Most home sales experts are predicting a slump in San Diego home sales for the early part of 2019, but that could be a good window of opportunity for home buyers ready to purchase property.
Employment is Up
The good news for those living in San Diego is the economy looks great for next year. San Diego County employment is up 1.7 percent from last year, totaling almost 1.5 million jobs. The county is situated beautifully for employment with payrolls adding 5,200 jobs in July and August, according to data from the Employment Development Department reported in the San Diego Union-Tribune.
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That offset a dip of 14,000 in non-farm jobs earlier in the summer. The unemployment rate has hovered around 3.4 percent. Leading the pack in more jobs was the professional and business sector. It's no wonder with so many businesses headquartered in San Diego from biotechnology like Arena Pharmaceutics to finance like LPL Financial to telecommunications companies like Qualcomm.
Wages in San Diego County are up also, according to numbers from First Tuesday Journal. Its latest comparable numbers from 2014 and 2015 show the county had a 2.2 percent growth in per capita income with it settling at $55,168 in 2016. While that is slightly lower than the 3 percent growth the entire state of California experienced, it is still a good increase.
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Home Values are Up
The other good news for those who already own a home is that 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. Although home values will continue to increase in 2019, the rate of increase will slow down and will rise only 4.3 percent.
Zillow currently lists the current market temperature as “very hot” with the median San Diego home value holding at $629,100. However, the average price of homes sold in the area is $596,500.
Sales Outlook
San Diego home sales have continued to remain slow, are are project to finish out 2018 around 70 percent of what they were in the peak year of 2003. Data shows that 43,200 homes are expected to be sold this year, compared to 60,800 sold in 2003.Yet, sales have stabilized to about the same rate every year, going in cyclical seasons, since the bottom dropped out in 2008.
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The one bright spot in sales are turnover rates. Overall, turnover rates remain a slower pace than they were in 2005 and homeowner turnover is much less than renter turnover. Even so, the homeowner turnover rate of 9 percent is matching that of 2005 and most expert say that is good for sales because it puts more homes on the market. The 9 percent homeowner turnover rate is up from the 7.8 percent rate in 2015 and 7.7 percent rate in 2014, according to First Tuesday Journal.
Home ownership rates in San Diego are gently climbing from previous years also. There was a 54.7 percent home ownership 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, but rising home ownership rates are offering hope for those in the housing markets.
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Factors Affecting Sales
There are two factors affecting San Diego's housing market that are causing it 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 home ownership. The shift 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.
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First Tuesday Journal states the rental construction peak will happen around late 2019 and early 2020. After than, there will be more vacant rentals as more people start buying homes.
The second issue affecting home buying in 2019 is affordability. CAR president Steve White said there aren't enough homes available for middle-income families and rising interest rates will give would-be home buyers pause in making a decision to purchase.
“Would-be buyers who are concerned that home prices may have peaked will wait on the sidelines until they have more clarity on where the housing market is headed. This could hold back housing demand and hamper home sales in 2019,” White said in an October interview with ABC Channel 10 News.
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Home prices are affected, in part, by a lack of construction of single-family homes, he said. However, ongoing out migration may push more available homes on the market in 2019.
CAR statistics show more people moved out of their home county in 2018. Their records put that number at 28 percent, higher than the 21 percent in 2017.
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Taxes Remain the Same
Property tax limits may incentivize some to buy homes in 2019. Under state law, homes can only be reassessed for tax purposes upon completion of new construction or when it is sold. Additionally, state law allows for a maximum of 2 percent increase annually according to the California Consumer Price Index.
The base rate is 1 percent before any bonds, special charges or fees are added. In San Diego, the total percentage amounts to around 1.25 percent of the purchase price.
The weakened market, more homes becoming available through outmigration, less elevation of home values and a good job economy make next year a good time to buy for those who are ready and able to do so. It will be a buyer's market, so there could be some good negotiated deals available.
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However, the window to buy will likely be short as predictions are that those currently renting will be looking to buy toward the end of 2019. That will result in more competition for current homes because there will remain a flatline of construction for new single-family houses. More demand will also likely cause prices to begin rising more rapidly again.
Those looking to settle and raise a family have a lot of choices of neighborhoods and types of housing in San Diego. There are a lot of diversity, activities for everyone, and niche communities that make for a great quality of life.
Those who want more information about home buying in specific areas of San Diego, or who are looking to see what is on the market, should contact me.
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Scott
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