If you’re keen to invest in the San Diego real estate market in 2020 you must read till the end. Affordability has become an issue for many would-be home buyers 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. According to a new report by Zillow, San Diego is expected to be California’s hottest housing market in 2020.
However, nearly 29 percent of those surveyed said they believe San Diego home values will fall in 2020. During the 20-year period 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 is home to roughly one and a half million 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., too. 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 the California’s jobs recovery, which is a good news for San Diego’s housing industry.
San Diego housing market 2020 remains one of the hottest in the nation (ranked 10th by Zillow). Rents are predicted to rise 8.4% and properties are forecast to rise 4.7%, so investing in San Diego real estate in 2019 seem to be the right investment decision. Is it going to be one of the hottest real estate markets for investors in 2020? The San Diego real estate appreciation rate in the last quarter was around 0.95%.
However, it is quite unclear whether it would remain steady or not. Looking at the positive forecast, the annual appreciation rate is predicted to be between 3.8 to 4.5%. You can either choose to invest in your future, or market your home to potential buyers. Let’s find out more about it. Please note that there are many variables that can potentially impact the value of a home in San Diego (or any other market) and some of these variables are impossible to predict in advance.
San Diego Real Estate Market Forecast 2020
What are the San Diego real estate market predictions for 2020? Let us look at the price trends recorded by Zillow over the past few years. Since 2015, the median home price in San Diego have appreciated by 32.8% from $491,000 to $652,000. Last year saw was the seventh consecutive year of home price gains, prices increased by only 3.9%. Despite a cooling trend, San Diego is expected to be California’s hottest housing market in 2020, according to Zillow. The latest San Diego real estate market forecast is that home prices will increase by 5% in the next twelve months.
The latest real estate data from Zillow shows that the current median home value in San Diego is $652,175. $652,175 is currently a seller’s real estate market – which means that the demand from buyers is exceeding the current supply of homes for sale. Pricing of homes is trending higher and is more attractive for sellers in the current phase.
Here is the San Diego, CA real estate price appreciation graph by Zillow. It shows us the current home price appreciation forecast of 5% till Jan 2021.
The median list price per square foot in San Diego is $487, which is higher than the San Diego-Carlsbad Metro average of $390. Zillow reports that 12.6% of the listings in San Diego had a price cut in Jan 2020, which is a good thing for buyers. The median price of current listings in San Diego is $699,900 and the median price of homes that have been sold is $619,700. The sale to list price ratio is 88.44%. The median rent price in San Diego is $2,750, which is higher than the San Diego-Carlsbad Metro median of $2,700.
The shortage of supply and increase in the demand for housing will push the prices higher. The mortgage rates are continuing low and the umber of renters are increasing. San Diego detached home prices are up $300,000 in the last 4.5 years. San Diego real estate forecast shows big rent increases and strong home price growth. Since home building takes time especially in a heavily regulated environment, there’s little chance of diminished demand.
The forecast for home sales in San Diego in the years following 2018 is more of the same. Higher interest rates and economic uncertainty will continue to hold back sales volume further in 2019, with volume continuing to decrease well into 2020 when the next recession is forecasted to arrive. After volume and prices bottom in 2020-2021, homebuyers will return in greater numbers to push the housing market to its next boom, expected in 2022-2023.
San Diego Housing Market Forecast 2020 – 2021
Here is a short and crisp San Diego housing market forecast for the 3 years ending with the 3rd Quarter of 2021. The accuracy of this forecast for San Diego is 77% and it is predicting a positive trend. The LittleBigHomes.com estimates that the probability for rising home prices in San Diego is 77% during this period. If this price forecast is correct, the San Diego home values will be higher in the 3rd Quarter of 2021 than they were in the 3rd Quarter of 2018.
Check this page each quarter for updates to the San Diego Housing Market Forecast.
San Diego Housing Market Trends
We shall now discuss some of the most recent housing trends in the San Diego area and compare it with past couple of years. We shall mainly discuss about median home prices, inventory, economy, growth and neighborhoods, which will help you understand the way the local real estate market moves in this region. San Diego has been one of the hottest real estate markets in the country for many years.
Trulia has currently 1974 resale and new homes for sale in San Diego, CA including open houses, and homes in the pre-foreclosure, auction, or bank-owned stages of the foreclosure process. The median sale price in San Diego is $621,000. Homes are selling for about $445/sqft.
Following the housing market decline in 2007, single family rental properties became favorable options for investors, saving in construction or refurbishment prices. The quick turnaround for an owner to rent out their property means cash flow is almost immediate. Single family rental homes have grown up to 30% within the last three years. Almost all the housing demand in the US in recent years has been filled by single family rental units.
As per the real estate company called Neigborhoodscout.com, the median house price in San Diego is $607,071, which indicates that home prices in San Diego are well above the national average for all cities and towns in the United States. 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, row houses 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 2002-2004 numbers. The next peak in single family residential construction will likely begin around 2021 but it is highly unlikely to return to the frenzied mortgage-driven numbers seen during the Millennium Boom.
