Welcome to San Diego Blog | December 12, 2019

San Diego Real Estate Market 2020: Investment, Home Prices & Trends

The San Diego housing market may more unpredictable in 2019 than in previous years, in part due to slow sales and in part because of growth in both the number of jobs and in wages. Those considering buying a home will need to know some things to navigate the waters of real estate purchasing.

If you’re keen to invest in the San Diego real estate in 2020 and buy before prices become out of reach, you must read till the end. A recent forecast for the San Diego housing market suggests that home prices will continue rising into 2020, but at a slower pace than the previous year.

San Diego is often overlooked in favor of hotter real estate markets like San Francisco and Los Angeles.

However, that’s one of the reasons why you should consider investing in the San Diego real estate market. If you are a real estate investor, San Diego definitely has a track record of being one of the best long term real estate investments in the nation.

San Diego housing market 2020 remains one of the hottest in the nation (ranked 10th by Zillow). Rents are predicted to rise by 8.4%, and properties are forecast to increase by 4.7%, so investing in San Diego real estate in 2019 seems to be the right investment decision.

The San Diego home price appreciation forecast for 2020 is between 4% to 5%. Let’s take a close look at the San Diego real estate market trends and predictions for 2020 and find out why is it one of the best real estate markets to invest in California.

San Diego Real Estate Market Forecast 2020

The real estate data from Zillow shows that the median home value in San Diego is $635,400. San Diego home values have gone up 1.2% over the past year, and their San Diego real estate market prediction is that the prices will rise 0.2% within the next year. The median list price per square foot in San Diego is $470, which is higher than the San Diego-Carlsbad Metro average of $382.

The median price of homes currently listed in San Diego is $699,000, while the median price of homes that sold is $596,300. The median rent price in San Diego is $2,750, which is higher than the San Diego-Carlsbad Metro median of $2,722.

Here is the San Diego, CA, real estate price appreciation graph by Zillow. It shows us the current home price appreciation forecast of 0.2% until Aug 2020.

 

The shortage of supply and an increase in the demand for housing will push the prices higher. The mortgage rates are continuing low, and the number of renters are increasing. San Diego detached home prices are up to $300,000 in the last 4.5 years.
San Diego, real estate forecast, shows significant rent increases and stable home price growth. Since home building takes time, especially in a heavily regulated environment, there’s little chance of diminished demand.
The forecast for home sales in San Diego in the years following 2018 is more of the same. Higher interest rates and economic uncertainty will continue to hold back sales volume further in 2019, with volume continuing to decrease well into 2020 when the next recession is forecasted to arrive.
After volume and prices bottom in 2020-2021, homebuyers will return in higher numbers to push the housing market to its next boom, expected in 2022-2023.
According to LittleBigHomes.com, the San Diego real estate market forecast for the 12 months ending with the 3rd Quarter of 2019 is positive. The Accuracy of the Trend Projection for San Diego is 82%.
Accordingly, they estimate that the probability of rising house prices in San Diego is 82% during this period. If this Housing Market Forecast is correct, home prices will be higher in the 3rd Quarter of 2019 than they were in the 3rd Quarter of 2018.

San Diego Housing Market Forecast 2020 – 2021

Here is a short and crisp San Diego housing market forecast for the three years ending with the 3rd Quarter of 2021. The accuracy of this forecast for San Diego is 77%, and it is predicting a positive trend. The LittleBigHomes.com estimates that the probability of rising home prices in San Diego is 77% during this period. If this price forecast is correct, the San Diego home values will be higher in the 3rd Quarter of 2021 than they were in the 3rd Quarter of 2018.

San Diego Real Estate Market Trends

The San Diego real estate market trends indicate an increase of $42,500 (8%) in median home sales and a 0% rise in median rent per month over the past year. The average price per square foot for this same period rose to $438, up from $432.

The median sales price for homes in San Diego for Dec 14 to Mar 13 was $590,000 based on 2,107 home sales. The average price per square foot for San Diego was $438, an increase of 1% compared to the same period last year. The median rent per month for apartments in San Diego for Feb 18 to Mar 18 was $2,950.

Currently, Trulia has 3,077 resale and new homes for sale in San Diego, CA, including open houses and homes in the pre-foreclosure, auction, or bank-owned stages of the foreclosure process. The median sale price in San Diego is $621,000. Homes are selling for about $445/sqft.

