2024 Real Estate Outlook

2024 Real Estate Outlook

By Sarah Ward, Realtor

Last year was a particularly rough one for the San Diego housing market. The steadily rising mortgage rates caused buyers to drop out of the home search, and sellers didn’t want to sell causing unusually low inventory available. Mortgage rates hit a 20-year high in October causing payments to increase and affordability to drop. When mortgage rates neared 8% and beyond in the fall, the market really slowed down, with buyers sitting on the sidelines and throwing in the towel, hoping for a better 2024. Days on market ticked up.

So what to expect in 2024? With rates down nearly a full percent in the past 2-months, affordability is expected to improve causing more buyers to emerge. San Diego is actually loaded with high-income workers currently renting and greatly desiring to own a property. If rates stay steady and perhaps even drift lower with the slowing economy, expect multiple offers again on well-priced properties and I believe, prices to again increase steadily.

When you drive around San Diego County, do you see large housing developments being built? No. There is little new construction coming to market, other than the occasional condo or apartment building and nowhere near enough construction to satisfy demand. San Diego County is an island, surrounded by the Pacific Ocean, Mexico, the deserts and Camp Pendleton. San Diego has a serious housing shortage, some say a shortage of over 100,000 units. And with the vast majority of mortgages in the 3’s, people just don’t want to sell. Expect available inventory to remain low in San Diego, buyer demand to increase, and prices to tick up again in 2024.

One unknown factor though is the average mortgage rate. Mortgage rates follow the ten-year U.S. treasury rate. As a rule of thumb, add 2.75% to the ten year rate for a typical mortgage rate. Back in October, the ten-year exceeded 5% with mortgage rates approaching 8%. But the ten-year has since drifted back down near 4% with mortgage rates falling to around 7%.

The issue is the national debt of $33 trillion, increasing at $2 trillion per year. The federal government needs to continue selling trillions of dollars in new treasuries to fund the deficits and if global demand for U.S. treasuries wanes, rates will need to increase in order to get those treasuries sold. This is why I don’t see rates falling much further in the near term. A rate in the 6’s or low 7’s I believe is a pretty good deal (especially historically!) and we are close to that now. So I would encourage buyers to start making moves, getting preapproved for a loan, and looking at new listings. If rates ever drift into the 5’s buyers could refi, but if rates again touch 8% and beyond, the window of opportunity will be reduced.

If you are buying or selling in 2024, give me a call for a no obligation chat to discuss your options.

MARKET REPORT (Single Family): College Area (92115): December median price up 2.2% year over year to $915,000 and with 18 new homes for sale (a 50% decrease from last December) San Carlos (92119): median price down 2.3% to $977,500 with 8 new homes for sale (a 38.5% decrease from December 2022). Del Cerro/Allied Gardens (92120): median price down 1.4%, year over year to $1,045,000 with 13 new homes for sale (am 18.2% increase from last December).

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