Currently, there are 869 single family homes for sale in San Diego, CA on Zillow. Additionally, there are 840 single family homes for rent in San Diego, CA. Under potential listings, there are about 5 Foreclosed and 340 Pre-Foreclosure homes. These are the delinquent properties that may be coming to the market soon but are not yet found on a multiple listing service (MLS).
In the past month, 973 homes have been sold in San Diego, CA on Redfin.com. In addition to houses in San Diego, there were also 1264 condos, 253 townhouses, and 147 multi-family units for sale in San Diego last month. The median listing price is around $725,000. According their statistics, the San Diego housing market is very competitive. Homes in San Diego receive 2 offers on average and sell in around 30 days.
The average sale price of a home in San Diego was $609K last month, up 4.3% since last year. The average sale price per square foot in San Diego is $447, up 7.5% since last year. A hot listing in San Diego can sell for around list price and go pending in around 10 days.
Here is the latest San Diego housing market data for the month of Jan 2020 from Redfin.com. The sale to list price ratio shows us that it was a trending more like a seller’s real estate market in the past month.
San Diego Real Estate Market Trends |
|
| Median List Price | $725,000 |
| Avg. Sale / List | 98.6% |
| Median List $/Sq Ft | $498 |
| Median Sale Price | $609,000 |
| Median Sale $/Sq Ft | $447 |
Analyzing real estate data from multiple sources gives us a much broader perspective of the direction in which a market is moving. There are currently 3477 homes for sale in San Diego on Realtor.com. The asking price of single family homes can start from $132,000 and can go up to $37M for a luxury property located in Northern San Diego neighborhood in the city of La Jolla, CA.
Northern San Diego is a popular neighborhood with the median price of $1.10M. Coronado has a median listing price of $1.9M, making it the most expensive neighborhood in the city of San Diego. City Heights is the most affordable neighborhood, with a median listing price of $437K.
San Diego has a mixture of owner-occupied and renter-occupied housing. There are currently 1994 rental properties in San Diego and their rent prices range from $545 to $829K per month. The median rent price in San Diego is $2,690. According to Realtor.com, 367 homes were newly listed on the market within the last week.
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. There are 140 new construction single family homes for sale in San Diego within a price range of $370,000 to $12.5M. You can find affordable new construction homes in Southern San Diego neighborhood. This neighborhood has a median price of $499,000.
According to their data, in January 2020, the San Diego housing market was a balanced market, which means there was a healthy balance of buyers and sellers in the market. If a region’s housing market is balanced it means that there is enough demand from buyers to equal the supply from sellers. It also means that the market is not very competitive. Another bit of good news for home buyers planning to enter the market in 2020 is that housing inventory has risen over the past year. Ideally a buyer would prefer a sale to asking price ratio that’s closer to 90%.
Despite being a balanced real estate market, the sellers have managed to hold good leverage in these negotiations in the past month. On an average, they could sell homes for 98.96% of the asking price. A seller would always prefer scenarios which can yield a ratio of 100% or higher.
In January 2020, the median list price of homes in San Diego, CA was $679K, trending up 4.5% year-over-year. The median listing price per square foot was $476. The median sale price was $609.5K. Months of supply is a factor that determines how long it would take for all listed homes on the market to sell. In a healthy, balanced market, it would take about six months for the supply to dwindle to zero.
In terms of months of supply, the San Diego market can tip to favor sellers if the supply drops to below six months of inventory. As per Zillow’s forecast, the prices may rise by 5% in the next 12 months. That can happen because when inventory drops, buyers start competing and enter into a bidding wars. The homes move quickly on the market.
The median list price in San Diego is $775,000 on Movoto.com. The median list price in San Diego went up 3% from January to February. San Diego’s home resale inventories is 1,365, which decreased 5 percent since January 2020. The median list price per square foot in San Diego is $523.
As you can see in the graph, the median price per sq ft in San Diego rose to its peak value in Dec 2019, when it was $505. In January 2020 it was $503. Distressed properties such as foreclosures and short sales remained the same as a percentage of the total market in February.
San Diego is a moderately walkable city in San Diego County with a population of approximately 1,305,700 people. If you are looking to invest in the San Diego real estate, you should that three most important factors when buying a real estate anywhere are location, location, and location. Location creates desirability. Desirability brings demand. There should be a natural and upcoming high demand for rental properties. Demand would raise the price of your San Diego investment real estate and you should be able flip it for a lump sum profit.
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. Some of the popular neighborhoods in 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.
Here is a snapshot that shows the median home values in the some of the popular neighborhoods of San Diego.
San Diego, CA Foreclosures And Bank Owned Homes Statistics
As per the San Diego foreclosure data by Zillow, in San Diego 0.3 homes are foreclosed (per 10,000). This is lower than the San Diego-Carlsbad Metro value of 0.5 and also lower than the national value of 1.2. The percent of delinquent mortgages in San Diego is 0.4%, which is lower than the national value of 1.1%.
