Is NOW a good time to buy in San Diego?

“Is now a good time to buy a home in San Diego or should we wait until the market drops?”

It’s THE question I’ve been asked the most this year. It’s a good question but it assumes we are all expecting a big drop. I’m not. I don’t claim to know more than any expert but I have read the forecasts from experts across several industries and I haven’t seen a compelling argument that home prices in San Diego are going to drop significantly in the next few years.

Could prices drop by more than 10% next year? Perhaps, but that’s not a significant enough drop to stand on the sidelines if you are ready to buy a home in San Diego now. Our long term demand for housing units in San Diego, remains high. We have jobs and growing families and new people moving into the state faster than people are moving out. This demand is represented by a strong rent market and by the level of difficulty in finding affordable options across San Diego.

Mortgage interest rates have been climbing and we are told they will climb once more before the Fed is satisfied and will keep rates steady for awhile. But the rate moving up or down doesn’t make a home affordable or not for your family. You determine affordability based on your unique goals and plans for the future. For those that are more conscientious of risk, be sure you have contingency plans should things take an unexpected turn.

Home prices in San Diego are directly influenced by rising interest rates, but we also have another factor that is unique and that is that rent rates are climbing steadily. Another unprecedented factor is short term rentals, they have provided investors with opportunities that didn’t exist before. Now a home that would have rented for $2,000 a month is rented out by the night like a hotel and brings in an average of $3,500 a month. While the home as your primary residence may not be worth anymore to you, if you must move and rent your place out, you have a lot more security.

In June we saw home prices in San Diego begin to flatline, by that I mean, appreciation seemed to slow and inventory began to take longer to sell. Across San Diego county we have seen price cuts on homes that were priced in line with previous appreciation trends. Other homes are sitting unsold because they need improvements, these same properties previously sold without too much difficulty.

Given the current uncertainty by many buyers that assume a big drop in home prices is imminent, it can be an ideal time to negotiate with sellers who need to sell quickly and are getting nervous after a couple months of their home not selling. If you are buying your primary residence your outlook should be over the length of time you plan to live in the home. How will things go the next 5, 10 or 15 years? Nobody can know with certainty but the lesson has been learned in the ups and downs of the San Diego Real Estate market.

The previous decline was caused by a housing bubble created directly by irresponsible loan programs. (Adjustable rates, negative amortization, etc.) the domino effect created when homeowners with no money invested walked away from their mortgage was millions of foreclosures strong. That is what crashed the market in 2005-2008. What will cause the next adjustment? Who knows? But I do know many people that kept working, paying their mortgage and never touched their home equity, or lack thereof, through the last downturn.

So is now a good time to buy a home in San Diego?

Whatever you choose to do, consider the following tips to hedge against a potential drop:

1- how long do you plan to live in the area?

2- buy your home based on at least a 5 year plan

3- think about what it would rent for if you had to move unexpectedly

4- find a home with multigenerational living space.

5- look for a property with room for a granny flat or guest house/Accessory Dwelling Unit (ADU).

My next post will discuss granny flats/guest house/ADUs and how easy they are to add to your property.

This post was created and written by: Sean Chapman.

Sean has been working in the San Diego Real Estate Industry since 2003 and it has been his family’s business since as young as he can remember. He has been raised receiving an in-depth training and understanding of the industry. He loves to help his clients discover all the possibilities in their homes and properties of interest. He follows the market closely as it continually shifts over the years and he makes it his business to stay in touch with market trends in the greater San Diego County, Riverside County, Orange County, and Los Angeles County as well as across the entire nation. He spent several years in his career training thousands of Real Estate agents nationwide and has maintained those relationships over the years continuing his industry networking and continued education. He chooses to use the knowledge he gains to use as a priority to benefit his clients first and foremost.