San Diego Real Estate Market Spring and Summer 2019 Update
The San Diego Real Estate Market is in an interesting place. I believe there is opportunity in the 2019 spring and summer market for both buyers and sellers. But I also believe there is opportunity in any market if you know where to find it or how to get it. So as far as the market in 2019 is concerned it can’t be explained by a quick phrase like “it’s great” or “you better buy now” although in same cases it is. There are some really good things going on right now, one of them being that interest rates have dropped into the low 4% range and even the high 3% range for a 30 year fixed. 15 year fixed loans even lower. So if a buyer is looking to purchase a home or condo the interest rates are great. If you’re thinking about selling your home it’s a good time because the interest rates, being low, allow a buyer to go up in price range.
Back to the end of Summer of 2018
To really understand the 2019 real estate market in San Diego we have to go back the 2018 market. The market was carrying over from a very health and robust 2017 market that continued into a very healthy and robust 2018 market. Interest rates in 2017 were around 4% and then in January 2018 interest rates started climbing until April 2018 when they went up to 4.5% for a 30 year fixed. Now this was expected since Donald Trump and the Fed said they were going to raise rates in 2018. It was no surprise when rates started rising. The buyers that were sitting on the fence jumped off the fence and bought homes and condos. Buyers knew, at least the savvy ones, how interest rates effect their monthly mortgage payment and purchase price. So there was a rush to the market in early to middle 2018. The summer rush to purchase a home was fueled by the knowledge that interest rates were going up and it wasn’t just talk, like previous years, they actually were going up.
At the end of summer 2018 the market got quiet. Not everywhere and not in every price range but overall agents were saying and feeling a slowdown. I believe 2 things were the cause of the slowdown. One was without a doubt the interest rates going up which caused the fence sitters all jump in before the rates went up. Many of them bought their homes in the first half of 2018. Second was that sellers and or sellers agents pushed the price range to accommodate for the next expected jump in price from the recent summer rush of buyers. That price jump never happened. Listings stayed on the market longer and in many cases they reduced the price to a price range a buyer would consider writing an offer on. Inventory built up. It was great for a buyer but now that interest rates were higher many buyers were sitting it out and watching to see what would happen. Sales were still going on but not at the pace seen in previous years. Especially the middle-upper-end to upper-end homes and condos were not selling like they were.
Mortgage Rates 1 year, 3 Year, 5 Year, 10 Year and Max from Freddie Mac
1 Year Chart - Mortgage Interest Rates April 2018 - April 2019
3 Year Chart - Mortgage Interest Rates April 2016 - April 2019
5 Year Chart - Mortgage Interest Rates April 2014 - April 2019
10 Year Chart - Mortgage Interest Rates April 2009 - April 2019
MAX Freddie Mac Chart - Mortgage Interest Rates April 1970 - April 2019
The California Association of Realtors came out with the Traditional Housing Affordability Index for the second quarter of 2018. They stated that the affordability index went down from a 26 to a 23 “less affordable by 3 points” with the median home price in San Diego being $645,000. This showed a monthly payment including principle, interest, taxes, and insurance being $3,420 and the minimum qualifying income to buy that $645,000 median priced home was $136,720. More negative news kept some buyers out of the market, taking a let’s wait and see stance. This continued through the remainder of 2018. There were sales but not as robust as earlier in the year. Remember real estate is mostly cyclical.
Traditional Housing Affordability Index in San Diego California 2017-2018
Early 2019 Real Estate Trends
The trend from 2018 continued into 2019. Sellers that had overpriced their homes continued to let them sit on the market for longer market times instead of adjusting the price to a range that a buyer would consider making an offer on. After a while sellers pulled their homes off the market or did indeed relook at where the market is and price their homes correctly for a sale. Remember that if a home is priced at market value or near market value and it’s a reasonably nice home that buyer’s would like to buy a seller will receive offers. But when a home is overpriced it will sit on the market until a seller realizes what the real value of their home is and lower the price. Sellers, including me, want the most amount of money when they sell their home. But when it’s overpriced it then doesn’t sell and in turn works against you once you realize it and then reduce the price. Price it right to begin with and your results are better by far.
A Zillow Zestimate and other similar house value tools have convinced sellers that the value of their home is what these tools say it is. They couldn’t be more wrong. It can be off by tens of thousands of dollars or more. These tools can be comparing your home to a much smaller home that hasn’t been remodeled in 50 years. It can also be comparing your home to a home much larger than yours that just recently had a complete $250,000 remodel. There’s no way that these tools can accurately know which properties are comparable to yours, its guessing. They are just tools for amusement, they are not made to substitute the knowledge and experience of a qualified real estate professional to show you what your home is worth in today’s market and why. It’s somewhat funny to me that a homeowner would trust an online estimate of their home’s value and consider it to be truth, almost like looking at the amount in their savings account and 401k account and seeing a number. The number in your bank account and 401k account is accurate; the number on a Zestimate or similar tool is nothing short of a guess. It’s not a real indication of the value of your home. If you want another tool to guess the value of your home click my San Diego Home Value tool. If you want an accurate value contact us and we’ll do the work, oh and by the way we give free home value assessments. Free Home Value Checkup by The Lewis Team 619-981-3917.
