Welcome to San Diego Blog | February 20, 2020
San Diego’s Single Family Homes in 2020
There’s good news for those who already own a home: values increased over the past year, according to the California Association of Realtors (CAR). Home prices rose 6.2 percent over 2017, according to Zillow. Home values have slowed recently, with 2019 showing a 1.2 percent increase.
The traditional single-family house continues to be the most desired type of home, and competition among buyers — powered by a strong economy— has pushed the median home price to record highs in San Diego County.
Builders are expected to deliver around 3,000 homes this year, said Meyers Research, around the same amount as the last few years — but still fewer than many analysts say the region needs. It is substantially more than 2009 when 1,786 homes were built, but a departure from 2004 when 9,555 homes were constructed.
Part of the reason why there are not more single-family homes opening this year is lack of land zoned for housing, especially tricky in coastal markets; it isn’t just that we run into the ocean, but that mountains throughout the county also make it hard to build.
New homes potentially closer to job centers are much more expensive. Some of the biggest job centers in the county are north of downtowns, such as Kearny Mesa and Sorrento Valley.
Even though one of the chief complaints from developers is a lack of land, some are making do with urban infill.
Single-family homes are always going to be appealing to people. Development is an ever-moving goal post, and we are continually chasing after what’s favorable to the market.
In line with this, 30-year fixed-rate mortgages rates are meager. In September 2019, the rate was 3.56 percent, close to an all-time low. Compare that to the same time in 2018, which was 4.6 percent. This is the lowest it’s been since 2016. 15-year fixed-rate mortgage rates show a similar story. This should make home-buying more attractive. According to Trulia, long-term mortgage rates are still on the decline.
Despite the rising housing prices, the low mortgage rates make this potentially a perfect time to buy.
Sellers are much less willing to budge on their price because they tie much emotion into their single-family homes. Despite the market currently cooling, it’s becoming harder and harder to change sellers’ perception of their home price. Meanwhile, buyers are confident that the market has reached a price peak.
Homeownership rates in San Diego are gently climbing from previous years also. There was a 54.7 percent homeownership rate posted in the second quarter of 2018, compared to 52.6 percent in the first quarter. That is still slightly lower than 56.1 percent posted in the second quarter of 2017. Still, rising homeownership rates are offering hope for those in the housing markets.
Two factors are affecting San Diego’s housing market to flatline. First. There is more multi-family construction occurring than single-family residential. That is because of an ongoing shift to rentals rather than homeownership. The change is leftover residue from the 2008 economic collapse, according to experts.
However, both single-family and multi-family housing construction is increasing. 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.
The rental construction peak will happen around late 2019 and early 2020. After that, there will be more vacant rentals as more people start buying homes.
The second issue affecting home buying in 2020 is the affordability as there aren’t enough homes available for middle-income families. Home prices are affected, in part, by a lack of construction of single-family homes. However, ongoing out-migration may push more available homes on the market in 2020.