And that’s not going to happen. This housing market is skewed to sellers due to a persistent imbalance in supply and demand.

This is also true across much of Southern California. The Southern California region was recently singled out as having the steepest decline in housing inventory over the past year or so. It’s a positive sign for homebuyers, especially for those to want to invest in San Diego real estate. For buyers in San Diego, the mortgage rates are still low and the positive forecast for the next twelve months nearly guarantees appreciation.

The US housing market has been heating up with an increase in home-buying activity despite the COVID-19 pandemic. The real estate sector has been one of the most resilient areas of the economy during the severe economic shutdown. While uncertainty remains on the resurgence of COVID-19, the healthy housing demand we see today will create significant tailwinds in the near term.

The chart below, created by Zillow, shows the growth of median home values since 2011 and their forecast until Sep 2022. 

Impact of COVID-19 on The San Diego Housing Market

Let’s discuss the impact of COVID-19 on the San Diego housing market. Before the pandemic, the Median Sold Price of Existing Single-Family Homes in San Deigo County for March 2020 was $675,000, which was a year-over-year increase of 8.2%. Compared to the previous month (February), the median sold price increased by 0.7% and home sales increased by a whopping 23.4%. Existing SFR sales in March 2020 were 589, down 5.5% from a year ago. The existing SFR Median Price was $840,000, up 16.7% from a year ago.

As the Covid-19 outbreak went viral in California, home sales were impacted across all the counties due to “shelter at home” restrictions. The shutdown due to the coronavirus pandemic had an impact on California's economy and the real estate sector as well. San Diego home buyers have been praying for a price drop, and they got a decent break during this Covid-19 pandemic.

There has been some short-term impact of the Coronavirus pandemic on the San Diego Housing Market — with buyers withdrawing offers and sellers removing their homes from the market. The general uncertainty played a smaller role in recent weeks. There have been delays in closings due to financing issues as loan funding has slowed down. Sales were down from early April and are still down as compared to last year's numbers. The pandemic, however, has not had much impact on San Diego's home prices yet.

San Diego County home prices grew 1.5% during April and that’s up 7.2% from last year. The median price rose by $10,000 to $670,000 and this is well up from last year the median price of 625,000. In May, San Diego County home prices increased by 0.8% to $655,000 whereas the home sales dropped by a massive 42.3%. Active listings by the end of May were 2,709, a year-over-year drop of 42.7%.

In May, the home sales in all the counties in Southern California, except Ventura, declined 36 percent or more from last year, with San Diego dropping the most at 42.7 percent, according to C.A.R. The median sold price in San Diego County increased by 0.8% to $655,000 as compared to last year. However, when you compare it with April 2020, the price decreased by 2.4%.

In July, home prices in San Diego County blew past previous records to hit an all-time high of $634,000. That represented a 9.3 percent price increase over a year earlier, its highest annual jump in nearly two years. The previous record median price was $600,250 in June.

Prices were up sharply across Southern California as experts pointed to historically low-interest rates and a lack of homes on the market as driving forces — despite a global pandemic and high unemployment. The median price of single-family homes in San Diego County hit a record of $700,000, up to $44,500 from the old record in June.

In August 2020, sales of single-family homes increased by 10.2% y-o-y, affirming that there is a strong demand among homebuyers in the area. Pending sales have also increased over the last 3 months in San Diego County. Home prices across the San Diego metro area are rising steadily in 2020. Due to the pandemic, it was expected that the home prices would remain flat or drop a bit in the coming months to favor buyers. That was a much-awaited condition for homebuyers who cannot afford a home at the median price. But that's not the case.

The median sold price of single-family homes increased by a whopping 12.7% year-over-year to $650,000. Earlier in July, the median price had increased by 10.6%. The San Diego home prices have increased by 6% from June to July of 2020. According to the latest San Diego real estate market update for August 2020, the inventory of single-family homes has dropped 51.2%. That is one reason we see a drop of 2.2% in sales as compared to the previous month (July).

***The latest housing trends have already been discussed above***

San Diego Real Estate Investment: Should You Invest or Not?

Should you consider San Diego real estate investment? Many real estate investors have asked themselves if buying an investment property in San Diego is a good investment? You need to drill deeper into local trends if you want to know what the market holds for real estate investors and buyers in 2021 or 2022. Although this article alone is not a comprehensive source to make a final investment decision for San Diego, we have collected ten evidence-based positive things for those who are keen to invest in San Diego real estate now.

Let’s look at the state of the San Diego real estate market and the factors driving the property market short and long term. Affordability has become an issue for many homebuyers in the San Diego area. This is another housing market trend that is affecting many major cities across the country but particularly in the western coastal markets. How big is San Deigo's housing market? San Diego is a moderately walkable city in San Diego County with a population of approximately 1,305,700 people.

It is the second biggest California city and one of the ten biggest cities in the country. San Diego is one of the fastest-growing cities in the U.S, and its economy is strong. San Diego is often overlooked in favor of hotter real estate markets like San Francisco and Los Angeles. However, that’s one of the reasons why you should consider investing in the San Diego real estate market. The city of San Diego continues to outpace California's job recovery, which is good news for San Diego’s housing industry.

The San Diego metropolitan area is known as the birthplace of naval aviation, serving as a major employment center in the nation for defense and in the Southern California region for scientific research, health care, education, trade, and tourism. The significant military presence supports hundreds of thousands of jobs, pays billions of dollars in wages, and has an overall annual economic impact on the San Diego metropolitan area of billions of dollars.

San Diego's housing market remains one of the hottest in the nation (ranked 10th by Zillow). Since home building takes time especially in a heavily regulated environment, there’s little chance of diminished demand. San Diego has been one of the hottest real estate markets in the country for many years. During the 20 years from 1998 to 2018, the median home value in San Diego rose by a whopping 217%. But the median household income only rose by around 77% during that same 20-year time frame.

San Diego has a mixture of owner-occupied and renter-occupied housing. As per Neigborhoodscout.com, a real estate data provider, one and two-bedroom single-family detached are the most common housing units in San Diego. Other housing types prevalent in San Diego include large apartment complexes, duplexes, rowhouses, and homes converted to apartments.

There were 4,100 single-family homes and 6,400 multi-family homes built in 2017, compared to 2,200 single-family homes and 7,800 multi-family units in 2016. Today, the general trend for SFR construction in San Diego County is still far below the 2002-2004 numbers. The next peak in single-family residential construction will likely begin around 2021, but it is doubtful to return to the frenzied mortgage-driven numbers seen during the Millennium Boom.

The San Diego Housing Market Is a Relative Bargain

California is known for its insane real estate prices. San Diego stands out as a relatively affordable real estate market. The median home price is around $550,000. This sounds bad if you compare it to the national average of $300,000, but it is a bargain in California. You could snap up several San Diego rental properties for the price of one home in San Francisco.

The San Diego housing market is cooling. Home price appreciation fell below 5%, and home prices in some areas are declining due to decreasing demand. This is an improvement over the 6 to 8% appreciation San Diego had been seeing. The expanding inventory of houses on the market makes this a great time to invest in the San Diego housing market.

San Diego's Housing Supply Is Constrained As New Construction of Homes is Quite Slow

San Diego is a growing housing market. By 2050, the population of San Diego County is expected to grow to 4.5 million, approximately a 50% increase from the population in early 2007 of 3,098,269 people. Population trends have connections with housing trends as it increases the demand for housing supply. However, construction in San Diego has stalled. Single-family residential construction is well below the demand for such homes in the San Diego housing market.

