San Diego Real Estate Market And Investment Overview 2021

Home prices & sales are rising across the Southern California housing market and San Diego is no exception. The Southern California median sales price hit an all-time high in September of last year but since then we have seen a month-over-month decline. However, the annual price growth is still in double-digits.

According to a recent report released by C.A.R., the Southern California region remained strong in January 2021 by recording a year-over-year sales growth of 13.5%. As compared to the previous month, the sales declined by -29.8% for the entire Southern California housing market. It looks consistent as a seasonal trend when prices and sales tend to dip in the winter season and then rebound in spring.

The median price stayed at $650,000, which is a gain of 14.4% over last year and 0% over December. The same trend can be seen for San Diego County. The recent market reports suggest San Diego County home prices have stalled last as far as month-over-month growth is concerned.

But many experts say the factors that have pushed up prices in 2020 will likely continue in 2021 well, especially low inventory. They feel that a shortage of houisng supply, a federal stimulus deal, and the coming spring buying season will likely push the home prices up considerably (check the forecast given below).

Mortgage interest rates are so low that buyers can afford more than they thought. The housing demand in San Diego has also been driven by the desire for additional space as people spend more time at home. Inventory is low, prices are rising, and pent-up demand alongside low mortgage rates has the San Diego housing market flooded with homebuyers.

Southern California Housing Market Trends 2021

Here's how individual counties of Southern California are setting or matching price records as compared to January 2020 (Data released by C.A.R.). San Bernardino County led the pack with the highest sales growth of 17.0% and price growth of 20.0% over last year. Still, it is the most affordable with a median price of $390,000 for existing single-family homes. In all the counties, the pace of sales and price growth has reduced to a large extent since December.

• In Los Angeles County, the median sales price rose 13% from a year earlier to $697,660, while sales climbed by 15.2%.
• In Orange County, the median sales price rose 13.6% to $971,000, while sales climbed by 14.3%.
• In Riverside County, the median sales price rose 19.3% to $495,500, while sales climbed by 12.6%.
• In San Bernardino County, the median sales price rose 20% to $$390,000, while sales climbed by 17%.
• In San Diego County, the median sales price rose 10.6% to $730,000, while sales climbed by 9.9%.
• In Ventura County, the median sales price rose 17.6% to $776,000, while sales climbed by 6.9%.

San Diego Housing Market Trends 2021

Conforming with the seasonal real estate trends, San Diego County home prices stayed at $730,000, which is a gain of 10.6% over last year and 0% over December, according to C.A.R.'s January 2021 report. The report also shows that home sales fell by 31.7% MTM, yet are still up 9.9% over last year.

Condo's median price was at $475,500 with a drop of -2.0% MTM. But this price point is up 9.3% from one year ago. San Deigo's real estate market saw a sharp increase in the median price as compared to last year. Here are the housing metrics for January 2021 and year-over-year percentage changes.

Months Supply of Inventory is very tight, currently holding at 1.8 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. That sort of supply doesn’t favor buyers or sellers.

In the Greater San Diego region, January started strong for the housing market, with healthy buyer demand and strong market fundamentals, according to the Greater San Diego Association of REALTORS®. A robust increase in housing starts in December points to an active year for new construction, but higher material costs, especially lumber, and a limited supply of buildable lots will temper the number of new units With inventory remaining constrained in most market segments, sellers continue to benefit from the tight market conditions. The percentage change is shown as year-over-year for November 2020.

• Closed Sales increased 1.2 percent for Detached homes and 11.1 percent for Attached homes.
• Pending Sales increased 5.4 percent for Detached homes and 18.0 percent for Attached homes.
• Inventory decreased 61.1 percent for Detached homes and 48.7 percent for Attached homes.
• The Median Sales Price was up 11.9 percent to $744,000 for Detached homes and 11.5 percent to $485,000 for Attached homes.
• Days on Market decreased 40.9 percent for Detached homes and 23.1 percent for Attached homes.
• Supply decreased 63.2 percent for Detached homes and 52.6 percent for Attached homes.

San Diego Housing Market Forecast 2021 (Updated)

What are the San Diego real estate market predictions for 2021? Let us look at the price trends recorded by Zillow (a real estate database company) over the past few years. Since 2012, the median home price in San Diego has appreciated by nearly 96%, from $378,000 to $741,195 — ZILLOW HOME VALUE INDEX). The annual pace of home appreciation is 5%, lower than in recent years when the annual rise averaged around 10%.

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 Zillow Buyer-Seller Index (BSI) currently lists the current market temperature as “hot” in San Diego – which is a sign of a strong seller’s real estate market. Similar growth has been recorded by NeighborhoodScout.com as their data also shows that in the past ten years, San Diego real estate appreciated by 74%. This amounts to an annual real estate appreciation of 5.7%, 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 4%. In the latest quarter, the appreciation rate has been 1.8%, which annualizes to a rate of 7.4%. This figure is on the lower side as compared to Zillow's forecast given below.

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. The typical value of homes in San Diego-Carlsbad Metro is $689,361.

Here is the latest housing forecast for San Diego, San Diego MSA, and San Diego County until September of 2021. 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 1.6 months if no homes are listed. 

Low mortgage rates will bolster the home buying market and continue pushing up home price growth. For sellers, now is the opportune time to put their San Diego home up for sale. The pricing of homes is trending higher and is more attractive for sellers in the current phase.

