Buckle Up - This San Diego Real Estate Car Has Plenty of Gas and No Breaks
Written By: Patrick Kappel
We just saw something unprecedented happen in San Diego. From December to January the median sales price of a detached home in San Diego increased from $942,650 to $980,000. This is a 3.96% increase in just one month. Mind you, December to January is historically the slowest month of the season and when we see prices typically drop.
To be clear, this is unprecedented. Since record keeping began, San Diego has never seen a 3.96% month over month increase in home values December to January. That is until now.
As I mentioned, usually home values go down from December to January. This is the time we often tell our buyer clients they can get a "deal."
The last time we saw prices increase from December to January was December 2021 to January 2022 when prices increased from $850,000 in December 2021 to $880,000 in January 2022. That was a 3.5% increase. That year, 2022, we saw prices rise dramatically over the next 90 days from January to April once the holidays were done. Home prices went from $880,000 in January to a new San Diego County record high single family home median price of $1M in April. That is a 13.6% rise in just 3 months!
Then in April 2022 interest rates began going up and prices began going down. The rise in interest rates in 2022, acting like car breaks, is the only thing that stopped rampant price growth and an upward spiral in San Diego home values.
There are no breaks on the car this year - interest rates are not predicted to go up like they did in 2022. In fact, they are expected to decline.
We are entering 2024 with the same trend (prices going up 3.96% in January) that we experienced at the start of 2022. The only difference this time is that, unlike in 2022 when an increase in interest rates finally slowed price escalations, in 2024 we will see interest rates trend downwards. Let me be clear -- as interest rates trend downwards we will see prices take off and escalate faster than what we saw in 2022.
The last time home prices went up over 3% from Dec to Jan we saw a 13.6% increase in pricing over the next 90 days. If prices go up 13.6% from where we are today at $980,000, that would bring the median San Diego home sales price to $1,113,280 this spring -- well above our previous record of $1,015,000 set in August of 2023 (during a time of much higher interest rates mind you).
I don't know if prices will go up 13.5% in the next 90 days (they might) but I do know that prices will likely go up 13.5%, or more, over the course of this year as interest rates trend down. We will likely see the median sales price of San Diego homes hit an all time new record high this spring, surpassing the previous record high of $1,015,000. We also will likely see median home prices surpass $1.1M, if not higher, before the end of this year. As we enter 2024 we are faced with the same problem that we had prior to the 2020 pandemic - low supply relative to demand. Only now, four years later, due to inflation the price of everything is much higher and the supply of housing relative to demand is much lower. In the San Diego housing market we have always had the same problem, and it's not low or high interest rates. It's low supply. This is a problem that likely will not be cured in my lifetime or your lifetime. And this is exactly why I personally see San Diego real estate as one of the most attractive and secure investments in the World. Owning an asset with low supply and high demand typically proves to be a wise choice over the long run.
Buckle up. This car has no breaks, lots of gas, and prices will escalate rapidly this year.
If you've been sitting on the sidelines waiting to buy, do not delay. Don't wait for the spring market or more homes to "come on the market." The longer you wait, the more you will pay to buy the same home. Your time to buy is now. Reach out for your personal buyer consultation and we will put a strategy in place to help you reach your goals.