There have been faster growth in the construction of multi-family housing in the San Diego real estate market, but that is also below historic rates. Currently, both single-family and multi-family housing construction is increasing in San Diego. Even though there are more multi-family starts over single-family homes in terms of raw numbers, the percentage of single-family homes being constructed outpaces that of multi-family units.

San Diego also shares several geographic constraints that other California coastal cities do. You can’t build on water. The Cowles Mountains limit how much the city can expand inland, constraining the housing supply. Regulations limit high-density construction, preventing the area from meeting demand with too many tall condo towers. So, do the wilderness areas off-limits to construction like Cuyamaca Rancho State Park and Cleveland National Forest.

The Diverse Student Market Feeds the San Diego Rental Market

San Diego is a major metropolitan area, and it is home to several colleges and universities. The University of California at San Diego is one of the largest. It is sometimes confused with San Diego State University, a different campus, and the University of San Diego. Point Loma Nazarene University is a Christian school in San Diego. National University is located in nearby La Jolla.

Smaller schools like the Art Institute, Alliant International University, Azusa Pacific University, Brandman University, Miramar College, Mesa College, and California College of San Diego fill out the San Diego real estate market.

A side benefit of the diversified student market is that you can buy multiple properties across the San Diego housing market and enjoy a “diverse” investment portfolio. You won’t see demand for the property rise and fall based on the popularity of a flagship school, and the strong San Diego housing market allows you to rent it to newcomers to the area or military officers if you can’t fill the unit with students.

San Diego’s economy isn’t as reliant on tourism as other coastal towns. Instead, defense and the military are a larger part of the local economy. This dumps tens of thousands of renters into the San Diego real estate market who will never buy because they could be deployed elsewhere in a year or two. The military also gives generous allowances for those who rent San Diego rental properties, keeping rents near the military base strong regardless of the state of the economy.

San Diego Rental Prices Are Increasing Year-Over-Year

The San Diego real estate market has been ranked among the ten most expensive real estate markets in the country, though it ranks below several other West Coast cities. This creates massive demand for San Diego rental properties by those who simply cannot afford to buy homes. The rental market will continue to grow as the city grows an estimated 500,000 population by 2050, adding tens of thousands each year. The median rent in San Diego is $2700. The rent you’d receive on single-family San Diego rental properties would, of course, be much higher.

If you find a good bargain and make it family-friendly, you could charge well over $3000 a month. If you can convert San Diego rental properties into smaller units, you’d receive around $2200 a month for a one or two-bedroom apartment. The cash on cash returns for properties in the San Diego housing market is around 2.5% for traditional rental properties and nearly 2% if you rent on Airbnb. The fact that the city isn’t too dependent on tourism means you could rent properties on the beach to newcomers, locals, and students if tourism is slow.

Before the pandemic, the average rent for an apartment in San Diego had been growing at 4% year-over-year (source: RentCafe). About 40% of the apartments can be rented for less than $2000, and 60% of the apartments can be rented for more than $2,000 per month. This shows that rent prices are very high in San Diego.

Homeowners vs Renters Statistics: According to the most recent 2020 American Community Survey census data, San Diego County has a renter percentage of 46.7% which is the second most renter percentage of all the counties in the greater San Diego County region. The homeowner percentage is 53.3%. The monthly cost of ownership for property owners in San Deigo is around $2,073.

The median gross rent is $1,658, which is the third most expensive among all other counties in the greater San Diego County region. Comparing rental rates to the United States average of $1,062, San Diego County is 56.1% larger. Also, compared to the state of California ($1,503), San Diego County is 10.3% larger.

Rental Trends: As of October 20, 2021, the average rent for a 1-bedroom apartment in San Diego, CA is currently $2,100. This is a 17% increase compared to the previous year. Over the past month, the average rent for a studio apartment in San Diego remained flat. The average rent for a 1-bedroom apartment remained flat, and the average rent for a 2-bedroom apartment increased by 2% to $2,800.

• Two-bedroom apartment rents average $2,800 (a 19% increase from last year).
• Three-bedroom apartment rents average $3,500 (a 10% increase from last year).
• Four-bedroom apartment rents average $4,300 (a 17% increase from last year).

San Diego Real Estate Market Is More Landlord Friendly For Short Term Rentals

We can’t say that California is landlord-friendly. However, specific cities are better for landlords and real estate investors than others. One reason to invest in the San Diego housing market over San Francisco or Los Angeles is the fact that San Diego is one of the few big cities that doesn’t have rent control. The city has groups fighting proposals to apply rent control to San Diego rental properties in addition to apartments.

San Diego has many tourist attractions. Balboa Park is home to the San Diego Zoo, the Air and Space Museum, the Natural History Museum, the Desert Garden, the local youth Symphony, a Japanese garden, and a golf complex. There’s a SeaWorld in San Diego, an MLB stadium, the USS Midway Museum, and the San Diego zoo safari park. On top of this is the mild weather and proximity to the beach. Any San Diego rental properties in easy reach of these attractions command a premium on rental sites like Airbnb.

Demand for rentals in the San Diego real estate market soars during Comic-Con, one of the biggest comic conventions in the country. The only limit on San Diego rental properties has been the fluctuating rules by the city council, such as a measure passed limiting rentals to primary residences that were rescinded a few months later in 2018. Yet permission for rentals is limited in many master-planned communities and condo developments, keeping rents for Airbnb and other short-term rentals strong.

San Diego Is A Great Place Place To Live In 

San Diego is a great place to live in which makes real estate investment a lucrative opportunity. It has nice sunny weather and impressive beaches. It has more than 300 parks, including Mission Trails Regional Park, and 40,000 acres of undeveloped open space. Balboa Park has the world-famous San Diego Zoo, Old Globe Theatre, and museums. San Diego Zoo is also one of the prettiest zoos in the world to walk around. U.S. News analyzed 125 metro areas in the United States to find the best places to live based on the quality of life and the job market in each metro area, as well as the value of living there and people's desire to live there.

San Diego, California was ranked:

• #36 in Best Places to Live
• #51 in Best Places to Retire
• #3 in Best Places to Live in California
• #5 in Most Expensive Places to Live
• #9 in Best Places to Live for Quality of Life
• #12 in Safest Places to Live

San Diego is home attracts millennials with its higher education opportunities and big-city amenities such as excellent restaurants, dive bars or clubs, and great nightlife. The craft beer scene in San Diego is one of the best in the world. North County is desirable for young families whereas millennials are moving downtown and to communities to the northeast as a result of gentrification and the diverse entertainment options centralized in those areas.

Where To Invest In San Diego Real Estate Market?

Are you looking for an investment property in the San Diego real estate market? Maybe you have done a bit of real estate investing in San Diego but want to take things further and make it into more than a hobby on the side. It’s only wise to think about how you can and should be investing your money. In any property investment, cash flow is gold. San Diego offers an ideal mix of limited supply, high demand, and excellent income potential.

San Diego's mild climate, miles of beaches, fun attractions, and great schools make the city one of America's best places to live. If you’re going to invest in California, it needs to be in San Diego. Good cash flow from San Diego investment properties means the investment is, needless to say, profitable. On the other hand, a bad cash flow means you won’t have money on hand to repay your debt.

Therefore, finding the best investment property in San Diego in a growing neighborhood would be key to your success. The three most important factors when buying real estate anywhere are location, location, and location. The location creates desirability. Desirability brings demand. You should focus on neighborhoods with relatively high population density and employment growth.

Both of them translate into high demand for housing. There should be a natural and upcoming high demand for rental properties. Demand would raise the price of your San Diego rental property and you should be able to get a good return on your investment over the long term.

