As summer heat starts to roll into San Diego, real estate is (no surprise) also a hot commodity. Home prices in San Diego have been increasing for several years, and prices have risen 8% in the last year alone. They continue to rise in many areas during this busy summer season.
Real estate booms can usually be attributed to a combination of factors – already high prices in an area, a strong local economy, and other factors such as lack of inventory (which we definitely have), demand for housing, a tough rental market, as well as other economic factors (in the current economy think trade wars and other administrative issues).
In San Diego County so far in 2018 job growth is 2%, while population growth is also 2%. The price to rent ratio is also very high, at 26 this is calculated as the ratio of home prices to annual rental rates. For example, where a home worth $200,000 could rent for $1000 a month, the price-rent ratio is 16.67. The formula used is $200,000 ÷ (12 x $1,000). The average price to rent ratio in the top 25 US cities (including San Diego) is 25, so San Diego is slightly higher than average.
While it seems high prices are hanging around, at least for now, it is interesting to note that many on-market homes are also dropping prices. In the last 30 days alone there have been 250 price changes in the city of Carlsbad alone. 183 homes closed escrow during that time. Those homes that are in desirable locations, with desirable floorplans and amenities, and are priced well tend to sell more quickly.
In my personal opinion I do not think that the price increase phenomenon will continue for long. If you are thinking of selling now is a great time. If you are thinking of buying property you need to weigh your options – buy now with high prices or wait to see when prices will drop. Of course buyers also need to consider that mortgage rates will undoubtedly rise several more times this year, and they also need to pencil out the costs of buying vs. renting. In many cases it is less expensive to own instead of renting, plus there is no worry that a landlord may decide to sell down the road.