Spring and Summer 2019 What’s Next
Three things to consider:
1. Interest Rates have dropped “may not stay low for long”
2. Most sellers are pricing their homes more realistically
3. Many buyers have been sitting on the sidelines since end of summer 2018
We live in a time where what is said, “whether it’s true or not” seems to be believed. So for instance if a potential buyer reads something on their social media, they will usually believe it. If a buyer hears somewhere that it’s a bad time to buy, they believe it. It seems to be where things are today. Yes, it’s a general statement but when I ask buyers why they’re not buying right now they say that they want to wait and see where things are going. I ask them what event they’re looking for to prompt them to purchase a home. They don’t know but they say they will know when it’s the right time. Not only have I seen this phenomenon but many agents I speak to say the same thing. Negativity, true or not, has a huge effect on the market.
I believe that as soon as there starts to be good news concerning the San Diego Real Estate Market from a few sources like; social media, news print & television, friends and family then the buyers will be out in force again and the multiple offers on properties will again be the norm. Buying a property before the masses jump in is where the opportunity exists. It requires courage.
What’s going on in the Market Right Now
In the lower price ranges, entry level and first time home buyer properties, there is a good amount of business going on. As long as it’s a home in good condition that is priced at market value or close to market value then properties are selling and sometimes getting multiple offers. I spoke to an agent yesterday that told me her clients wrote an offer on a property in the $400,000 range that had 9 offers on it. So in some areas of San Diego and in some price ranges the market is on fire. The upper end properties or properties close to being at the upper end are not selling as good as the entry level priced homes. Although when they are priced where they should be based on solid comparable properties then they have a greater chance at putting up the sold sign in their front yard. Inventory in most areas and most price ranges has increased.
To me it seems like a good time to get out there and buy something before the summer rush that may be right around the corner. It’s better to be the only offer on the property you want then to be one of many. If you want to see what it looks like for you to buy; purchase price, monthly payment, preview homes and/or condos, contact us we would love to talk. No obligation just for you to find out the facts. Contact us. 619-656-0655
If you’re considering selling your home this may also be the opportunity you have been waiting for. I mean you can’t sell your home if it’s not on the market, right. You also need a team of agents to market it correctly and get it sold. Contact us for a free home value assessment.
Flippers are Making Homes Better for Buyers
There is and has been a lot of flipping homes in San Diego. Some flippers are better than others but overall it has had a good effect on neighborhoods by revitalizing older run down homes and making them look nicer and newer. We work with and know about many properties that are currently being remodeled by flippers that will soon be coming on the market. If you are looking for newly remodeled homes in San Diego County then please let us know. We can get you on our interest list for upcoming off-market homes.
Most buyers don’t want to go through the hassle of buying a home that needs a lot of work. I show homes that need a lot of work to buyers and they will almost always not want to take on the challenge. Some of them don’t even want to paint or replace flooring. But when I show a home that has been remodeled it’s a different story altogether. Most buyers love a property that is 100% ready to go with all of the remodel work, or most of it, already completed. In 2019 the flippers are going to be out in full force buying dilapidated homes and making them like new.
Building Wealth Through Real Estate
You can never build wealth through real estate if you rent. You’ll be building wealth for the landlord and I’m sure they appreciate the fact that your there to help them do it. Is 2019 the year you start building wealth through real estate? Once you purchase a home with a fixed mortgage of usually 30 years then your monthly principal and interest stays the same. It’s locked in for 30 years. Rent on the other hand will almost inevitably go up. So if you’re paying rent of $2,500 a month now, in 10 years that number could be way higher, could be as much as $3,500-$4,000 month. If you bought a property and locked in a fixed rate mortgage it stays the same until you pay it off and then, here’s the magic, you own it … it’s yours. If you rent it’s your landlords.
Over time you may decide to make the home a rental and you will now be the landlord and you will have a renter that pays off your home’s mortgage. Doesn’t that sound pretty good? Once you rent the house out then you will be ready to buy your second home. You may decide to grow old in this home and pay it off or maybe turn this one into an investment property as well and now you have two properties that have renters paying off the mortgage for you. Pretty soon you’ll be making more in rent then what your mortgage payments, taxes, insurance and maintenance is. You can apply the extra to the principal and pay the home off earlier than 30 years. Now you have income from your property to use in your retirement to offset social security, 401k, savings, pension and other retirement monies. That’s what I mean by building wealth.
And if you just buy one home and pay it off, you have a place to live when you retire and not have to pay the mortgage because you paid it off and you will not have to pay rent as part of your retirement expense. The main factor in this equation is time. The sooner you get started the better chance you have of attaining wealth in real estate and with the interest rates where they’re at in 2019 it’s a great time to buy a property on a 30 or 15 year fixed rate loan.
Thinking about buying or selling in 2019?
Contact The Lewis Team today!