The neighborhoods in San Diego must be safe to live in and should have a low crime rate. The neighborhoods should be close to basic amenities, public services, schools, and shopping malls. A cheaper neighborhood in San Diego might not be the best place to live in.

A cheaper neighborhood should be determined by these factors – Overall Cost Of Living, Rent To Income Ratio, and Median Home Value To Income Ratio. It depends on how much you are looking to spend and if you are wanting smaller investment properties or larger deals in Class A neighborhoods. The inventory is low, but opportunities are there.

Some of the popular neighborhoods in or around San Diego are Carmel Valley, Rancho Bernardo, Point Loma, Pacific Beach, Mission Valley, Mira Mesa, Rancho Penasquitos, Bonita, Del Cerro, North Park, La Jolla, 4s Ranch, Mission Hills, Otay Ranch and Rancho Santa Fe.

As we write this, the asking price of single-family homes for sale in San Diego (on Realtor.com) starts from $132,000 for a 3-bedroom house and can go up to $37M for a luxury 10-bedroom house located in the Northern San Diego neighborhood.

You can get a beautiful 3-bedroom new construction single-family house for around $379,000 in the Southern San Diego neighborhood — which is quite an affordable entry price as San Deigo home prices are some of the most expensive in all of the United States.

Here are some of the best neighborhoods in San Diego where you can buy an investment property.

Encanto is one of San Diego’s most affordable neighborhoods if you want to buy an investment property. According to Neighborhood Scout Encanto’s median real estate price is $405,140, which is cheaper than 69.5% of California homes. Encanto is a hilly neighborhood located in the southeastern part of San Diego, California. The neighborhood of Encanto is split into two sections, North Encanto (which lies north of Broadway), and South Encanto (which lies south of Broadway).

The name Encanto usually refers to the neighborhood of Encanto, but it can also refer collectively to the neighborhoods of the Chollas Valley planning area, which consists of Chollas View, O'Farrell, Lincoln Park, Emerald Hills, Valencia Park, Broadway Heights, Alta Vista, Rosemont, as well as Encanto. The citizens' community planning group that represents these eight neighborhoods in accordance with the City of San Diego Council Policy 600-24 is named the Chollas Valley Community Planning Group.

The Encanto Neighborhoods Community Plan is designed to expand the existing retail, commercial and light industrial areas along the main transportation corridors and the villages surrounding the trolley stops at 47th and Market streets, and Euclid Avenue and Market Street. Its cultural heart is the Market Street Village, situated along Chollas Creek, and the trolley stop at the intersection of Euclid Avenue and Market Street.

With its proximity to San Diego Bay just 2 1/2 to 5 miles away, temperatures tend to be mild. The area offers excellent opportunities for infill development, including commercial, transit-oriented mixed-use along the main corridors, and view lots for single-family residential in the surrounding hills.

Nestor is another relatively affordable neighborhood in San Deigo having a median real estate price of $500,280, which is less expensive than 60% of the neighborhoods in California. The average rental price in Nestor is currently $1,788, based on NeighborhoodScout's exclusive analysis. Rents here are currently lower in price than 68.1% of California neighborhoods. Nestor is a residential neighborhood in the southern section of San Diego, and part of the Otay Mesa-Nestor community planning area. Zillow predicts that home values in Nestor would increase by 4.6% in the next 12 months.

It neighbors Palm City and Otay Mesa West to the east, Egger Highlands to the north, San Ysidro to the southeast, and the Tijuana River Valley to the south. Major thoroughfares include Coronado Avenue, Saturn Boulevard, Hollister Street, and Tocayo Avenue. According to Areavibes.com, the cost of living in Nestor is 19% lower than the San Diego average and 13% higher than the national average. On their livability index, it ranks better than 42% of areas in San Diego.

The Otay Mesa-Nestor community planning area is located in the southern region of the City and is bounded on the north by Chula Vista, on the east by the community of Otay Mesa, on the south by the Tijuana River Valley and the San Ysidro community, and on the west by Imperial Beach. Twenty percent of the planning area consists of schools, parks, transit, and other public facilities, while vacant, undeveloped, agricultural, and mineral extraction and processing uses comprise the remaining 15 percent.

Emerald Hills is a fairly good neighborhood in San Diego to invest in real estate. It is a calm neighborhood with many green spaces nearby for residents to visit. Most areas in this neighborhood are quiet, as noise from the streets and other parts of the city is rarely an issue. It is bordered by Oak Park and California State Route 94 on the north, Chollas View and Euclid Avenue on the west, Encanto on the east, and Valencia Park and Market Street on the south. Major thoroughfares include Kelton Road and Roswell Street.

Most houses for sale in this neighborhood are located in places that are not very suitable for walking since carrying out daily needs is sometimes difficult. The Median Home Value in Emerald Hills is $418,600 and Zillow predicts a rise of 4.2% in the next twelve months.

Another urban area that is great for investment is the Downtown/City Center. It is one of the best places to live in California. It offers residents a dense urban feel and more than 70% of the residents rent their homes. So it is a great neighborhood to buy rental properties due to high demand. Downtown's public schools are above average.

The Median Home Value in Downtown is $572,100 and Zillow predicts an increase of 4.5% in the next twelve months. The median rent is around $1,491. It offers good nightlife with restaurants, bars, and entertainment venues. Niche.com ranks it #25 among the best neighborhoods to live in San Diego.

Highest Growing San Diego Neighborhoods For The Last 5 years (List by Neighborhoodscout.com)

1. La Jolla Shores Dr / N Torrey Pines Rd
2. 4th Ave / Quince St
3. Emerald St / Cass St
4. Soledad Mountain Rd / Pacifica Dr
5. Jellett St / Erie St
6. Stresemann St / Gobat Ave
7. Darkwood Rd / Park Run Rd
8. City Center
9. Spring Canyon Rd / Scripps Ranch Blvd
10. Rosecrans St / Nimitz Blvd

The cheapest or most affordable neighborhoods to rent in San Diego are Alta Vista, where the average rent goes for $1100/month, Broadway Heights, where renters pay $1100/mo on average, Emerald Hills, where the average rent goes for $1100/mo, Encanto, where renters pay $1100/mo on average $1,383, Jamacha Lomita with an average rent of $1100, and Skyline, where the average rent price is 1100. In all of these areas, the asking prices are below the average San Diego rent.

Apart from San Deigo, you can also invest in several other real estate markets in California. California has the 6th largest economy in the entire world. This is largely driven by its innovative production, the heavy tech sectors in the state, and more. Apart from the San Diego real estate market, you can also invest in another hot market in San Jose. San Jose is part of Silicon Valley, a place where $100,000 a year or higher salaries from competing for tech firms has driven up the cost of real estate.

But what about the San Jose housing market itself? San Jose is the third-largest city in California, home to roughly a million people. It has the highest cost of living in any area in the U.S., and it is one of the most expensive housing markets in the country. If you want to invest in San Jose real estate, you may not need to buy and renovate. Instead, if you know of industrial or commercial properties near major employers they may need to convert to employee housing, which you could buy now and hold until it sells.

If that doesn’t happen, you could still turn it into a co-working space. In January 2018, Redfin ranked the ten hottest neighborhoods in the United States. Nine of the ten were in San Jose. When single home prices fall from 1.2 million to 1 million, homes now sit on the market for several days instead of being snapped up immediately.

The other good place for real estate investment in California is Sacramento. Sacramento is an island of sanity in an overpriced, over-regulated, and overheated West Coast housing market. It reflects the California ideal that most of the state has lost, and that’s we recommend it to investors over the “hotter” California metro areas. These are the same factors causing many Californians themselves to vote with their feet and move here instead of moving out of the state altogether.

