It doesn’t take a genius to understand San Diego’s popularity. The abundance of heat, sunshine, and quality job opportunities all contribute to a much sought after lifestyle. Increasing immigration, more military spending, and proximity to Mexico and the Asian block countries positions San Diego perfectly for considerable housing demand and extremely high home prices. Not surprisingly, the cost of living is rising, and it means some workers and businesses may need to migrate to cheaper cities. Labor shortages, rising mortgage rates, and higher lumber costs are looming, which all contribute to house prices rising, leading to fewer resale houses available. The housing problem has been brewing for 7+ years, and it’s been particularly challenging in California. Yet for capable real estate investment people, the San Diego real estate market forecast for 2018 is a golden opportunity.
Great time to sell: real estate market forecast for San Diego in 2018
It’s hard not to forecast San Diego as a great real estate market from 2018 straight through 2020—if you can find anyone willing to sell. San Diego is an exciting place to live and invest in. It’s largely younger US buyers and foreign buyers that are eyeing property there. As such, while many experts call for moderate price increases, the stats suggest higher San Diego home prices and decreased availability. For rental property investors who want to capitalize on the severe housing and rental property shortage currently impacting San Diego, now is the perfect time to sell. Property owners near the I5 with waterfront views in La Jolla, Del Mar, Claremont, Solana Beach, and Encinitas are particularly well-positioned to make a killing.
While investors could hang onto their homes for another 20%, if enough San Diegans take this approach, the consequences could be very serious. There’s likely not going to be a big selloff anytime soon so price rises could elevate more. Some are hoping governments offer incentives for home sellers to let go of their properties sooner. San Diego housing prices dipped during the recession but resumed their rise and passed into record territory in 2017: the average home price in October was $529,750, while its all-time peak of $545,000 was reached in June.
San Diego real estate market forecast 2018: lower-priced properties to see the greatest increase
Lower priced properties in San Diego are in a separate tier altogether—and one more likely to see huge price growth in 2018. The 2007 real estate crash saw big drops in luxury home prices in San Diego and this time around, some are wondering: if the current situation turns into a San Diego housing bubble as part of a larger US housing crash, will foreign investors vacate fast? But many experts believe that California and San Diego are pretty resilient and that they will remain among the most attractive destinations for foreign money.
Lack of housing development, political resistance to growth pose problems
Anyone looking into the San Diego real estate market forecast for 2018 quickly understands that lack of housing development and simultaneous urban intensification are among the city’s weak points. Politicians may also be attempting slow growth in the area, at least partially in response to an anti-growth sentiment among the population. But those offering resistance are under pressure to stop slowing the flowering potential of San Diego’s incredible real estate fortune. Zoning changes, emphasis on townhomes, and reduced regulations would likely speed up construction of new developments. Indeed, solutions for the future may include more streamlined permitting processes, a change in parking requirements, and a greater mix of housing types.
Recovery from recession
San Diego continues its steady recovery from the 2008 recession and financial crisis. But while jobs and income continue to grow, residential construction continues to falter. So far, multi-family construction has experienced a quicker recovery than single-family residential (SFR) construction. A demand shift from SFRs to rentals is expected to continue, fuelling the growth of multi-family construction, which should peak around 2019 or 2020. Vacancy rates are then predicted to increase, as tenants will opt for homeownership more and more. Home sales volume in San Diego County saw its last significant increase in 2015, which was 12% higher than the year before.
Today’s flat sales volume can be attributed to end users who have yet to return to the market in large numbers. Sales volume has continued to slow in 2017, following an increase in mortgage rates. Taking into account population gains, jobs won’t fully recover until sometime in 2018, at which point home sales volume will take off, reaching its cyclical peak around 2020-2021.