What’s Next For San Diego Housing ?

What is going to happen to prices in the future?
While it can be difficult to predict the future, San Diego has had remarkably stable home values despite a 20 month run up to the highest interest rate in 23 years.  Prices are likely at their lowest right now in the late Fall 2023 / early Winter 2024, baring an unforeseen disaster.
You’ll get more for your house if you wait to sell until after February 1st, 2024 when buyers start shopping each year and you’ll get even more if you wait for interest rates to drop into the 6% range which could happen as early as next summer but probably later. The flip side is that the same low interest rates that increase your selling price also increases your purchase price for your next house. That said if you can afford to buy now and wait to sell  later you could get a low purchase price and a high sales price. However it’s a gamble and may incur holding costs while you wait. 

Are we finally going to see prices drop? 

Probably not. After two solid years of spiking interest rates  prices didn’t really budge. They did initially drop briefly 12% below the short lived market peak in March 2022 and yet prices have recovered all but 1% of that high.  The Fed has tried to break the high prices by increasing the interest rate but even a huge increase in monthly costs to own a home have not resulted in lower house prices.

When I say “a huge increase” I mean the monthly cost to buy a home has more than doubled on average for San Diego homes since Jan 2021. Part of that increase to the buyer is from the average home price increase of 40% during that time and the other part is the more than doubling of the interest rate from below 3% to a whopping 7.5%. As an example, in Jan 2021 a $1M house purchase cost $4,000 a month including taxes. Buying that same house (now priced at $1.4M) would costs a buyer $9,000 a month with the higher interest rate (and it requires $80,000 more for a downpayment).

Should I hold and wait to sell ? 

If you can hold on to your house you will likely get a higher price in the near future. Buyers traditionally take a break during the holidays and resume interest in purchasing again by February 1st which is when you should wait to put your house on the market.  Demand has been building for 20 months  because the high interest rates have left buyers unable to qualify for large enough loans to afford the high prices.  When interest rates drop, buyers will qualify for higher prices again and come to the market to bid on yours. That is not likely to happen soon but for those with the luxury of being able to wait 1 to 4 years it may be to your advantage.  

What will buying look like over the holidays ? There is hope for buyers. Inventory has been building up this fall most notably since the summer of 2023. Historically the number of available homes drops as we enter into the fall but instead this year the number has increased by 50% from 4,600 to 7,000 homes. That is unusual and suggests that perhaps the high interest rates are having a cumulative affect on supply.

Meanwhile demand has fallen as it does seasonally and is down to just 1,500 homes a month which is as low as it was last year. The window for buying is currently the best it has been and may close quickly if interest rates drop and more buyers move into the market. 


What should I do If I’m thinking of selling ? 

Trying to time the market is often impractical and unwise. Price isn’t everything.  Most people selling their homes do so because of life events that dictate timing.  While they don’t want to lose money, they also want their transaction to work around changes in lives. In most cases the practical thing may be a slight delay regarding when to put a property on the market combined with a stellar presentation and a multiple offer strategy to drive up price between buyers. 

The details of your life matter and your agent should be instrumental in helping you determine how to work your house sale into your life. 

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