If you’re considering Sacramento real estate investment, the diverse rental market is a definite plus. Being a state capital, it is home to several universities. This allows you to rent to the relatively large student market in addition to the local population. There is, of course, the University of California campus in Sacramento, but you could own investment properties by American River College and other, smaller schools in the area, too.

Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market areas, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing, and interest rates.

NORADA REAL ESTATE INVESTMENTS has extensive experience investing in turnkey real estate and cash-flow properties. We strive to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in many other growth markets in the United States. We can help you succeed by minimizing risk and maximizing the profitability of your investment properties.

Not just limited to San Diego or California but you can also invest in some of the best real estate markets in the United States. All you have to do is fill up this form and schedule a consultation at your convenience with our team to see if San Diego makes sense as a place to invest today.

We can help build you a custom portfolio of turnkey properties located in some of the best markets in the United States. By researching and structuring complete turnkey real estate investments, we can help you succeed by minimizing risk and maximizing profitability.

---

Remember, caveat emptor still applies when buying a property anywhere. Some of the information contained in this article was pulled from third-party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified through the references given below. As a general policy, Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US.

References:

Latest Market Data, Trends, and Forecasts
https://www.car.org/
https://www.car.org/marketdata/data/countysalesactivity
https://www.sdar.com/press-releases.html
https://www.zillow.com/SanDiego-ca/home-values
https://www.neighborhoodscout.com/ca/san-diego/real-estate
https://www.realtor.com/realestateandhomes-search/San-Diego_CA/overview
https://www.sandiegorealestatehunter.com/blog/san-diego-real-estate-market-forecast
http://www.homebuyinginstitute.com/news/san-diego-more-moderate-forecast
https://www.zillow.com/research/2020-hot-markets-south-26293/
https://journal.firsttuesday.us/san-diego-housing-indicators-2/29246/

California COVID-19 Economic/Market Update
https://car.sharefile.com/share/view/s2a8899fc081428a8

Cooling market
https://www.10news.com/news/making-it-in-san-diego/making-it-in-san-diego-slowing-housing-market-could-create-buying-opportunity

New housing supply
https://journal.firsttuesday.us/san-diego-housing-indicators-2/29246

Relatively cheap market
https://www.cnbc.com/2019/02/27/spring-housing-market-could-be-coolest-in-recent-years-realtorcom.html
https://www.sandiegouniontribune.com/business/real-estate/sd-fi-corelogic-home-20180724-story.html

Rental rates
https://www.rentcafe.com/average-rent-market-trends/us/ca/san-diego
http://worldpopulationreview.com/us-cities/san-diego-population

Landlord friendly
https://www.sandiegouniontribune.com/business/real-estate/sd-fi-rent-control-20180703-story.html

Short term rentals
https://www.mashvisor.com/blog/airbnb-san-diego
https://www.sandiegoreader.com/news/2018/mar/07/city-lights-airbnb-forcing-you-out
https://www.sandiegouniontribune.com/business/tourism/sd-fi-airbnb-regulations-council-20181022-story.html

College market
https://www.niche.com/colleges/search/best-colleges/m/san-diego-metro-area

Foreclosures
https://www.realtytrac.com/statsandtrends/ca/san-diego-county/san-diego

General stats
http://worldpopulationreview.com/us-cities/san-diego-population
https://www.sandiego.org/articles/east-county/san-diego-east-mountains.aspx

The California housing market moderated for the fourth month in a row in September 2021. After a busy summer, the state's housing market continues to stabilize. After setting another record in August, California's median house price fell to $808,890 in September, down 2.3 percent from $827,940 in August. September's price was 13.5 percent more than last September's $712,430, according to the California Association of Realtors (C.A.R.).

The median price in California remained above the $800,000 benchmark for the sixth consecutive month but the double-digit price year-over-year price gain was the smallest in 14 months. However, September saw a recovery in existing house sales which reversed a four-month slump. September's monthly sales pace was up 5.6 percent from 414,860 in August but down 10.5 percent from a year earlier, when 489,590 houses were sold. The month-over-month rise was the highest since August 2020, and despite continuing declines from the previous year, statewide sales increased 16.8 percent on a year-to-date basis.

The supply-demand imbalance continues to heat the market, with many buyers offering sales bids that are higher than the asking price. Over 62.2% of homes sold above the asking price in September, but it was also the lowest level since February 2021. However, market competitiveness should ease and house prices should moderate, providing a chance for homebuyers who waited out the extremely competitive market early this year to reconsider purchasing. Both sales growth and price growth slowed in September.

Homes are flying off the shelves in record time. The median number of days it took to sell a California single-family home inched up from 9 days in August to 10 days in September and was slightly lower than the 11 days in September 2020. Tight inventory and low mortgage rates, similar to national housing market trends, are fueling the rise in California home prices.

While this type of price appreciation has an impact on housing affordability, higher home prices should encourage more sellers to list their homes for sale, slowing the rate of appreciation. The normalization of the market and modest improvement in housing inventory over the past few months have created an opportunity for homebuyers who had avoided the highly competitive housing market that had prevailed for much of the previous year to seize the opportunity.

Housing costs have been on the rise in California, which has impacted affordability. Only less than 25% of home buyers can afford to buy a median-priced home in the Golden State. According to C.A.R.'s Traditional Housing Affordability Index (HAI), the percentage of home buyers who could afford to buy a median-priced existing single-family home in California in the second quarter of 2021 fell to 23 percent from 27 percent in the first quarter of 2021 and 33 percent in the second quarter of 2020.

The figure for the second quarter of 2021 is less than half of the affordability index peak of 56% in the second quarter of 2012. C.A.R.'s HAI calculates the percentage of all households in California that can afford to buy a median-priced single-family home. C.A.R. also publishes affordability indices for specific regions and counties within the state.

• As of the second quarter of 2021, a statewide median-priced existing single-family home would require a minimum annual income of $150,800.
• An effective composite interest rate of 3.20 percent would mean that the monthly payment on a 30-year, the fixed-rate loan would be $3,770 assuming a 20 percent down payment. 

In September 2021, the median price in all of the major regions continued to grow on a year-over-year basis, with three of them increasing by double-digits. Home prices continued to rise steadily from the previous year, with 44 out of 51 counties tracked by C.A.R. showing a year-over-year gain from 12 months ago, and 38 of them increased more than 10 percent from last September

• The San Francisco Bay Area had a year-over-year price gain of 21.7 percent, with the median price being $1,290,000.
• The Central Valley had a year-over-year price gain of 15.4 percent, with the median price being $450,000.
• Southern California had a year-over-year price gain of 15 percent, with the median price being $755,000.
• The Central Coast had a year-over-year price gain of 5.8 percent, with the median price being $886,900.
• The Far North had a year-over-year gain of 5.7 percent, with the median price being $370,000.
• The Los Angeles Metro Area had a year-over-year price gain of 15.9 percent, with the median price being $730,000.
• Inland Empire had a year-over-year price gain of 16.9 percent, with the median price being $520,000.

California is still a seller’s market and home prices have reached record-highs across all the regions due to tight supply. Nearly 62% of homes sold above the asking price in September. New construction can’t keep up with demand in the California housing market. Every major region saw home prices continuing to increase from last year as buyers competed amid a shortage of homes for sale. There is an increase in demand leading to bidding wars and subsequent higher selling prices.

These trends show us that the California housing market remains very competitive. Growth of sales are prices are driven by low mortgage rates, buyers seeking more living space, and a perennial shortage of houisng supply. Homes are selling quickly with a minimal price reduction. The statewide sales-price-to-list-price ratio was 101.9 percent in September. It was the lowest level in seven months. If it's above 100%, the home sold for more than the list price. If it's less than 100%, the home sold for less than the list price.