 

There are 4,111 homes for sale on Realtor.com. 486 of which were newly listed within the last week. The San Diego home prices range from $3.5K to $350M. Additionally, there are 2,015 San Diego rental properties for sale, and their rent price ranges from $75 to $2M per month.

According to their statistics, in August 2019, the San Diego housing market was a seller’s market, which means there were roughly more buyers than there were active homes for sale.

Ideally, a buyer would prefer a sale to ask a price ratio that’s closer to 90%. In San Diego, sellers could hold good leverage in these negotiations as the rate was 99.11% in the past month. It also means that the sellers could sell homes for 99.1% of the asking price in the past month. A seller would always prefer scenarios that can yield a ratio of 100% or higher.

In August 2019, the median list price of homes in San Diego, CA was $680K, trending up 1.6% year-over-year. The median listing price per square foot was $462. The median sale price was $636K. On average, homes in San Diego CA sell after 51 days on the market. The trend for median days on the market in San Diego, CA, has gone up since last month, and slightly up since last year.

The median list price in San Diego is $736,750 on Movoto.com. The median list price in San Diego was less than 1% change from September to October. San Diego’s home resale inventories are 3,440, which decreased 1 percent since September 2019. The median list price per square foot in San Diego is $476. September 2019 was $473. Distressed properties such as foreclosures and short sales remained the same as a percentage of the total market in October.

San Diego, CA Single Family Homes Statistics 2020

Following the real estate market decline in 2007 in the U.S., single-family rental homes became favorable options for investors, saving in construction or refurbishment prices. The quick turnaround for an owner to rent out their property means cash flow is almost immediate.

Single-family rental properties have grown up to 30% within the last three years. Single-family rental units have filled almost all the housing demand in the U.S. in recent years.

U.S. single-family rental market has seen steady rent increases between 2010 and 2019. According to CoreLogic’s latest Single-Family Rent Index (SFRI), which analyzes single-family rent price changes nationally and among 20 metropolitan areas, it shows a national rent increase of 3% in April 2019, as compared to 2.8% in April 2018.

As per the real estate company called Neigborhoodscout.com, the median house price in San Diego, CA is $600,536, which indicates that home prices in San Diego are well above the national average for all cities and towns in the United States.

Single-family detached homes are the single most common housing type in San Diego, accounting for 45.14% of the city’s housing units. One or two-bedroom single-family detached homes are the most common housing units in San Diego.

Other types of housing that are prevalent in San Diego include large apartment complexes, rowhouses, and a few duplexes. San Diego has a mixture of owner-occupied and renter-occupied housing.

Currently, both single-family and multi-family housing construction is increasing in San Diego. Even though there are more multi-family starts over single-family homes in terms of raw numbers, the percentage of single-family homes being constructed outpaces that of multi-family units.

There were 4,100 single-family homes and 6,400 multi-family homes built in 2017, compared to 2,200 single-family homes and 7,800 multi-family units in 2016.

According to a new report, the residential construction has yet to gain any momentum in San Diego, falling back considerably in 2018. Thus far, multi-family construction has experienced a quicker recovery than single-family residential (SFR) construction.

Expect the demand shift from SFRs to rentals to continue, injecting growth into multi-family construction in upcoming years, peaking around 2022-2023.

Another bit of good news for homebuyers planning to enter the market in 2019 is that housing inventory has risen over the past year. As of September 2018, the San Diego housing market had about a three-month supply of homes for sale. That was up from a low of about 1.5 months at the end of 2017.

Currently, there are 1,415 single family homes for sale in San Diego, CA on Zillow. Additionally, there are 919 single family homes for rent in San Diego, CA. Under potential listings, there are about 2 Foreclosed and 375 Pre-Foreclosure homes. These are the properties that may be coming to the market soon but are not yet found on a multiple listing service (MLS).

