The College Area year-to-date median home has increased almost 9% to $570,000 compared to this$570,000 compared to this
time last year but the closed sales (year- to-date) has decreased 9%. The months of inventory has actually increased slightly to around 2.5 months (a fairly low number historically). One issue is that both interest rates and property prices have increased significantly, decreasing the affordability index, and decreasing the pool of buyers that can actually afford a property. So buyer demand has thus decreased.
The U.S. economy in the second quarter grew at its fastest pace in almost four years, but housing activity played a decreased role in the economic expansion. New home construction and existing-home sales declined last quarter, as homebuilder hurdles, decreased inventory, and increasing price gains created some difficulty for the housing market.
Looking ahead over the next year, it is expected that current market conditions are expected to remain the same, with lower inventory available and steady demand continuing. In other parts of the country, new home construction has picked up over the past two years but here in San Diego our new home construction has remained depressed due to heavy regulation, the very high cost of building, and the lack of available land. I would not expect home prices to continue to increase at a 9% rate but I would expect prices to hold steady or slightly increase. Prices have run up so fast over the past several years that prices may have gotten slightly ahead of themselves.
In a Freddie Mac August, 2018 report, Chief Economist Sam Khater stated. “These (home sales) challenges were predominantly seen in expensive markets out West, where demand and sales are beginning to dampen because of weakening affordability.” However, the surging economy and labor markets cannot be ignored.
San Diego companies are expanding, household incomes are increasing, and the demand for residential real estate locally is clearly expected to stay steady. Workers need homes.
David M. Blitzer, a Managing Director and Chairman at S&P Dow Jones states “… even as home prices keep climbing, we are seeing signs that growth is easing in the housing market. Sales of both new and existing homes are roughly flat over the last six months amidst news stories of an increase in the number of homes for sale in some markets. The west still leads the rise in home prices with Las Vegas displacing Seattle as the market with the fastest price increase.”
We have been in a strong seller’s market but data suggests a slight tilt back towards buyers with some economists last week suggesting a market closer to equilibrium in the coming years.
Zillow (Senior Economist Aaron Terrazas) recently stated “For the past several years, home sellers held all the cards at the negotiating table, fielding multiple offers while buyers faced stiff competition and a fast-moving market. Conditions are starting to show signs of easing up, but the effects of years of limited construction still linger. Inventory is still falling on an annual basis, and home values are growing well above their historic pace.”
If you are currently considering buying or selling property in San Diego County, give me acall to set up a short, no pressure, no obligation meeting to discuss your issues and options to move forward.