High demand across all of California's sub-markets means that low inventory and lightning-fast market conditions are not going away soon. There just aren’t enough homes listed for sale to satisfy the demand from buyers. The number of for-sale properties continued to fall from last year by 9.7 percent. It was the smallest decline in two years. C.A.R.’s Unsold Inventory Index (UII) was unchanged from 1.9 months in August and was slightly below last year’s level of 2.0 months. The index indicates the number of months it would take to sell the supply of homes on the market at the current rate of sales.

Will The Housing Market Go Up or Down in California in 2022?

Each month C.A.R. surveys 1,000 California consumers regarding their sentiments about various aspects of the housing market or the economy that directly impact housing to create a California Housing Sentiment Index. In September 2021, the overall housing sentiment index reached 70 (-2 from last month). The California housing market is showing signs of normalization, as high prices and a competitive, gradually improving economy continue to entice more sellers back into the market.

Furthermore, C.A.R. reported that interest rates remained favorable last week, and new listings resumed their upward trend. Although rising mortgage applications and home sales have not yet materialized, California consumers have become slightly more optimistic about buying in the last month, and the remainder of the year is expected to remain at or near the 400,000 unit threshold through December.

Encouragingly, the number of new listings being added to the MLS each day has finally started to exceed closed sales and C.A.R. is still forecasting at least 10% growth in home sales this year. If the economy improves, rates could keep rising slowly, but many experts expect borrowing costs to remain low by historical standards throughout 2021. Here's what consumers feel at this time.

Is it a good time to buy a home in California?

C.A.R.’s monthly Consumer Housing Sentiment Index for September 2021 found that only 19% of consumers believe that now is the good time to buy a home, and 81% think this is not a good time to buy a home. The consumer sentiment is up by 1% from last month. As a result of continuously rising prices in all the major regions, the housing market sentiment also shows that only 33% of the consumers feel that it will be easier to find a home over the next twelve months (+2 from last month's survey). 67% said it won't be easier to find their dream house.

Is it a good time to sell a home in California?

According to the survey, almost one-third (70 percent) of Californians believe now is a good time to sell a home. That’s a decrease of -2 over the August 2021 poll. More than half of the consumers (53%) who participated in the survey still feel that home prices will continue to rise in the 12 months. That’s a decrease of -1% from the previous month. Less than half of the people are optimistic about the economy's recovery. Only 38% (-4 from last month) believe that economic conditions will improve in the state over the next 12 months while 62% still have a gloomy outlook.

California Housing Market Trends 2021 (Describes September)

Here are some of the key points of the California housing market report for September 2021, according to the September 16 release by C.A.R.

Existing-Home Sales

• September's sales pace was up 5.6 percent on a monthly basis from 414,860 in August.
• It was down 10.5 percent from a year ago when 489,590 homes were sold on an annualized basis.
• The month-over-month rise was the highest since August 2020.
• Despite continuing declines from the previous year, statewide sales increased 16.8 percent year to date.
• At the regional level, sales in all the five regions fell year over year in September, with two regions seeing double-digit declines.
• The Far North region continued to have the biggest sales decline (-18.8 percent) from a year ago.
• Central Coast also fell by more than 10 percent in sales, with all counties but Santa Cruz dropping by double-digits.
• San Francisco Bay Area (-7.0 percent), Southern California (-8.3 percent), and the Central Valley (-6.2 percent) also saw a decline in sales year over year, but the declines were more moderate.
• All but 10 of 51 counties tracked by C.A.R. posted a year-over-year decrease in closed sales in September, with 32 counties declining by more than 10 percent in sales from last year.
• Lassen had the sharpest sales decline from a year ago at -52.9 percent.
• Ten counties experienced a year-over-year sales growth in September, a decline from 13 counties from the prior month.
• Yuba (50.7 percent) had the largest sales gain from last year.

California Median Home Price

• Median prices in all major regions continued to grow on a year-over-year basis, with three of them increasing by double-digits in September.
• The San Francisco Bay Area had the largest jump (21.7 percent) of all regions.
• The Central Valley was the second strongest growing at 15.4 percent.
• It was followed by Southern California (15 percent).
• The Central Coast had the fourth-highest price growth rate of all regions with its median price increasing 5.8% year-over-year.
• The Far North region posted a growth of 5.7 percent.
• In September, 44 out of 51 counties tracked by C.A.R. showed a year-over-year gain from 12 months ago.
• 38 of them increased more than 10 percent from last September.
• Del Norte had the largest growth of 42.0 percent.
• Six counties had a drop in their county median price.
• Lassen falling the most at -24.8 percent.

California Housing Supply

• California’s housing supply leveled off in September as the market transitioned into the off-season.
• Three out of five counties reported by C.A.R. declined in active listings from last September.
• 24 of them dropping by 10 percent or more year-over-year.
• Marin had the largest decline in supply from a year ago, falling 52.8 percent from September 2020.
• Over one-third of the reported counties improved in housing supply from a year ago.
• Santa Barbara led the pack with a year-over-year growth rate of 93.6 percent.
• September’s Unsold Inventory Index (UII) was unchanged from 1.9 months in August and was slightly below last year’s level of 2.0 months.
• The index indicates the number of months it would take to sell the supply of homes on the market at the current rate of sales.

Median Days & Sales Price to List Price Ratio

• The median number of days it took to sell a California single-family home inched up from 9 days in August to 10 days in September and was slightly lower than the 11 days in September 2020.
• C.A.R.’s statewide sales-price-to-list-price ratio was 101.9 percent in September 2021 and 100 percent in September 2020.
• It was the lowest level in seven months.
• Looking at sale-to-list percentages can help buyers and sellers get a sense of how to negotiate on pricing.
• The higher ratio of 100% or above shows a strong market favoring sellers.
• The statewide average price per square foot for an existing single-family home remained elevated.
• September’s price per square foot was $393, up from $321 in September a year ago.

Mortgage Interest Rate

• The 30-year, fixed-mortgage interest rate averaged 2.90 percent in September, up from 2.89 percent in September 2020, according to Freddie Mac.
• The five-year, adjustable mortgage interest rate was an average of 2.45 percent, compared to 2.98 percent in September 2020.

California Housing Market – Regional Sales and Price Trends – September 2021

Sales dipped in all five major regions compared to the same period last year, according to regional data. Median prices in all of the major regions continued to grow on a year-over-year basis, with three of them increasing by double-digits in September.

These monthly and yearly trends numbers can be positive or negative depending on which side of the fence you are — Buyer or Seller? Home sales rebounded in June 2020 for the first time since the pandemic and California’s median home price reached $626,170, improving 6.5 percent from May and 2.5 percent from June 2019. The monthly price increase was higher than the historical average price change from May to June and was the highest ever recorded for a May-to-June change.

Factors are businesses reopening, mortgage payments are falling, and some sellers are more ready and eager to sell. Sales remain strong in a traditional off-season and this year looks promising across the region. It looks like 2021 will end with a new record at home sales and prices. Median prices in all major regions continued to increase but none set a new record high in September 2021. 44 out of 51 counties tracked by C.A.R. showing a year-over-year gain from last September. Whether you’re looking to buy or sell, timing your local market is an important part of real estate investment.

For sellers in the California housing market, it is a good time to sell. A low inventory would keep the prices from falling. Sales Price to List Price ratio has been 101.9% in September 2021. 62% of homes were sold above their initial asking prices on MLS. A seller would always prefer this ratio to be close to 100% or higher.

