26 Jan San Diego Home Prices to Rise 8.3% in 2021
CoreLogic said the lack of homes for sale will continue to push up prices
The price of a San Diego home could increase by more than 8 percent this year, more than anywhere else in the nation, according to a forecast released Tuesday.
Real estate analysts CoreLogic said the price of a single-family home in San Diego County will increase 8.3 percent from November 2020 to November 2021. That means the median price of house in San Diego could be around $776,000 by the end of the year.
CoreLogic said main reason is a lack of homes for sale that will push up prices as buyers fight it out. A secondary factor is income growth for highly skilled positions in San Diego County.
It isn’t out of the ordinary for San Diego homes to increase a lot in a year — in fact, single-family homes here were up 9.5 percent last year — but the forecast is noteworthy because CoreLogic predicts most markets will see price appreciation slow in most markets.
The only regions that the real estate analysts say will come close to climbing as much as San Diego will be: Miami, predicted to increase 3.2 percent; Los Angeles, up 3.2 percent; and Washington, D.C., up 2.9 percent. CoreLogic said the total national increase should be around 2.5 percent.
“San Diego is just one of those markets that has had a lot of income growth and not enough supply to meet demand,” said Selma Hepp, CoreLogic deputy chief economist.
She said San Diego is an example of what has been seen a lot across the nation: High-wage workers who have been able to work from home have seen fortunes increase during the pandemic while low-wage workers lost income because their jobs were among the first shuttered during shutdowns.
“Income inequality is being exacerbated by all of this,” Hepp said.
For people with the money to purchase, there are not as many options as in previous years. As of mid-December, the Redfin Data Center said there were 3,763 homes listed for sale in all of San Diego County. While December is typically a very slow month for sales activity, it still is the lowest in recent memory. Around the same time in 2019, there were 5,182 homes for sale and 7,471 in 2018.
Real estate agents across San Diego County in 2020 said potential sellers wanted to wait out the pandemic before putting their homes on the market. Some of the thinking was not wanting to move during the crisis, as well as avoiding potential buyers walking through the house and carrying COVID-19 with them.
Yet analysts say supply constraints in California can’t be explained only by a lack of homes for sale — but also slowed home construction. As of the third quarter 2020, San Diego County had built about 6,691 homes. While that appears to be on track for more than 2019, it still is down for from boom times when 17,306 housing units were built in 2004 and 15,258 in 2005.
Nathan Moeder, principal with San Diego real estate analysts London Moeder Advisors, said local building has been under what is needed for a growing population. He said data for the state-certified housing plan for the county, which plans out out how many homes would be needed from 2012 to 2020, shows the region fell short by more than 35,000 housing units.
“We’re only building half of what we need,” he said.
While it may seem to many San Diegans that home prices here are overvalued, CoreLogic said they aren’t. It ranks markets by undervalued, normal and overvalued. It only says a market is overvalued if home price growth is 10 percent or more of household income growth in that region.
It said overvalued markets include Denver, Las Vegas, Miami, Phoenix and Washington, D.C. However, it said San Diego ranks as “normal” because of gains in household income growth pushed up by higher-paying jobs. CoreLogic used data from the U.S. Bureau of Economic Analysis that showed personal income in San Diego metro up by 4.2 percent, above the national average of 3.5 percent.
The price of a resale single-family house in November was $717,000, said CoreLogic data provided by DQNews, down slightly from an all-time high of $730,000 reached in October.
While the increase in prices might be hard to stomach for potential buyers, it has meant good fortunes for homeowners in San Diego County.
Hepp said increased equity for owners means they can use it to make improvements to their homes, use it to finance the purchase of a second property, or sell and buy a new place in a lower-cost market.
CoreLogic doesn’t predict all markets will see increases in 2021. For instance, it said Houston — hit hard by declines in the oil industry and the recent hurricane season — will see prices decrease 1.4 percent by November 2021.
Trends in San Diego County could mean the biggest working generation, millennials, will mostly be renters. A LendingTree study, also released Tuesday, said San Diego metro is not as popular with millennials, who tend to be poorer than Generation X and baby boomers.
LendingTree said of the 50 largest metros, Jan.1 to Dec. 15, 2020, San Jose had the largest share of mortgage purchase requests by millennials at 62 percent. I was followed by Boston, Denver and Minneapolis at 59 percent, and Buffalo and San Francisco at 58 percent.
San Diego ranked No. 35 on the list with 51 percent of millennials making the purchase requests. Las Vegas was the least, at No. 50, with 43 percent.