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A recent forecast for the San Diego housing market predicted that home prices could level off through the rest of 2020 and into 2021. But given the current supply and demand situation in the area, a significant home-price decline seems unlikely.
In April, the housing market in San Diego (and much of California) slowed to a crawl as the coronavirus pandemic brought stay-at-home orders and quarantine protocols. But since then, home-buying activity in San Diego and statewide has increased quite a bit.
There are a couple of reasons for this. For one thing, mortgage rates continue to hover at historically low levels. Secondly, the entire real estate industry has adapted in a way that allows transactions to continue while safeguarding public health.
San Diego Housing Forecast: Will Home Prices Hold?
In June, the housing research team at Zillow predicted that home prices in San Diego would essentially flatten through the rest of this year and into 2021. By their estimation, the median home value rose by 6% over the past year. Looking forward, they predict that prices will dip slightly over the next year or so.
In early June 2020, Zillow’s researchers wrote: “San Diego home values have gone up 6.0% over the past year and Zillow predicts they will fall -0.8% within the next year.”
But when you look at the current supply-and-demand situation within the San Diego housing market, a predictions could also be made that home prices will hold up through 2020.
Current real estate conditions in the area are much different than they were during the last housing downturn of 2008. This time around, the San Diego housings market was in good shape going into the economic downturn. So it will probably fare better than it did during the last downturn.
There is also a serious supply-and-demand imbalance that continues to put upward pressure on home prices across Southern California. Given all of these trends, Zillow’s forecast for the San Diego real estate market might be erring on the conservative side. Home values in the area might beat their prediction by avoiding any kind of decline. Time will tell.
According to a May 26 article from The San Diego Union Tribune, this housing market led the state in terms of year-over-year home value appreciation. To quote the Tribune article:
San Diego County not only saw prices increase in March during the first month of the COVID-19 pandemic, it outpaced all markets in California. Home prices in the San Diego metropolitan area had risen 5.2 percent in a year … the highest annual increase since last summer.
Population Growth Continues to Drive Demand in 2020
With its beautiful beaches, pleasant year-round weather, and plentiful outdoor attractions, the San Diego area continues to attract new residents from elsewhere in the country. This makes the local real estate market more competitive.
According to the U.S. Census Bureau, the city’s population grew by 9.4% from 2010 to 2019. That was quite a bit higher than the 6% national growth rate over the same timeframe.
The population for the city of San Diego is currently around 1.4 million. The broader metropolitan area, which includes Carlsbad and San Marcos, is now home to roughly 3.4 million people.
These population trends play into the recent forecasts for the San Diego housing market. Population growth in general tends to bring more buyers into the markets and puts upward pressure on home values. This is something that will continue through 2020 and into 2021, despite the current coronavirus (COVID-19) situation.
Tight Inventory Making Things Tough for Buyers
According to data reported recently by the national real estate brokerage Redfin, the number of homes for sale in San Diego Country dropped by 31% from April 6 to May 3. That’s partly the result of sellers taking their homes off the market in response to the COVID-19 crisis.
The San Diego real estate market was experiencing a supply shortage before the pandemic occurred. Now, supply conditions are even more constrained across the metro area.
According to Redfin, the metro area had about a two-month supply of homes for sale as of April 2020. That is well below what’s considered to be a balanced housing market. So from an inventory standpoint, it’s still a seller’s market and probably will be for a while.
How Unemployment Has Affected the Housing Scene
Today, there are fewer home buyers in the San Diego area who actually have the financial means needed to make a purchase. That’s because of a sharp rise in unemployment, stemming from the coronavirus pandemic.
According to the state of California’s Employment Development Department, the unemployment rate for San Diego County rose from 4.2% in March of this year to 15% in April. Almost all of that can be attributed to the COVID-19 situation in some way.
Granted, some of those jobs will come back as the state continues its multi-stage reopening plan. But it will take some time for the local economy to get back to something resembling normal.
The bottom line here is that the real estate market forecast for San Diego is not that bad, considering the circumstances. The same is true for a lot of cities across the country right now.
Despite the government-imposed restrictions and economic slowdown, the real estate market continues to march on. It’s clearly moving at a slower pace than it was before the crisis began. But it has not ground to a halt the way some expected it to.
In fact, many housing analysts and economists are now saying that the housing market could help pull the broader economy out of the doldrums, through the latter part of 2020 and into 2021.
According to Craig Lazzara, a managing director at S&P Dow Jones Indices, “housing prices continue to be remarkably stable.”
Disclaimer: This article includes projections and forecasts relating to the San Diego real estate market in 2020 and 2021. Those forward-looking views were provided by third parties not associated with our company. Housing predictions are the equivalent of an educated guess and should be treated as such.