For buyers in the California housing market, it is a good time to buy. Low-interest rates continue to fuel optimism for homebuying. The 30-year, fixed-mortgage interest rate averaged 2.90 percent in September, according to Freddie Mac. Interest rates remain low giving buyers the purchasing power and home prices a boost. Fortunately, new listings have finally started to rise, which could help to sustain a higher level of home sales deeper into summer by providing much-needed supply.

All of these factors have led the market to optimism in homebuyers. Recent forecasts from industry groups like Freddie Mac and the Mortgage Bankers Association have predicted that the average rate for a 30-year fixed mortgage could stay within the low 3% range well into 2021.

California Housing Market Forecast 2021-2022 (New Predictions)

Here's a rundown of the forecast released by CAR in October 2021

What are the California real estate market predictions for 2021 & 2022? California housing market is shaping up to continue the trend of the last few years as one of the hottest markets in the U.S. Supply constraints and higher home prices will bring California home sales down slightly in 2022, but transactions will still post their second-highest level in the past five years, according to a housing and economic forecast released today by the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).

• Existing, single-family home sales are forecast to total 416,800 units in 2022, a decline of 5.2 percent from 2021’s projected pace of 439,800.
• California’s median home price is forecast to rise 5.2 percent to $834,400 in 2022, following a projected 20.3 percent increase to $793,100 in 2021.
• Housing affordability is expected to drop to 23 percent next year from a projected 26 percent in 2021.

C.A.R.'s “2022 California Housing Market Forecast” assumes a 5.2 percent decrease in existing single-family home sales next year, to 416,800 units, down from the predicted 439,800 units in 2021. The forecast for 2021 is 6.8% greater than the pace of 411,900 houses sold in 2020. California's median house price is expected to climb 5.2 percent to $834,400 in 2022, from $659,400 in 2020. Demand and supply imbalances will keep prices rising, but higher interest rates and a partial adjustment of the sales mix will likely slow the price rise. The rise of remote working will help keep costs in control and prevent the statewide median price from increasing too quickly in 2022.

According to C.A.R.'s 2022 projection, the US gross domestic product would expand by 4.1 percent in 2022, after a predicted rise of 6.0 percent in 2021. With a predicted nonfarm job growth rate of 4.6 percent in 2022, up from 2.0 percent in 2021, California's unemployment rate will fall to 5.8 percent in 2022, down from 7.8 percent in 2021. In 2022, the average 30-year fixed mortgage rate will be 3.5 percent, up from 3.0 percent in 2021 and 3.1 percent in 2020, but still low by historical standards.

Let us look at the price trends recorded by Zillow over the past few years. Since Oct 2011, the California home values have appreciated by nearly 132.4% — Zillow Home Value Index. ZHVI is not the median price of homes that are sold in a month within a geographic region. It is calculated by taking all estimated home values for a given region and month (Also called Zestimates), taking a median of those values, applying some adjustments to account for seasonality or errors in individual home estimates.

It, therefore, represents the whole housing stock and not just the homes that list or sell in a given month. By this calculation, the current typical home value of homes in California is $708,936. It indicates that 50 percent of all housing stock in the area is worth more than $708,936 and 50 percent is worth less (adjusting for seasonal fluctuations and only includes the middle price tier of homes).

In Oct 2020, the typical value of homes in California was around $598,000. Home values have gone up 21.9% over the last twelve months. It can be said that California is currently the seller's real estate market which means that demand is exceeding the supply, giving sellers an advantage over buyers in price negotiations. There are fewer homes for sale than there are active buyers in the marketplace. Buyer demand remains robust, which has been pushing home prices up by a double-digit rate of appreciation.

Latest Weekly Trends & Forecast From California REALTORS®

CAR's latest weekly housing data for the week ending October 09, 2021, shows that assuming that the COVID situation improves further, the economy and housing market should continue to perform well in 2022. While statewide house sales are projected to decline slightly next year, our newest estimate indicates that housing demand will remain strong, with sales reaching their second-highest level in five years. While interest rates will remain historically low, the market will remain competitive in 2022. As the market continues to normalize, structural issues will resurface, and house prices will stay high.

According to the latest C.A.R. housing and economic projection published recently, supply limitations and rising house prices will slow California home sales in 2022, but they will still be the second-highest in five years. A 5.2 percent decrease in existing single-family house sales is predicted for 2022, down from 439,800 units in 2021. The 2021 number is up 6.8% from the 411,900 houses sold in 2020. The statewide median house price is expected to climb 5.2 percent to $834,400 in 2022, from $659,400 in 2020.

The C.A.R. Annual Housing Market Survey predicts that house sellers will net $322,500 in 2021, up 53.6% from last year. Sellers who had stayed in their property for five years or longer had an average net cash gain of $381,000, up 31.4% from 2020. In 2021, less than 1% of all house sellers made a net loss, far below the long-term average of 9.9% and the lowest amount since 2005.

As we near the end of the year, supply, demand, and house prices are all anticipated to cool. Indeed, closed sales fell to their lowest level since late February in the first full week of October, while new active listings fell to their lowest level since late January. REALTORS'® predictions for house prices have also been revised downward, with just 24.2 percent of our poll respondents last week believing prices will increase in the next week, down from a high of 73.7 percent at the end of April. If the market continues to trade in line with its seasonal trend, it is expected to moderate further but stay stable going ahead.

The percentage of California REALTORS® who expected listings and prices to rise was 23.1 percent and 24.2 percent respectively. Here's a rundown of the latest weekly market trends.

• All parties involved – buyers, sellers, and agents – agreed that home prices will likely remain on their upward trend in the short term.
• 24.2% (+21.8%) of California Realtors® feel prices will rise in the coming weeks.
• 21% (-16.5%) think that sales will grow in the coming weeks.
• An average of 694 daily closed transactions was reported in the past week, down 26.2% week-over-week.
• An average of 851 contracts was signed per day in the past week,  down 9.4% week-over-week.
• Seller's optimism continues to dip in the latest weekly trends.
• An average of 786 new listings per day was reported in the past week, which represents a decline of -11.4%.
• Only 23.1% (-8.9%) of California Realtors® think listings will be up next week.
• Interest rates always fluctuate, just as the real estate market does.
• The recent improvement in the pandemic situation and the shortage of labor availability has pushed rates upward recently.
• On Friday, the 10-year Treasury yield climbed 6 basis points to 1.6 percent, surpassing a level last seen on June 4.
• Despite the poor employment statistics, investors anticipate the Fed to keep tapering, which may lead to a rate hike before the end of the year.
• We don’t see huge changes ahead in the coming months.
• They could fluctuate as more economic data become available throughout the year but the average 30-year fixed-rate average will likely stay close to 3 percent in 2021.
• Home prices continued to grow solidly from last year.
• 49 counties tracked by the association reported a gain in median price on a year-over-year basis in August, as tight supply and heated market competition continued to put upward pressure on home prices.
• An ongoing shortage of supply is the main reason for price appreciation.
• With the cost of borrowing at historic lows, buying a home makes more sense than renting for many first-time buyers.
• For repeat buyers, there is an increasing desire for a larger second home.
• Affordability is at the Lowest Level Since Mid-2018, according to C.A.R.’s Traditional Housing Affordability Index (HAI).
• A highly competitive market fueled by low-interest rates and a tight supply of homes for sale pushed the state’s median home price nearly 34 percent higher than a year ago.
• The percentage of home buyers who could afford to purchase a median-priced, existing single-family home in California in the second quarter of 2021 dropped to 23 percent from 27 percent in the first quarter of 2021 and from 33 percent in the second quarter of 2020.
• A minimum annual income of $150,800 was needed to make monthly payments of $3,770, including principal, interest, and taxes on a 30-year fixed-rate mortgage at a 3.20 percent interest rate.
• Thirty-seven percent of home buyers were able to purchase the $585,000 median-priced condo or townhome. An annual income of $108,000 was required to make a monthly payment of $2,700.
• The C.A.R.’s 2020 Annual Housing Market Survey finds that 39 percent of REALTORS^® who responded said their buyers are opting for a bigger home.
• This trend is likely to continue in 2021 as well.
• 35 percent said buyers are opting for a property with more rooms.
• 37 percent said buyers are opting to live in a suburb rather than a city.
• 26 percent said buyers are opting to live in rural areas rather than cities or suburbs.