• San Diego-Carlsbad Metro home values have gone up 13.5% over the past year and Zillow predicts they will rise 12.6% in the next twelve months.
• San Diego home values have gone up 10.9% over the past year and the latest forecast is that they will continue to increase in the next twelve months.
• San Diego County home values have gone up 13.5% over the past year and will continue to increase in the next twelve months.

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

Here is another short and crisp San Diego housing market forecast by “LittleBigHomes” for the 3 years ending with the 3rd Quarter of 2021. They predict that the probability of rising home prices in San Diego is 77% during this period. If this price forecast is correct, the San Diego-Carlsbad Metro home values will be higher in the 3rd Quarter of 2021 than they were in the 3rd Quarter of 2018.

The historical change in home prices for San Diego-Carlsbad, CA is shown below for the three-time period. The San Diego Home Price Index has increased for the last 25 consecutive quarters. The highest annual change in the value of houses in the San Diego Real Estate Market was 32% in the twelve months ended with the 3rd Quarter of 2004.

The worst annual change in home values in the San Diego Market was -20% in the twelve months ended with the 3rd Quarter of 2008. The highest growth in home values in the San Diego Real Estate Market over three years was 88% in the three years ended with the 3rd Quarter of 1979. The worst performance over three years in the San Diego Market was -32% in the three years ended with the 3rd Quarter of 2009.

Due to the COVID-19 response, the industry is adapting to the current environment by conducting business using technologies such as virtual showings and e-signing to help buyers and sellers with their housing needs in the face of these challenges. Sellers, brokers, and homebuyers seem to be adjusting to restrictions imposed on the real estate industry because of the coronavirus pandemic.

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. In January 2021, the Sales-to-List Price Ratio was approximately 100%, which means there is not much price gap between what sellers are offering and what buyers are buying.

The decrease in the number of active listings also indicates that inventory will 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 100%. 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. In fact, 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 at their lowest and the positive forecast for the next twelve months nearly guarantees appreciation. If they buy a house now, they could aim for a good ROI in the summer of 2021.

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.

Impact of COVID-19 on The San Diego Housing Market

Let’s discuss the impact of COVID-19 on the San Diego housing market in 2020. 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 types of housing that are 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.

In the past ten years, the average annual home appreciation rate has been around 5 to 6%. This puts San Diego in the top 10% nationally for real estate appreciation. The San Diego real estate appreciation rate in the last quarter was around 1.22%, which amounts to an annual rate of 4.97%, according to Neighborhoodscout.com. Housing prices have been growing at a moderate speed since last year. Rents in San Deigo are also rising year-over-year. They rose by 4% as compared to the previous year. The mortgage rates are continuing low and the number of renters is increasing.

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.

Impact of COVID-19 on The San Diego Housing Market

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 data has already been discussed above***

San Diego Real Estate Foreclosure Trends

Here are some foreclosure statistics of the San Diego real estate market. The foreclosure rate in San Diego County is below the national and California average. There were 2,744 foreclosure filings in 2019 in San Diego County, said Attom Data Solutions, which includes default notices, scheduled auctions, and bank repossessions.

That’s down from 3,390 in 2018 and 4,025 in 2017. It is the lowest number of foreclosure filings for San Diego County in more than a decade, and a sharp contrast to the 49,125 foreclosure filings in 2009.

Real estate research firm Black Knight said the foreclosure rate in San Diego County hit a 14-year low in November 2019, below the national and California averages. Around 0.125 percent of county mortgages were in active foreclosure in November, compared to the 0.160 percent California average and the 0.469 percent national average.

Back in September 2020, there were 246 properties in San Diego, CA that were in some stage of foreclosure (default, auction, or bank-owned) while the number of homes listed for sale on RealtyTrac was 1,656. The number of properties that received a foreclosure filing in San Diego, CA was 25% lower than the previous month and 80% lower than the same time last year.

NEW FORECLOSURE FILINGS FOR SAN DIEGO, CA

CURRENT FORECLOSURE RATES FOR SAN DIEGO, CA

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 2020.

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.

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. 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, too, 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 March 2, 2021, the average rent for a 1-bedroom apartment in San Diego, CA is currently $1,828. This is a 4% increase compared to the previous year.

• Two-bedroom apartment rents average $2,400 (a 3% increase from last year).
• Three-bedroom apartment rents average $3,340 (a 5% increase from last year).
• Studio apartment rents average $1,595 (a 9% 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. A bad cash flow, on the other hand, 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 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 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.

10 Highest Appreciating San Diego Neighborhoods Since 2000 (List by Neighborhoodscout.com)

1. Main St / S 32nd St
2. National Ave / Sampson St
3. Ocean View Blvd / S 45th St
4. S 32nd St / National Ave
5. S 45th St / Logan Ave
6. Guadalcanal Ave / Henderson Ave
7. Park Blvd / Presidents Way
8. Near Harbor Island Dr
9. Fairmount Ave / Polk Ave
10. Ocean View Blvd / S 38th St

The cheapest or most affordable neighborhoods to rent in San Diego are Alta Vista, where the average rent goes for $975/month, Broadway Heights, where renters pay $975/mo on average, Emerald Hills, where the average rent goes for $975/mo, City Heights East, where renters pay $975/mo on average $1,383, Darnall with an average rent of $1,439, and Rolando, where the average rent price is 1,484.

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