San Diego County Housing Report: Values Rising
June 27, 2023
What's your home worth?
Call George Lorimer at 619-846-1244 to discuss your home sale or purchase.
Despite the high mortgage rate environment eroding home affordability, home values in San Diego County have been on
the rise after bottoming in December.
Home Price Appreciation - The catastrophically low supply of available homes will continue to propel a rise in home values.
Plenty of housing naysayers have been calling for a severe market correction ever since home values skyrocketed higher after the initial COVID lockdowns from June 2020 through May 2022, two years of rapid appreciation. Then with mortgage rates climbing sharply from 3.25% in January of last year to 7.37% in October, the naysayers’ chorus grew much louder. Many anticipated a sharp decline in home values that rivaled the Great Recession. They can get quite emotional about their position. On the face of it, experiencing a swift rise in home values reminiscent of 2000 through 2005 and then the massive erosion in home affordability last year, it is understandable that some would conclude that prices would fall. And they did for seven months last year, but that all changed after they bottomed out in December.
Click here to get a full report
It is time to push the emotions aside and consider the facts, basic economic principles, and irrefutable data. According to the Freddie Mac Home Price Index, home values in the San Diego County region did not even drop during the initial COVID lockdown, yet appreciation slowed to a monthly increase of .2% in March and April of 2020. They then accelerated right where they left off in March and rose by 1% every month through November. In 2021, home values rose by 2% or more from February through June. This level had only been achieved since the turn of the century in April 2000, March through July 2002, February through May 2002, February through June 2004, and March through May 2013. Only 14 months out of 243 months before the pandemic. It occurred again from January through March 2022, eight times in total in just two years.
Values peaked in May 2022 and then dropped from June through December. With rapidly rising rates and affordability reaching record lows, they fell by 1% or more from June through November. This level had only been reached since the turn of the century from July 2007 through February 2009, 20 months straight.
Year-over-year home values are down 4%, but the focus should be on the current monthly trend. Home values turned positive in January and have continued rising ever since. They are not increasing at the torrid pace of 2020 through the first several months of 2022, but the trend is up. Why are home prices not plunging with high mortgage rates and severe affordability issues? It all boils down to a catastrophically low supply of available homes.
Last year values dropped even though the inventory was at low levels. It rose from 1,453 homes in January until it peaked at the start of August at 4,806 homes, a 231% rise. Yet, the 3-year average peak before COVID (2017 to 2019) was 7,354, an extra 2,548 homes. There were not many homes last year; nonetheless, values dropped as affordability continued to erode with rising rates. It was not a supply and demand issue but strictly a home affordability issue. Demand was substantially impacted, reaching lows last seen during the Great Recession. But back then, there was a glut of homes available to purchase, over four times 2022 levels. Weak demand was matched up against an overabundant supply. As a result, values plunged for nearly two years.
In 2023, the year started with 2,898 homes; only 2021 and 2022 were lower. The inventory bottomed in April at 2,025 and has added only 432 homes since, currently sitting at 2,457, its lowest end-of-June level since tracking began in 2012. Last year at this time, there were 4,140 homes, 68% more or an extra 1,683 available homes. The 3-year average before COVID was 6,823, an additional 4,366 homes or 178% higher than today. While demand remains at Great Recession levels, unlike last year, it is matched against a catastrophically low supply.
Today’s lack of supply and stabilized higher mortgage rate environment has resulted in an extremely hot real estate market that favors sellers in the negotiation process. For all homes priced below $1.5 million, the market is NUTS with an Expected Market Time (the number of days to sell all San Diego County listings at the current buying pace) of less than 40 days. Homes priced at or near their Fair Market Value are being inundated with buyer showings and receiving an avalanche of multiple offers within the first couple of weeks and often days. They are selling at or above their asking prices. Upon writing an offer, buyers quickly find that they are one of many, sometimes over ten offers on a home.
The inventory is about to hit its cyclical peak between July and August, not much time for the inventory to grow. After reaching a peak, the inventory will slowly and methodically decline through the end of the year. As a result, the pressure and trend for home values to rise on a monthly basis will continue at a slow pace. San Diego County home values are on the rise.