Impact of COVID-19 on The California Housing Market (Summary)

Before the coronavirus outbreak, the declining interest rates bolstered February home sales and prices in the California housing market. The no. of home sales in February went up 6.6 percent from the 395,700 level in January, marking the first time in three months that sales jumped above the 400,000 benchmarks. February also marked the eighth consecutive month of year-over-year sales increases, according to the CALIFORNIA ASSOCIATION OF REALTORS^®.

According to a United States Department of Commerce report, the median price nationwide for a home sold in February was $345,900, up 6.3 percent from January. As the coronavirus pandemic hit the country, the sales activity in the California housing market took a sharp decline. Many buyers backed out of purchase due to coronavirus concerns. Due to the Covid-19 outbreak, the new California home sales also began to drop from March onward. Here's the review of the California real estate market from March onward.

Impact of COVID-19

The immediate impact of the coronavirus pandemic on the California housing market was that realtors canceled their open houses and half of all agents reported a drop in buyer interest. A flash poll conducted by C.A.R. between March 14-16 found that 54% of realtors had buyers who backed out from buying a home because of the coronavirus, and about 45% had sellers who backed out from selling a property. The pandemic further impacted the buying or selling of a house as California issued a statewide ‘stay at home’ order on March 19 to slow the spread of the coronavirus.

All non-essential businesses were essentially shut down. The real estate industry and many businesses that support it have been deemed non-essential. Real estate transactions like home buying, title research, residential leasing, and renting were allowed to continue. So were things like building maintenance and cleaning. Home construction was typically allowed to continue, as well. This meant that people could continue to live in their apartments and call the property manager to get the plumbing fixed.

Home sales and purchases already begun could be completed. However, it became much more difficult to arrange open houses or take photos of a property for sale. Some realtors adapted by setting up virtual showings of properties, whether it was via cell phone video, high-resolution photos, or drone. However, photographers can’t travel to properties, while stagers and appraisers can’t travel to homes that owners want to sell.

This froze the housing market for the most part due to shelter-in-place orders. Financial services were considered essential; this included banks and mortgage lenders. Unfortunately, the shutdown of up to 80 percent of the country means many are afraid to take out a home loan even if they still have a job. That is why mortgage applications fell by 30 percent in the last quarter of March 2020 while unemployment applications hit a record three million.

The U.S. Initial Unemployment Insurance Claims are that over 40 million people have already lost their jobs.

As new coronavirus cases were detected in California and the ‘shelter-in-place’ mandate was extended, a sharp sales decline increased unsold inventory – leading to a balanced real estate market. The COVID-19 pandemic kept both buyers and sellers on the sidelines in the California housing market. Many potential sellers delayed putting their homes on the market, which led to fewer new listings. Some buyers were excited and decided not to enter the market due to their weak financial condition. California home sales experienced the worst month-to-month sales decline in more than four decades.

According to C.A.R, home sales dropped sharply in April from both the previous month and year as the housing market began to feel the full impact of the state’s stay-at-home order.

This was because of a decline in open houses and home showings that are impossible to hold in such conditions.  Existing, single-family home sales totaled 277,440 in April on a seasonally adjusted annualized rate, down 25.6 percent from March and down 30.1 percent from April 2019. Additionally, sales in escrow were also delayed by the closure or limited availability of all the essential services related to a home sale.

The statewide median price remained above the $600,000 benchmark for the second consecutive month in April, price growth showed clear signs of softening when compared to the past six months. The April statewide median price of $606,410 for existing single-family homes in the state dipped 1.0 percent from March, and the 0.6 percent gain was essentially flat from April 2019, when the median price was $603,030. The year-over-year price gain was substantially smaller than the six-month average gain of 7.8 percent recorded between October 2019 and March 2020.

California home sales fell to the lowest level since the Great Recession as the housing market suffered the full impact of the coronavirus pandemic in May, according to a June 16 release by CALIFORNIA ASSOCIATION OF REALTORS®. As housing demand in California fell sharply in May, home prices also took a dip. The median home price fell below last year’s price for the first time since February 2012 and broke the state’s 98-month year-over-year price gain streak.

All major regions dipped in sales by more than 35 percent from last year. The Bay Area and Central Coast dropped the most at -51.1 percent each. Southern California home sales dropped by -45.6 percent, and the Central Valley by -36.6 percent. Existing single-family home sales were down by 13.9 percent from April and down by 41.4 percent from May 2019. May’s statewide median home price was $588,070, down 3.0 percent from April and down 3.7 percent from May 2019. Year-to-date statewide home sales were down 12.9 percent in May.

Median prices continued to dip in May from last year in the Central Coast and the Bay Area but inched up slightly in the Central Valley region. The median home price was virtually unchanged in Southern California. The unsold inventory index jumped to 4.3 months in May from 3.4 months in April and was up from 3.2 months in May 2019. Total active listings continued to decline on an annual basis for the 11th consecutive month.

The 34 percent year-over-year decrease in listings was the biggest drop since March 2013. The median number of days it took to sell a California single-family home dipped to 17 days in May from 18 days in May 2019. C.A.R.’s statewide sales-price-to-list-price ratio was 99.7 percent in May 2020, up slightly from 99.3 in May 2019.

After the California real estate market suffered its worst month in 13 years, California’s Realtors and landlords saw a big rebound in June. The housing markets in Los Angeles, San Francisco, San Jose, San Diego, and Sacramento saw the biggest recovery. Home Sales were up 42.4 percent from May and down 12.8 percent from June 2019. The luxury market suffered the most with more than 50% drops in sales. Sales Price to List Price Ratio of 99.5% in June means homes are selling very close to their listing prices.

June’s statewide median home price was $626,170, up 6.5 percent from May and up 2.5 percent from June 2019. Throughout the state, single-family home prices rose 6.5% to $626, 170, or a rise of $38,000 from the previous month. Sales grew 42.5% from May. California condo prices rose 4.6% and month-to-month sales increased by 68.5%. Condo prices have risen 4.6% YoY while sales slumped 16.2%.

The return in the COVID-19 cases remains a concern across the nation and California, and it may hinder the housing market's recovery in the second half of 2020. Meanwhile, the lowest ever mortgage rates have been able to increase buyer activity, which in turn may help to sustain the rise in sales in the coming months.

After falling to the lowest level since the Great Recession, continued to improve in August as home sales climbed to their highest level in more than a decade. The median home price broke last month’s record and hit another high, according to the September 16 release by C.A.R.

Existing, single-family home sales totaled 465,400 in August on a seasonally adjusted annualized rate, up 6.3 percent from July and up 14.6 percent from August 2019. August’s statewide median home price was $706,900 up 6.1 percent from July and up 14.5 percent from August 2019. Year-to-date statewide home sales were down 6.8 percent in August.

The California housing market outperformed expectations in September, breaking a record high median price for the fourth straight month. Existing, single-family home sales totaled 489,590 in September on a seasonally adjusted annualized rate, up 5.2 percent from August and up 21.2 percent from September 2019.

