San Diego Housing Bubble? 5 Reasons it Won’t Crash in 2019 (HOT)

Real estate prognosticators have speculated on a housing bubble burst in San Diego for the past several years. Largely, that is because the economic downtown of 2008 affected the area tremendously and left residual fears of it happening again in a 2.0 version. There is also, typically, a bubble that bursts around every 13 years.

However, economic experts are stating the possibility of a burst bubble in San Diego is highly unlikely. The area just has too many positive things going for it to see another troubled time like what happened in 2008. 

Below are five reasons why the San Diego housing market won't crash in 2019.

1. The economy is strong.

The 3.7 unemployment rate in San Diego is well below the state's 4.5 unemployment rate and also beats the national 4.2 percent rate. June 2018 numbers show there were 22,900 more jobs than the same month in 2017 with a 4.2 percent unemployment rate at that time.

Other indicators show that there will be wage increases in 2019, which is where the real jobs and economic recovery lies that will spur home sales.

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Nathan Moeder, adjunct professor of economics at the University of California, San Diego and principal at London Moeder Advisors real estate group said the only way for a housing bubble to burst in the area is for major employers to close shop or for a military defense agency to leave. He said that is extremely far-fetched. 

In fact, many San Diego employers are adding to their payroll. More money pushed into the military by the Trump administration ensures defense agencies will continue to operate and even expand by adding new technology and equipment. 

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2. Home values will grow moderately in 2019.

San Diego real home values rose 6.2 percent in 2018 and are expected to rise 4.3 to 4.7 percent in 2019, according to Zillow and other experts. The fast pace of rising values in 2017 over the prior year is good for homeowners wanting to sell. While the rise isn't as much as in the past, it still shows solid, stable growth. That is an indicator of the overall economy and some of what those in banks and other financial institutions use to determine outcomes of loan applications. 

Median home prices in San Diego are currently at $685,000 with the median selling price at $596,500, according to Zillow.

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3. There is a low house inventory.

There continues to be construction of single-family residences, but not at the pace of multifamily units. There were 4,100 single family residences built in 2017 and that's almost double of those built in 2016. There were 6,400 multifamily starts in 2017, down slightly from 7,800 in 2016. 

Even with ongoing construction, there continues to be more demand for home purchases than there are houses to offer. This means San Diego homes will always be easy to sell and home prices will continue to rise. 

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Drew Lyon, broker/owner at Harcourts Avanti, said San Diego housing is at an all-time high with a low inventory. Many senior citizens are remaining in their homes longer and those homes start in the lower price category of $400,000 and up to $1 million. Yet, overall turnover rates are still good at 9 percent in 2018, up from 7.8 percent in 2015. 

4. The population is growing.

There continues to population growth by births, immigrants and those moving to the area to take new jobs. The population grew by in 2018 and by .7 percent in 2017. Although 2017 growth fell below the 15-year average of .9 percent, the slower rate isn't affecting the area economically. There are 3.4 million people living in San Diego County.

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Downtown San Diego Partnership reports the urban area alone has more than 37,000 residents. It also has around 4,000 businesses that include 120 tech and innovation start ups and 81,000 employees. The city is the eighth largest city in the U.S. With a population of 1.4 million in 2017. According to the San Diego Association of Governments, the population in the city is expected to be 1.54 million and the total county population will be 3.54 million by 2020.

Many newcomers will first occupy rental units or homes, so they likely won't be ready to purchase until late 2019. Most experts predict a new demand for home purchases late next year. 

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5. More millennials will be purchasing homes.

According to experts, millennials will bring on a home buying surge throughout the country because they are coming into the age to buy property and have families. Many will see buying as a good alternative to renting as rent rates will also increase in 2019. 

Millennials are expected to start moving into the real estate market in late 2019 or 2020 as they become secure in their jobs and have savings to buy. This will create an even larger demand for homes in the San Diego area. 

Lyon said those who sit on the sidelines waiting for a housing bubble to burst could be waiting a long time.

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All real estate experts agree people shouldn't wait for a housing bubble to burst to try to get that awesome deal on a San Diego home because the bubble is not likely to ever burst. Even if it does, most agree home values would only drop from their growth price levels to their current prices. 

The best option is to prepare your finances now to get pre-approved so you can move on the house you want before heavy competition begins in late 2019 and before interest rates climb higher. Once the high demand begins, you may have to be more competitive on your buying price to get into a home. That will mean more overall costs in a down payment as well as more money you will be paying in interest over the long haul.

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Those who have questions or need information about San Diego real estate call can or text me at (760) 297-4539.

I would be happy to help!

Your Non Crashing Insider, 

Scott

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