San Diego home prices are skyrocketing, with many wondering when prices will reach their peak.
In June, the median home price in the county rose to a record $750,000, up from the previous record of $725,000 set in May. The latest record is nearly 25 percent greater than the year-ago median price of $600,500.
The record-setting activity appears to be a product of limited supply, low mortgage rates and buyers willing to pay thousands over asking prices — in one case $45,000 above ask — to secure in-demand properties.
Q. Are San Diego home prices approaching their peak?
Phil Blair, Manpower
YES: Approaching being the key word. As long as interest rates stay low and homeowners are concerned about lingering COVID issues, I think the normal turnover of housing will stay slow. With every price jump more buyers are forced to drop out of the market. I think we will see a leveling off of house prices, but I see no condition on the horizon that will cause prices to drop significantly.
Gary London, London Moeder Advisors
YES: While the supply shortage, coupled with high demand, continues to bid up prices, the affordability gap widens for many, a situation that is not sustainable. Moreover, forbearance, rental assistance and moratorium programs are coming to an end. I think that the best that we can hope for is a pricing peak and then some pricing stability. There is the potential for some pricing decrease if inflation and interest rates continue to move upward. However, our region is better positioned than most to withstand a downward trend as the local economy remains strong.
Alan Gin, University of San Diego
NO: Growth in the economy is strong and will likely get stronger as businesses reopen. That will lead to solid increases in income, which will continue to boost the housing market. People who kept their jobs were able to accumulate enough money for down payments (the “COVID piggy bank”), as there was less spent on traveling, eating out, etc. On top of that, San Diego has its usual supply problem, as geography and policy limits the amount of construction that can occur.
Bob Rauch, R.A. Rauch & Associates
Not participating this week.
Austin Neudecker, Weave Growth
NO: In the short term, the supply-demand balance is still moving in the wrong direction and prices could continue to rise. While the market will likely normalize over time, in the long run, San Diego remains a highly attractive place to live. As long as we continue to attract and create innovative companies that generate high-paying jobs, the near-perfect climate, innumerable activities and growing cultural establishments make our hometown hard to beat!
James Hamilton, UC San Diego
NO: The Fed is on a course to keep interest rates below the inflation rate for some time. That’s a cautionary note for holding your money in bonds or stocks, and makes real estate one of the most attractive investments available now. The increase in house prices can’t go on forever, but it’s too soon to call the peak. Don’t sell your home to the first offer because a higher one may be coming.
Chris Van Gorder, Scripps Health
NO: I don’t see prices peaking in the foreseeable future unless there is a significant downturn in the economy that dampens demand. While home pricing and the surge in sales could be impacted by rising interest rates, it will be a long time — if ever — before supply catches up with demand. There are just too many people trying to buy. And homeowners are hesitant to sell for fear they could be priced out of buying another home in the area.
Norm Miller, University of San Diego
NO: We have a runway of increasing prices, driven by low rates, low inventories and modest new construction. Sellers fear not being able to find a new home if they sell. Keep in mind that it is not so much income driving the second and third home prices, but rather equity gained on prior homes and a buoyant stock market that is rolled into the next purchase. The hard part for new home buyers is getting on that carousel.
Jamie Moraga, IntelliSolutions
NO: We are currently seeing reduced inventory and high demand which is leading to bidding wars and thousands over the asking price. Couple that with low-interest rates and a desirable location, San Diego continues to have a hot housing market. The pandemic has also uniquely driven the market as homebuyers are seeking more space because they are spending more time at home. Until demand recedes and interest rates increase, we should continue to see increased home prices in San Diego into 2022.
David Ely, San Diego State University
NO: Demand for housing has outpaced the construction of new homes for years. A dramatic expansion in the housing supply needed to resolve the imbalance seems improbable in the foreseeable future. Low mortgage rates over the next several years will continue to stimulate home buying. The rise in San Diego home prices may slow as more residents are priced out of the market, but market imbalances will continue to drive home prices higher for some time.
Ray Major, SANDAG
Not participating this week.
Reginald Jones, Jacobs Center for Neighborhood Innovation
YES: Home prices will level off. Not fast, though. Historically low interest rates have increased buyer purchasing capacity. Limited inventory is prime for the seller. The trend will likely exist into 2022. Looming economic factors bear watching. Some predict mortgage rate hikes sooner rather than later. Lifting the foreclosure moratorium bringing delinquent inventory could jolt the market, as well. All said, San Diego has an affordability problem limiting too many working families from homeownership.
Lynn Reaser, Point Loma Nazarene University
NO: Low mortgage rates, growing employment and rising incomes continue to support housing demand. Local resistance, regulatory constraints and building costs continue to constrain supply. The city of San Diego is producing less than half the number of units necessary to meet its state-mandated target by 2029. As more households are priced out of the market, price increases are likely to slow, but without a recession, a peak is not close at hand.
Kelly Cunningham, San Diego Institute for Economic Research
YES: Prices will reach a peak, but San Diego is not there yet. The ratio of median home price in San Diego is currently 7.0 times the median household income. This ratio previously peaked at 8.0 in the fourth quarter of 2005 before collapsing to 3.6 by the first quarter of 2009. Los Angeles’ housing price ratio is currently 10.1 times their median income, while Orange County is already shrinking from recent 8.3 peak to 7.9.
Have an idea for an EconoMeter question? Email me at jennifer.vangrove@sduniontribune.com.
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July 30, 2021 at 06:45PM
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