September’s statewide median home price was $712,430 up 0.8 percent from August and up 17.6 percent from September 2019. Year-to-date statewide home sales were down 3.7 percent in September. The home price exceeded the $700,000 mark for the second consecutive month.

Existing, single-family home sales totaled 484,510 in October on a seasonally adjusted annualized rate, down 1.0 percent from September and up 19.9 percent from October 2019. October’s statewide median home price was $711,300 down 0.2 percent from September and up 17.5 percent from October 2019. Year-to-date statewide home sales were down 1.3 percent in October.

Existing, single-family home sales totaled 508,820 in November on a seasonally adjusted annualized rate, up 5.0 percent from October and up 26.3 percent from November 2019. November’s statewide median home price was $699,000 down 1.7 percent from October and up 18.5 percent from November 2019. Year-to-date statewide home sales were up 1.3 percent in November.

Existing, single-family home sales totaled 509,750 in December on a seasonally adjusted annualized rate, up 0.2 percent from November and up 28 percent from December 2019. December’s statewide median home price was $717,930, up 2.7 percent from November and up 16.8 percent from December 2019. For 2020 as a whole, sales of existing statewide homes were up 3.5 percent from last year.

Existing, single-family home sales totaled 484,730 in January 2021 on a seasonally adjusted annualized rate, down 4.9 percent from December and up 22.5 percent from January 2020. January’s statewide median home price was $699,890, down 2.5 percent from December and up 21.7 percent from January 2020.

Existing, single-family home sales totaled 462,720 in February 2021 on a seasonally adjusted annualized rate, down 4.5 percent from January and up 9.7 percent from February 2020. February’s statewide median home price was $699,000, down 0.1 percent from January and up 20.6 percent from February 2020, according to C.A.R.

Existing, single-family home sales totaled 446,410 in March 2021 on a seasonally adjusted annualized rate, down 3.5 percent from February and up 19.7 percent from March 2020. March’s statewide median home price was $758,990, up 8.6 percent from February and up 23.9 percent from March 2020. Year-to-date statewide home sales were up 17.1 percent in March.

Conclusion

The most important thing to remember is that it is a health crisis – not an economic one. This pattern differs from a standard economic recession, which is a situation in which economic activity falls for 6-18 months and then recovers more slowly. A wave of job losses nationwide will create many distressed home sellers in the California real estate market. Yet this is a buying opportunity for investors who have financing.

The slowdown in what is normally a busy season will cause some realtors to go out of business. Mortgage brokers and lenders will experience a boom in business since record low-interest rates cause a spike in mortgage refinances. We’ll also see a flurry of activity in the California real estate market as people pick up where they left off. For example, those who wanted to move before school starts in the fall aren’t going to wait another year to see what the housing market is going to do.

They’ll rush to showings and try to close on a property, as long as their financial situation is stable. We can expect the summer of 2021 to see record activity in the California housing market due to the standard spike in real estate transactions before the school year starts.

On top of this are the young graduates and couples that want to buy their own homes. Plus there will be long-term renters who recognize the opportunity that low mortgage rates represent, searching for homes once they can be pre-approved for a mortgage and visit properties.

There will be a slower economy for a while, but several ongoing trends aren’t going to reverse themselves. Millennials will want to move out of their parent's homes and into their own. We can’t say there will be a coronavirus-led baby boom, but many families having been stuck inside with their kids will decide they want a larger home, yard, or both.

We can talk about the many people who’ve moved out of California to other states. Yet the state continues to attract immigrants from around the world. And young native-born Americans flock here for high-paying jobs, as well. That isn’t going to change due to the virus. Tech giants expanding to Seattle or Portland haven’t relocated their development hubs out of Silicon Valley.

Furthermore, the demand for rentals in the California housing market remains strong. This is why we don’t expect to see a decline in monthly rents, though housing prices may fall significantly before shooting back up. A secondary effect of the coronavirus outbreak is that it has crimped supply chains around the world and slowed down construction.

This will drive up the value of both new and existing properties in the California housing market since the supply of new and redeveloped properties has been stifled. And there is certainly the possibility the California housing market will see bidding wars on the few available and desirable properties by people who have more margin thanks to historically low mortgage rates.

We can expect a few shifts in the California housing market long-term. Realtors will probably continue to utilize 3D virtual tours, using 360 cameras to capture images of every room in the house. This helps them sell the home 24x7x365, whether or not everyone is stuck at home.

While appraisers, stages, and construction crews can’t work remotely, we can expect far more back-office work in the real estate industry to be done remotely because that’s become commonplace. We can also expect online contract reviews and digital signatures to become the norm because it allows real estate transactions to move forward through some of the participants are at home.

Demand for housing was very strong before the coronavirus hit the U.S. This pandemic is not expected to last nearly as long as the United States subprime mortgage crisis, which was a nationwide financial crisis, occurring between 2007 and 2010.

The sharp sales drop in May was the steepest we’ve seen but there are encouraging signs that show the market is recovering and should continue to improve for the remainder of 2020.

Some of the realtors saw no decline in their businesses even during the peak of the pandemic. According to them, the real estate sector was active even in the pandemic. The way of operating business has changed. People are working from home. They are using applications like FaceTime to show buyers homes instead of traditional open houses.

Lenders experienced a surge in demand as opportunistic buyers move to take advantage of low mortgage rates. Brett Jennings, the founder of Real Estate Experts, writes, “our market is still thriving” in Santa Clara County, seeing only a few cancellations despite shelter-in-place conditions and the fact that “we have one of the highest counts of active COVID-19 cases in California.”

According to Dr. Svenja Gudell, the chief economist of Zillow Group, when they examined pandemic histories ranging from the 1918 flu epidemic to the 2003 SARS outbreak, they noted that economies “snapped back quickly once the epidemic was over.”

Residential real estate is likely to fare far better than the commercial real estate sector. Sometimes, you have to take advantage of these market disruptions to see that many investors will pump the brakes on investing out of fear and other illogical emotional reasons, while others see the opportunity of having access to more real estate inventory, possibly better pricing, and still historically low-interest rates.

---

References/Data Sources

• https://www.car.org/
• https://www.car.org/aboutus/mediacenter/newsreleases
• https://www.car.org/marketdata/data/countysalesactivity
• https://www.car.org/marketdata/marketforecast
• https://www.car.org/marketdata/marketminute
• https://www.car.org/marketdata/interactive/housingmarketoverview
• https://www.zillow.com/ca/home-values
• https://lao.ca.gov/LAOEconTax/Article/Detail/265
• https://sf.curbed.com/2020/3/23/21188781/sf-housing-market-coronavirus-covid-19
• https://www.ppic.org/publication/new-patterns-of-immigrant-settlement-in-california
• https://fox40.com/news/business/local-real-estate-market-slows-amid-covid-19-pandemic
• https://www.point2homes.com/news/us-real-estate-news/experts-california-real-estate-2020.html
• https://www.washingtonpost.com/business/2020/02/27/mortgage-rates-head-back-down-coronavirus-fears
• https://www.cnbc.com/2020/03/18/weekly-mortgage-applications-drop-over-8percent-as-interest-rates-jump.html
• https://www.usnews.com/news/business/articles/2020-03-25/business-fallout-companies-in-china-see-delays-in-reopening
• https://www.dallasnews.com/business/real-estate/2020/03/25/homeowners-who-cant-pay-their-mortgages-are-getting-help
• https://www.wfsb.com/news/businesses-considered-essential-under-stay-safe-stay-home-policy/article_53f8e0d0-6d17-11ea-a04d-57ecbb72c518.html