With U.S. home values having fallen by more than 20% nationally from their peak in 2007 until their trough in late 2011, many homeowners are now underwater on their mortgages, meaning they owe more than their home is worth. The percent of San Diego homeowners underwater on their mortgage is 5.0%, which is lower than San Diego-Carlsbad Metro at 5.0%.
| Total No. of Foreclosures in San Diego | 484 (RealtyTrac) |
| Homes for Sale in San Diego | 854 |
| Recently Sold | 8077 |
| Median List Price | $615,000 (2% drop vs Dec 2018) |
There are currently 484 properties in San Diego, CA that are in some stage of foreclosure (default, auction or bank owned) while the number of homes listed for sale on RealtyTrac is 854. In January 2020, the number of properties that received a foreclosure filing in San Diego, CA was 42% higher than the previous month and 14% higher than the same time last year.
In San Diego, the zip code with the highest foreclosure rate is 92121, where 1 in every 946 housing units is foreclosed. 92105 zip code has the lowest foreclosure rate, where 1 in every 1621 housing units becomes delinquent.
Is San Diego a Good Market For Real Estate Investment?
Now that you know where San Diego is, you probably want to know why we’re recommending it to real estate investors. Investing in real estate is touted as a great way to become wealthy. Should you invest in the San Diego rental real estate? Many real estate investors have asked themselves if buying an investment property in San Diego is good investment? You need to drill deeper into local trends if you want to know what the market holds for the real estate investors and buyers in 2020.
If you are looking to make a profit, you don’t want to buy the most expensive property on the San Diego real estate market and expect to make a good profit on rents. Perhaps you are looking for a slightly different hold-over, an investment property in San Diego that you might move into or sell at retirement in the future. Either way, knowing your profit potential and purpose is the first thing to consider.
Let’s look at the state of the San Diego real estate market and the factors driving the property market short and long term.
1. 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.
2. Home Prices in San Diego Haven’t Been This Great a Deal in Years
The San Diego housing market is cooling. Home price appreciation fell below 5%, and home prices in some areas are actually declining due to decreasing demand. This is definitely 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.
3. New Construction of Homes in San Diego 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 has been faster growth in the construction of multi-family housing in the San Diego real estate market, but that is also below historic rates.
4. Rental Rates in San Diego Are Amazing
The median rental 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 are 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.
5. San Diego Is More Landlord Friendly
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.
6. The Rental Population Is Massive
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.
7. San Diego Is a Great Place for Short Term Rentals
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 was 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.
8. The Large Military Market Sustains the San Diego Rental Market
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.
9. The Diverse Student Market Feeds the San Diego Rental Market
San Diego is a major metropolitan area, and it is home to a number of 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 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.
10. Supply Is Literally Constrained
San Diego shares a number of 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 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.
Investing in San Diego Real Estate or Not: The Conclusion
Maybe you have done a bit of real estate investing in San Diego, CA 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. If you’re going to invest in California, it needs to be in San Diego.
A 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 a good San Diego real estate investment opportunity would be a key to your success. If you invest wisely in the San Diego real estate, you could secure your future.
As with any real estate purchase, act wisely. Evaluate the specifics of the San Diego housing market at the time you intend to purchase. Hiring a local property management company can help in finding tenants for your investment property in San Diego. If it is your first time to invest in San Diego real estate, then you would have to be aware of common beginner’s mistakes. Beginners would usually follow the media, buy a property and wait for its value to increase. This could be risky. Real estate investing requires research. We recommend doing your own research or hiring a real estate investment specialist for guidance.
Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. If housing supply meets housing demand, real estate investors should not miss the opportunity since entry prices of homes remain affordable. 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 area, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing and interest rates.
NORADA REAL ESTATE INVESTMENTS strives to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in the U.S. growth markets. We can help you succeed by minimizing risk and maximizing profitability.
The aim of this article was to educate investors who are keen to invest in San Diego real estate in 2020. Purchasing an investment property requires a lot of studies, planning, and budgeting. Not all deals are solid investments. We always recommend to do your own research and take help of a real estate investment counselor.
Other Good 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 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 of 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 the 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, you could buy now and hold until it sells. If that doesn’t happen, you could still turn it into 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.
*Remember, caveat emptor still applies when buying a property anywhere. 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, the Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US.
References:
General stats
http://worldpopulationreview.com/us-cities/san-diego-population
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
https://www.mashvisor.com/blog/san-diego-real-estate-good-investment-strategy
Landlord friendly
https://www.sandiegouniontribune.com/business/real-estate/sd-fi-rent-control-20180703-story.html
Rental market among the most expensive
http://worldpopulationreview.com/us-cities/san-diego-population
https://www.mashvisor.com/blog/san-diego-real-estate-good-investment-strategy
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
Mountains, Geography
https://www.sandiego.org/articles/east-county/san-diego-east-mountains.aspx
Market Data, Trends and Forecasts for 2020
https://www.zillow.com/SanDiego-ca/home-values
https://www.realtor.com/realestateandhomes-search/San-Diego_CA/overview
https://www.realtytrac.com/statsandtrends/ca/san-diego-county/san-diego
https://www.sandiegorealestatehunter.com/blog/san-diego-real-estate-market-forecast
https://gordcollins.com/real-estate/san-diego-housing-forecast
http://www.homebuyinginstitute.com/news/san-diego-more-moderate-forecast https://www.zillow.com/research/2020-hot-markets-south-26293/
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