Previous concerns regarding rising home prices in San Diego triggered issues of affordability back in 2015. At the time, San Diego’s real estate market even made it into our list of ‘Top 6 Home Buyer Concerns’ article. Along with prices being too high, potential homeowners also cited concerns like facing too much competition from other buyers, needing to sell their home first before being able to afford a new one, having limited options when it comes to new homes, not having enough for a down payment, and rapidly rising mortgage rates.
It looks like real estate developers and regulators should have listened closer to these concerns. As of September 2018, real estate sales in all of San Diego dropped to the lowest that they had been in the last 11 years. From 3,568 recorded sales in 2017, there was only 2,942 sales in September – a 17.5% drop in annual total sales. More significantly, this has been the lowest number of real estate sales in the area since the financial crisis hit in September 2007. Easy Money reports that only 2,152 sales were recorded during that time period. Experts are blaming these major developments on soaring prices as well as rising closing rates – either the same or related problems to the ones being cited by San Diego homebuyers three years ago.
Meanwhile, earlier in 2018, the previous all-time highs in San Diego real estate prices were in August, when the median home price was $583,000. This then took a significant drop to $575,000 in just a month later. Even so, this drop wasn’t enough to prevent the lowest recorded number of sales in more than a decade. In the Easy Money article, CoreLogic real estate analyst Andrew LePage explains that “The double whammy of higher prices and rising mortgage rates has priced out some would-be buyers and prompted others to take a wait-and-see stance.” And given the latest developments in San Diego real estate, it looks like would-be buyers from the middle to end of this year will have to wait a little longer.
As of November 2018, the median sale price of San Diego homes rose to $596,500. That’s pretty high, even when compared to the most coveted real estate in the country. The median sale price of the average home in Las Vegas was an even $300,000 in September, which today is just the median listing price, while the actual average is $261,000. Meanwhile, even the notoriously expensive real estate market of New York can’t exactly keep up with San Diego prices. At a median listing price of $825,000 and actual median sales price of $567,400, even NYC can’t compete with San Diego price averages – although the two share certain characteristics.
Similar to what’s happening in San Diego, closing costs are pricing new buyers out of the New York real estate market. In fact, Yoreevo’s article on buyer closing costs details how buyers in New York often have to add an additional 10% to the final price. There’s also the mortgage recording tax, which in NYC can cost between 2.05% to 2.175% of the total property cost. In San Diego, notable closing costs include homeowner’s insurance which is $1000 to $1500 per year, a flat fee of $400 for loan processing, $450 for appraisal, $500 for underwriting, and many other costs that need to be settled before you can actually purchase a property. While these numbers and percentages don’t sound like much, they can amount to thousands of dollars in added real estate costs. And that’s all on top of actual purchase prices – no doubt making the most expensive properties in the country even less affordable to prospective buyers.
How is it possible that San Diego is topping both The Big Apple as well as Sin City in terms of expensive real estate? Apart from the reasons cited above, there’s been a lot of evidence of San Diego recently experiencing a cultural and economic surge in the form of a variety of new business ventures, which real estate specialist and entrepreneur Jimmy Langley discussed in length when we got in touch with him for an interview in 2017. There’s the Pacific Highlands Ranch area where developer Pardee Homes has been erecting many residential buildings. Being located in Carmel Valley, these homes are close to Ponto Beach which is a pet-friendly beach area. Meanwhile, for the best new food and craft drinks, there’s North Park where new businesses catering to the latest trends tends have made their home.
There’s also Langley’s own Resident Brewing Company with its many locations springing up across San Diego. Other than real estate, the restaurant and bar scene have been experiencing a low-key renaissance in the area in recent years, and this definitely factors into how and why developers have been extremely confident about ballooning prices and other rates, knowing that they can somehow attract the buyers who can afford what they offer. As for whether or not all this will be good for San Diego in the long run, it’s unsure. For now all factors have led to the lowest real estate sales in the area for more than a whole decade.
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