June 27, 2023
What's your home worth?
Call George Lorimer at 619-846-1244 to discuss your home sale or purchase.
Despite the high mortgage rate environment eroding home affordability, home values in San Diego County have been on
the rise after bottoming in December.
Home Price Appreciation - The catastrophically low supply of available homes will continue to propel a rise in home values.
Plenty of housing naysayers have been calling for a severe market correction ever since home values skyrocketed higher after the initial COVID lockdowns from June 2020 through May 2022, two years of rapid appreciation. Then with mortgage rates climbing sharply from 3.25% in January of last year to 7.37% in October, the naysayers’ chorus grew much louder. Many anticipated a sharp decline in home values that rivaled the Great Recession. They can get quite emotional about their position. On the face of it, experiencing a swift rise in home values reminiscent of 2000 through 2005 and then the massive erosion in home affordability last year, it is understandable that some would conclude that prices would fall. And they did for seven months last year, but that all changed after they bottomed out in December.
Click here to get a full report
It is time to push the emotions aside and consider the facts, basic economic principles, and irrefutable data. According to the Freddie Mac Home Price Index, home values in the San Diego County region did not even drop during the initial COVID lockdown, yet appreciation slowed to a monthly increase of .2% in March and April of 2020. They then accelerated right where they left off in March and rose by 1% every month through November. In 2021, home values rose by 2% or more from February through June. This level had only been achieved since the turn of the century in April 2000, March through July 2002, February through May 2002, February through June 2004, and March through May 2013. Only 14 months out of 243 months before the pandemic. It occurred again from January through March 2022, eight times in total in just two years.
Values peaked in May 2022 and then dropped from June through December. With rapidly rising rates and affordability reaching record lows, they fell by 1% or more from June through November. This level had only been reached since the turn of the century from July 2007 through February 2009, 20 months straight.
Year-over-year home values are down 4%, but the focus should be on the current monthly trend. Home values turned positive in January and have continued rising ever since. They are not increasing at the torrid pace of 2020 through the first several months of 2022, but the trend is up. Why are home prices not plunging with high mortgage rates and severe affordability issues? It all boils down to a catastrophically low supply of available homes.
Last year values dropped even though the inventory was at low levels. It rose from 1,453 homes in January until it peaked at the start of August at 4,806 homes, a 231% rise. Yet, the 3-year average peak before COVID (2017 to 2019) was 7,354, an extra 2,548 homes. There were not many homes last year; nonetheless, values dropped as affordability continued to erode with rising rates. It was not a supply and demand issue but strictly a home affordability issue. Demand was substantially impacted, reaching lows last seen during the Great Recession. But back then, there was a glut of homes available to purchase, over four times 2022 levels. Weak demand was matched up against an overabundant supply. As a result, values plunged for nearly two years.
In 2023, the year started with 2,898 homes; only 2021 and 2022 were lower. The inventory bottomed in April at 2,025 and has added only 432 homes since, currently sitting at 2,457, its lowest end-of-June level since tracking began in 2012. Last year at this time, there were 4,140 homes, 68% more or an extra 1,683 available homes. The 3-year average before COVID was 6,823, an additional 4,366 homes or 178% higher than today. While demand remains at Great Recession levels, unlike last year, it is matched against a catastrophically low supply.
Today’s lack of supply and stabilized higher mortgage rate environment has resulted in an extremely hot real estate market that favors sellers in the negotiation process. For all homes priced below $1.5 million, the market is NUTS with an Expected Market Time (the number of days to sell all San Diego County listings at the current buying pace) of less than 40 days. Homes priced at or near their Fair Market Value are being inundated with buyer showings and receiving an avalanche of multiple offers within the first couple of weeks and often days. They are selling at or above their asking prices. Upon writing an offer, buyers quickly find that they are one of many, sometimes over ten offers on a home.
The inventory is about to hit its cyclical peak between July and August, not much time for the inventory to grow. After reaching a peak, the inventory will slowly and methodically decline through the end of the year. As a result, the pressure and trend for home values to rise on a monthly basis will continue at a slow pace. San Diego County home values are on the rise.
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San Diego Market Statistics
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