Wow, time for another update because this spring has been quite crazy. I noticed today that the median sale price for San Diego has reached roughly the 2022 peak. With 7% rates, this is really stunning.
Median price reaches 2022 peak. Low inventory is really propping up the market.
All Altos Research data is from the San Diego-Carlsbad-San Marcos metro area.
Redfin data is from the San Diego metro on Redfin data center.
Some updates possible if I see updates from these sources.
Inventory
Inventory is the main story. A year ago, I thought that inventory would not save the market, because once buyers step out, the homes for sale would start increasing. Boy was I wrong so far, the locked-in effect is real. I did not account for sellers refusing to sell even if they really wanted to. Which is the situation we’re in today.
So despite the climb last fall, inventory plummeted this spring. Buyers are holding out, but so are sellers.
Luckily it looks like we have turned a corner on inventory and it’s starting to climb again. Will it be similar to last year? Hard to tell, the economy seems to be in better shape this year, despite the bank failures.
Pending Sales
As mentioned above, buyers are holding out as much as they were last year. Pending sales are down lower than last year. And much much lower than the pandemic years. In fact the number of pending sales has been flat since February.
But then look at new listings. Also relatively flat since Feb with a bit of a summer boost to the level. Still, nothing compared to previous years and even down a lot from last year this time. How long will sellers hold out?
I figured that primary owners would not need to sell, but you’d think investors would be running the numbers. San Diego is a vacation area so there are quite a lot of STRs and the new ordinance changes the game on those. There is a cap to how many can be licensed so some number will have to transition for long term renting or sell the property. Despite a lot of airbnbs showing up in the for-sale and for-rent market, it’s not really having an effect on the number of new listings yet.
It’s been 2 months since the implementation date of the STR ordinance.
All listings specifically for hosting platforms will be removed after the May 1 implementation date if you continue to operate without a license,” Wood said.
– Matt Wood, STRO Program Manager, with the San Diego Office of the City Treasurer.
Home Prices
This is a gut punch for sure. Median sale price has now reached last year’s peak. It’s so hard to believe that this is at 7% rates. A friend of mine was telling me that houses right next door to each other in his neighborhood have mortgages that are 1000s different. It’s a strange world we live in today.
So will it keep going up? Median sales are the last indicator to change so this new peak is actually for sales that happened in June. To figure out what we might see upcoming, let’s look at some early indicators.
Median Days on Market
Median days on market gives us an early view on changes. It has made a trough and started climbing. That’s one good sign (phew) that the hot housing season is cooling off. This lines up with Altos inventory numbers from above starting to climb again.
Redfin’s data is 4 week averages so this is basically month of July data.
Another early indicator of a market shift is the percentage of price drops. This too has been on the rise since
Final Words
This is tough for us buyers. I guess that old saying the market can stay irrational longer than you can stay insolvent rings true here. This market is truly irrational. The small silver lining is well – buyers are not “insolvent” as they wait.
My down payment is growing nicely at 4.5-5%. I have other investments way in excess of my down, that are growing with the stock market climb this year so I’ve not missed out on that either.
On top of that, I feel like I’m saving a ton every month. My rent is $2500 and the houses I’m looking to buy would result in a $6000 mortgage payment, not counting maintenance., which is just a comical difference. It’s also funny that I “feel I’m saving $3500 a month”. Because really I’ve always been saving that, nothing’s changed, but I’m aware of it now. I’m aware I could be paying $6000 for shelter instead of $2500 and that just hits different.
My plan is to take that difference and throw it in during the first year of my mortgage when I do buy. I ran some numbers and the $60k saved will reduce the timeline by 5 years and the amount by 200k. That seems like a decent plan for us, and means I would not be pushing out my mortgage end date by waiting.
The main thing is how much one needs vs wants a house. For us, our apartment has plenty of space, a garage and patio and a great location. On top of that, there simply aren’t good homes popping up on the market that would be better for us. I feel a lot for those who are in a cramped situation with a growing family as that is definitely a harder spot to be in.
It’s a tough time to be a buyer in this market. Here’s to hoping July’s read on median sale prices is the peak for the year.
Disclaimer: I’m an idiot first time home buyer. I’ve never taken an econ class in my life. I’m just sharing what I see and learn as it happens. I am 100% certain I will get things wrong, so don’t take any of this as the golden truth.