San Diego, CA Foreclosures And Bank Owned Homes Statistics 2020

As per the San Diego foreclosure data by Zillow, in San Diego, 0.3 homes are foreclosed (per 10,000). This is lower than the San Diego-Carlsbad Metro value of 0.5 and also lower than the national cost of 1.2. The percent of delinquent mortgages in San Diego is 0.4%, which is lower than the national cost of 1.1%. With U.S. home values having fallen by more than 20% nationally from their peak in 2007 until their trough in late 2011, many homeowners are now underwater on their mortgages, meaning they owe more than their home is worth. The percent of San Diego homeowners underwater on their mortgage is 5.0%, which is lower than San Diego-Carlsbad Metro at 5.0%

There are currently 497 properties in San Diego, CA that are in some stage of foreclosure (default, auction or bank-owned) while the number of homes listed for sale on RealtyTrac is 1,462. In August 2019, the number of properties that received a foreclosure filing in San Diego, CA, was 29% higher than the previous month and 21% lower than the same time last year.

San Diego Home Prices And Appreciation Rates 2019

San Diego’s real estate appreciated 55.37% over the last ten years, which is an average annual home appreciation rate of 4.50%, putting San Diego in the top 10% nationally for real estate appreciation, according to NeighborhoodScout.com’s statistics.

The real estate appreciation in San Diego is so strong that despite a nationwide downturn in the housing market, San Diego real estate has continued to appreciate faster than most communities.

In the past 12 months, San Diego’s real estate appreciation rates continue to be some of the highest in America, at 8.31%, which is higher than appreciation rates in 84.55% of the cities and towns in the nation.

The good news for those who already own a home in San Diego is that values increased in 2018, according to the California Association of Realtors (CAR). Home prices rose 6.2 percent over 2017, according to Zillow.

Although home values in San Diego will continue to increase in 2019, the rate of increase will slow down and will rise only 4.3 percent. The San Diego home price increases sharply declined in reaction to slowing sales and rising interest rates, which began in late-2017.

The annual pace of increase is now just 2% in the high and mid-tier and 4% in the low tier, much lower than in recent years when the annual rise averaged around 10%, according to Journal.firsttuesday.us. Expect home prices to continue down in 2019. Falling home prices will continue into 2020, when the economic recession arrives, bottoming in 2021.

Best Neighborhoods to Invest in San Diego Rental Real Estate

If you are looking to invest in the San Diego rentals, you should know the best places to invest in. The three most important factors when buying a real estate anywhere are location, location, and location. The location creates desirability.

Desirability brings demand. Demand would raise the price of your San Diego rental real estate, and you should be able to flip it for a lump sum profit. When looking to invest in San Diego real estate, you need to find places where the expected property appreciation forecast is favorable.

The running costs for owning and managing a San Diego rental property should be below. The neighborhoods in San Diego must be safe to live in and should have a low crime rate.

The neighborhoods should be close to basic amenities, public services, and shopping malls. There should be a natural and upcoming high demand for rental properties and a low supply of income properties.

There are 102 elementary schools, 102 middle schools, 78 high schools, and 131 private & charter schools in San Diego, CA. There are 102 neighborhoods in San Diego.

Some of the best neighborhoods in or around San Diego, California are Rancho Bernardo, Carmel Valley, Pacific Beach, North Park, Pacific Beach, La Mesa, Mission Valley, Mission Hills, El Cajon, Mira Mesa, Scripps Miramar Ranch, Del Cerro, and University City.

Coronado has a median listing price of $1.9M, making it the most expensive neighborhood. Mission Valley is the most affordable neighborhood, with a median listing price of $445K.

Here are the best neighborhoods to invest in San Diego rental real estate because they have the highest appreciation rates (List by Neigborhoodscout.com).

  • 1  S 32nd St / National Ave
  • 2  S 45th St / Logan Ave
  • 3  28th St / Market St
  • 4  Ocean View Blvd / S 45th St
  • 5  Main St / S 32nd St
  • 6  Imperial Ave / 19th St
  • 7  Broadway / 10th Ave
  • 8  1st Ave / E Hawthorn St
  • 9  Guadalcanal Ave / Henderson Ave
  • 10  Park Blvd / Presidents Way

Is San Diego The Best Market For Real Estate Investment?

Now that you know where San Diego is, you probably want to know why we’re recommending it to real estate investors. Investing in real estate is touted as a great way to become wealthy. Should you invest in San Diego rental real estate? Is it a Good Time to Buy a House in San Diego 2020?

Many real estate investors have asked themselves if buying rental property in San Diego is a good investment? You need to drill deeper into local trends if you want to know what the market holds for the year ahead.

