Market Report 2022

Is the Real Estate Market Changing?

by Sarah Ward, REALTOR?

After two years of record-setting activity, there are some signs the housing market might be cooling. All-time high home prices and rising mortgage interest rates are slowing sales, with home sales declining for the third consecutive month under the weight of soaring homeownership costs. The California Association of REALTORS? (CAR) reports existing home sales were down 2.4% from the previous month, while pending sales fell 3.9% as of last measure, extending the trend of recent months. However, please be aware of home sales versus home prices. The media is quick to print bombastic and exaggerated headlines predicting the demise of the housing market. “Coming up at 11, home sales may be falling…” and “click here to read about the coming market collapse.”

Back in April the media was quick to push the metric that NEW home sales were down. As it turns out, that was for newly built homes, but reading further, the supply chain pinch for new construction materials caused less homes to be built in the first place resulting in less new home sales. In the past month, closed sales decreased 18.4 percent for detached homes but inventory decreased 2 percent in that same time period. The Median Sales Price inched slightly higher for detached homes and Days on Market decreased 5 percent.

What is happening is that homes are taking a little extra time to sell currently and the number of offers on a property has decreased, but homes are still selling quickly and for top dollar. This market is vastly different from the 2008 to 2012 market where millions of homes were foreclosed upon. That environment was quite different with loan underwriting much more lenient and with millions of homeowners having little to no equity and a high mortgage payment. Those people walked away from their properties causing prices to drop significantly.

But today, nearly all homeowners are equity-rich and not needing to walk away from a property. Another major factor is that current homeowners mostly enjoy rates in the 3’s and 4’s and do not want to sell their property and lose that financing arrangement. Many people can just rent out their property as well, with rents sky-high. So do not expect a surge of properties to come on the market anytime soon. Inventory will remain historically low. In San Diego County there are loads of buyer-renters waiting on the sidelines to finally purchase a home. Interest rates are still relatively low and inflation by all accounts will remain elevated for the near-term. With $31 trillion in federal government debt and continued trillion-dollar annual deficits, expect the dollar to weaken, and the price of everything, including real estate, to continue to rise. Real estate is an amazing hedge against inflation and the demand for real estate from both renters and investors will remain high, especially in San Diego.

As California continues to explore ways to solve the ongoing housing shortage, estimated at 1 million homes needed statewide, the Biden administration recently unveiled the Housing Supply Action Plan, which aims to expand housing access through a number of administrative and legislative actions and help relieve the nation’s housing crisis over the next 5 years. Also, Sacramento continues to come up with ideas to expand housing. But the bottom line is that San Diego will continue to have a chronic housing shortage, and while the buyer’s market may slightly cool going forward with extra time to sell a property needed and less offers, expect inventory to remain extremely low and prices to continue to rise, albeit a slower increase over the coming few years.

MARKET REPORT (single family): 92115 College Area: median price down 22% to $855,000 with closed sales down 40% to just 23 closed sales. 92119 San Carlos: median price up 14% to $1,100,000 with closed sales down 30% to 14 sales. 92120 Allied Gardens, Del Cerro: median price down 5% to $1,100,000 with 27 completed sales.