San Diego Real Estate Update – May 2021

I’m going to debunk all those articles we’ve been seeing lately about the real estate market being in a bubble in this month’s market update for you guys! Before we jump into it, I’d like to give you some context with the prevailing market data.

Inventory is down 60%!

Inventory is down by 60% compared to this time last year, though to be fair we were in an unprecedented place with COVID last year.

San Diego county is up by 9%

We’re seeing a surge in appreciation across the county, up by 9% for these last 4 months. This is quite significant as if we were to take this trend forward for the rest of the year, we’re looking at double-digit figures! We may even see a 20% appreciation, though I don’t think we should be quite that optimistic either!

We are in a hot seller’s market!

While the buyer market is very competitive at the moment, sellers can get great deals on their property right now.

CLAIM: The real estate market is going to crash

We generally see this or something along the lines of ‘home sales are down three months in a row’. This piece of information is in fact true for home sales but it’s the ‘why’ that’s more important than a catchy headline. The reason for this drop in sales is NOT due to a lack of demand but rather the steep drop in inventory I mentioned earlier. Buyers are eager to find their new home and take advantage of the current interest rates but our inventory just can’t keep up.

Now why do I think the real estate market is not headed for an imminent fall? You’ve got to consider the location; San Diego County is primarily built out already and running into an inventory shortage. With the rise in construction costs, many developers are putting their projects on hold, which is not helping the situation at all.

Secondly, homeowners are not going to just sell their home at a discounted price because the market is down. They are aware of the value of the property and won’t just party with that equity unless they’re in dire need.

We also don’t have much inventory coming in from foreclosures and the like. Our default numbers are currently lower than we’ve seen in years! Nobody is going to start fire sales on their properties for such trivial reasons.

If we follow this trend, we’re likely to see prices recover and stay the course with inflation. Many analysts know that real estate is one of the best hedges against inflation. When prices go up, so does the cost of real estate.

Now that we’re aware of all these factors, what’s likely to drive the change?

Interest Rates

This is likely the biggest factor. Federal Interest rates will increase perhaps by a quarter percent next month or half a percent in the last quarter, but they will be going up either way.

Rental Rates

Rental properties are up 4.5% this year! So it’s not necessarily cheaper to find a rental instead of purchasing a property. So as long as property remains a cost-efficient option compared to rentals and developers continue to put projects on hold, these factors should even out leading to a relatively stable and healthy real estate market.

Buyer Advice

It’s tough out there being a buyer right now. There are likely multiple offers on properties you are after so you must be competitive. We at True Local Realty have several helpful programs for you. One of them is that you can submit a cash-offer on your behalf to purchase the property that you’re going after, and then immediately roll into your traditional financing. If that sounds appealing, do reach out to us for the details!

Seller Advice

If you aren’t looking to get stuck in the middle of a selling agreement and don’t want to end up in an expensive rental property. We have a solution to this which is our trade-in program. We’ve partnered with a company called ‘HomeLight’ and they will actually front you the equity on your property (up to 90% of the value) so that you can go ahead and make your next purchase. Once you’ve moved out, we’ll stage and market your property, do any fixing and painting that’s required and ensure that it sells for top dollar!

We hope you enjoyed this article!

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