Investing in San Diego rental properties will fetch you good returns in the long term as the home prices in San Diego have been trending up year-over-year. Let’s take a look at the number of positive things going on in the San Diego real estate market, which can help investors who are keen to buy an investment property in this city.

We’ll focus on real reasons to invest in the San Diego real estate instead of giving you vague appeals to buy a house or an investment property because of general ambiance and mere promises of future growth.

1. The San Diego Housing Market Is a Relative Bargain

California is known for its insane real estate prices. San Diego stands out as a relatively affordable real estate market. The median home price is around $550,000. This sounds bad if you compare it to the national average of $300,000, but it is a bargain in California. You could snap up several San Diego rental properties for the price of one home in San Francisco.

2. Home Prices in San Diego Haven’t Been This Great a Deal in Years

The San Diego housing market is cooling. Home price appreciation fell below 5%, and home prices in some areas are actually declining due to decreasing demand. This is definitely an improvement over the 6 to 8% appreciation San Diego had been seeing. The expanding inventory of houses on the market makes this a great time to invest in the San Diego housing market.

3. New Construction of Homes in San Diego is Quite Slow

San Diego is a growing housing market. However, construction in San Diego has stalled. Single-family residential construction is well below the demand for such homes in the San Diego housing market. There has been faster growth in the development of multi-family housing in the San Diego real estate market, but that is also below historical rates.

4. Rental Rates in San Diego Are Amazing

The median rental in San Diego is $2700. The rent you’d receive on single-family San Diego rental properties would, of course, be much higher. If you find a good bargain and make it family-friendly, you could charge well over $3000 a month.

If you can convert San Diego rental properties into smaller units, you’d receive around $2200 a month for a one or two-bedroom apartment. The cash on cash returns for properties in the San Diego housing market is about 2.5% for traditional rental properties and nearly 2% if you rent on Airbnb.

The fact that the city isn’t too dependent on tourism means you could rent properties on the beach to newcomers, locals, and students if tourism is slow.

5. San Diego Is More Landlord Friendly

We can’t say that California is landlord-friendly. However, specific cities are better for landlords and real estate investors than others. One reason to invest in the San Diego housing market over San Francisco or Los Angeles is the fact that San Diego is one of the few big cities that doesn’t have rent control.

The city has groups fighting proposals to apply rent control to San Diego rental properties in addition to apartments.

6. The Rental Population Is Massive

The San Diego, real estate market, has been ranked among the ten most expensive real estate markets in the country, though it ranks below several other West Coast cities.

It creates massive demand for San Diego rental properties by those who cannot afford to buy homes. The rental market will continue to grow as the city grows an estimated 500,000 by 2050, adding tens of thousands each year.

7. San Diego Is a Great Place for Short Term Rentals

San Diego has many tourist attractions. Balboa Park is home to the San Diego Zoo, the Air and Space Museum, the Natural History Museum, the Desert Garden, the local youth Symphony, a Japanese garden, and a golf complex.

There’s a SeaWorld in San Diego, an MLB stadium, the USS Midway Museum, and the San Diego zoo safari park. On top of this is the mild weather and proximity to the beach.

Any San Diego rental properties in easy reach of these attractions command a premium on rental sites like Airbnb. Demand for rentals in the San Diego real estate market soars during Comic-Con, one of the biggest comic conventions in the country.

The only limit on San Diego rental properties has been the fluctuating rules by the city council, such as a measure passed limiting rentals to primary residences that were rescinded a few months later in 2018.

Yet permission for rentals is limited in many master-planned communities and condo developments, keeping rents for Airbnb and other short-term apartments secure.

8. The Large Military Market Sustains the San Diego Rental Market

San Diego’s economy isn’t as reliant on tourism as other coastal towns. Instead, defense and the military are a more significant part of the local economy. It-dumps tens of thousands of renters into the San Diego real estate market who will never buy, because they could be deployed elsewhere in a year or two.

The military also gives generous allowances for those who rent San Diego rental properties, keeping rents near the military base active regardless of the state of the economy.

9. The Diverse Student Market Feeds the San Diego Rental Market

San Diego is a major metropolitan area, and it is home to several colleges and universities. The University of California at San Diego is one of the largest. It is sometimes confused with San Diego State University, a different campus, and the University of San Diego.

Point Loma Nazarene University is a Christian school in San Diego. National University is located in nearby La Jolla. Smaller schools like the Art Institute, Alliant International University, Azusa Pacific University, Brandman University, Miramar College, Mesa College, and California College of San Diego fill out the San Diego real estate market.

A side benefit of the diversified student market is that you can buy multiple properties across the San Diego housing market and enjoy a “diverse” investment portfolio.

You won’t see demand for the property rise and fall based on the popularity of a flagship school, and the robust San Diego housing market allows you to rent it to newcomers to the area or military officers if you can’t fill the unit with students.

10. Supply Is Literally Constrained

San Diego shares a number of geographic constraints that other California coastal cities do. You can’t build on water. The Cowles Mountains limit how much the city can expand inland, constraining housing supply.

Regulations limit high-density construction, preventing the area from meeting demand with too many tall condo towers. So, also, do the wilderness areas off-limits to development like Cuyamaca Rancho State Park and Cleveland National Forest.

Investing in San Diego Real Estate: The Conclusion

Maybe you have done a bit of real estate investing in San Diego, CA, but want to take things further and make it into more than a hobby on the side. It’s only wise to think about how you can and should be investing your money. In any property investment, cash flow is gold.

Good cash flow means the investment is profitable. An inadequate cash flow, on the other hand, means you won’t have money on hand to repay your debt.

Therefore, finding an excellent San Diego real estate investment opportunity would be key to your success. If you invest wisely in San Diego rental real estate, you could secure your future if you are a beginner in the business of cash flow real estate investing, it essential to read good books on real estate.

The less expensive the San Diego rental properties are, the lower your ongoing expenses will be. Roughly a $150,000 property is what some experts recommend starting with. However, it is not easy to get that kind of a deal in San Diego as it is among the most expensive real estate markets in the U.S.

Most investors naturally gravitate to residential property investment. When looking for the best real estate investments in San Diego, you should focus on neighborhoods with relatively high population density and employment growth.

Both of them translate into high demand for housing. If housing supply meets housing demand, real estate investors should not miss the opportunity since entry prices of homes remain affordable.

You must also collaborate and learn from savvy real estate investors who have retired early on in their lives by investing in some of the best real estate markets like San Diego, CA. San Diego offers an ideal mix of limited supply, high demand, and excellent income potential. If you’re going to invest in California, it needs to be in San Diego.

Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process.

They are well-informed about critical factors that affect your specific market areas, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing, and interest rates.

NORADA REAL ESTATE INVESTMENTS strives to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in the U.S. growth markets. We can help you succeed by minimizing risk and maximizing profitability.

This article aimed to educate investors who are keen to invest in San Diego real estate in 2020. Purchasing an investment property requires a lot of studies, planning, and budgeting. Not all deals are substantial investments. We always recommend to do your research and take the help of a real estate investment counselor.

Best Real Estate Markets in California

Apart from the San Diego real estate market, you can also invest in another hot market in San Jose. San Jose is part of Silicon Valley, a place where $100,000 a year or higher salaries from competing for tech firms has driven up the cost of real estate.

But what about the San Jose housing market itself? San Jose is the third-largest city in California, home to roughly a million people. It has the highest cost of living in any area in the U.S., and it is one of the most expensive housing markets in the country.

If you want to invest in the San Jose real estate, you may not need to buy and renovate. Instead, if you know of industrial or commercial properties near major employers, they may need to convert to employee housing, you could buy now and hold until it sells. If that doesn’t happen, you could still turn it into a co-working space.

In January 2018, Redfin ranked the ten hottest neighborhoods in the United States. Nine of the ten were in San Jose. When single home prices fall from 1.2 million to 1 million, homes now sit on the market for several days instead of being snapped up immediately.

The median price for a new home or condo was $750,000 in 2018, down from a record of nearly $800,000 a few months prior. If you want to invest in the San Jose housing market, you should do it now while things are affordable.

 

 

 

 

 


Written by: Mia

Categories: Absorption Rates, Affordable Homes, Airbnb, Buyers, Property Management, Real Estate Investment, Real Estate Tips for Buyers, Real Estate Tips for Sellers, Renters, San Diego Real Estate

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