Between 2020 and 2021, San Diego’s population fell by over 11,000 residents. Many of the residents who chose to leave stated that high housing prices factored into their decision.
How does this population decline impact current or new San Diego residents looking to buy a house? Is the housing market still difficult for buyers to navigate? Can we expect any changes in the near future?
We’re here to give you the scoop on the 2022 housing market in San Diego and what it means for buyers, sellers, and renters. We’ll also offer tips for anyone looking to move to the San Diego area.
Read on for our complete guide to the San Diego housing market.
A General Overview of the San Diego Housing Market in 2022
Before we get into what the housing market means for you, let’s take a closer look at the state of the housing market, in general. As you may know, we’ve been in a national seller’s market for about two years, making it difficult for buyers who are looking for a home. In some ways, we’re still looking at the conditions that create a seller’s market, but rising interest rates may put a squeeze on sellers as well as buyers.
Like the rest of the nation, San Diego doesn’t have a huge inventory of houses for sale. This creates inherent competition for buyers who have fewer listings to choose from.
Will the inventory increase any time soon? It seems unlikely, particularly in the arena of new houses. Thanks to pandemic-related supply chain issues, building supplies are difficult and costly to acquire, which slows down the rate of new homes being built.
We all know that California is an expensive place to live overall, but San Diego happens to have one of the highest housing costs in the entire state. Earlier this year, Zillow reported that the median cost of housing in San Diego is now over $1 million. To put that in perspective, that is a 22.8% increase from last year.
High prices are driven by a variety of factors, including low inventory. Because competition is steep for buyers, sellers can set higher asking prices–and expect to receive offers above that asking price. While there is housing available at more affordable prices, it’s going to be difficult to gain access to San Diego’s most desirable neighborhoods.
Increasing Interest Rates
Another factor that can fuel a seller’s market is a drop in interest rates. When buyers can gain access to a mortgage without paying a fortune in interest rates, they’re more likely to jump at the opportunity to buy. Unfortunately for buyers and sellers, those interest rates are on the rise.
According to a recent assessment, interest rates now average at 5.68% for 30-year fixed mortgages and 4.90% for 15-year fixed mortgages. This puts us on track to meet and surpass the soaring interest rates of 2008.
Not everyone looking to move to San Diego is interested in purchasing a home right now. What is the outlook for hopeful renters?
While renting presents a more affordable option, renters may still encounter high levels of competition. In the past few months, rental vacancy rates fell to about 1% while rent increased by 15%, bringing the average rent to above $1600 for studios, $1900 for one-bedrooms, and $2400 for two-bedrooms.
Fortunately, many renters are able to be a little more flexible about where they live, since they aren’t making a long-term investment. By widening your search and looking at neighborhoods outside of the city, you may experience more luck.
What San Diego Buyers Can Expect from the Housing Market
As you may expect, buyers may encounter some difficulties when looking for housing in San Diego. Many buying opportunities these days turn into bidding wars, which can push out buyers who aren’t equipped with a ton of cash on hand.
That said, it isn’t impossible to buy a house in San Diego. Buyers who are willing to take their time and stay patient still have a shot at finding a house they love in or near San Diego. The key is making sure that you have a fall-back plan for the next year or so, which could mean committing to a rental or to the house you were hoping to sell.
What San Diego Sellers Can Expect from the Housing Market
Just last year, we would have said that things are looking great for San Diego sellers. With so much competition amongst buyers, sellers were seeing their houses go from listed to sold in a matter of days or weeks, and often above asking price.
We expect that sellers will still have luck finding the right buyer in a reaonsable amount of time. However, that flurry of high-priced sales will start to slow down as interest rates climb and make it more difficult for buyers to secure financing.
What San Diego Renters Can Expect from the Housing Market
Renters should see the least amount of upset in their search for housing. As we mentioned earlier, the vacancy rate is decreasing while rent is increasing. This does pose a challenge for renters, but not as big of a challenge as what prospective buyers are currently facing.
Still, renters may have to make a few sacrifices to secure an apartment this year. For example, they may need to downsize to account for the increase in rent. They may also have to forgo things like walkable or quick commutes, opting to live farther away from popular areas that tend to have the lowest inventory.
Tips for Navigating the 2022 San Diego Housing Market
We know what you’re thinking: this isn’t the news you were hoping for. On the bright side, these tumutuous conditions aren’t designed to last more than a few years. Still, that doesn’t solve your immediate issue of needing San Diego housing this year.
We’ve got a few tips to consider that will help you to navigate the 2022 San Diego housing market.
Assess Your Savings Account
When you’re looking to secure a mortgage in a housing market with low inventory, high prices, and rising interest rates, you’re going to need to think long and hard about how much you can afford to spend on a downpayment. It’s tempting to go with the lowest downpayment possible, paying only 3% of your home price upfront, but this isn’t ideal in this market.
Assess your savings account and determine how close you can get to a 20% downpayment without draining everything, including your emergency fund. If you can manage to secure a 15-year fixed mortgage, you’re in the best position to buy. If not, consider renting or staying put for another year or two while you build up your savings.
Consider Your Credit Score
How is your credit score looking? Your savings account isn’t the only thing you want to assess before seeking financing. Sure, there are plenty of institutions that will offer mortgages to buyers with low credit scores, but they’re also the institutions that are going to charge the highest interest rates.
If your credit score is below 750, consider renting or staying put for another year while you work on building credit. Make all of your large purchases on credit cards and pay them off immediately, work toward paying off loans and other sources of debt, and get that credit score to a better place before entering into the housing market.
Know the Neighborhoods
There are more places to live in San Diego than La Jolla, Hillcrest, Mission Valley, and Downtown. Keeping your finger on the pulse of up and coming San Diego neighborhoods will make it easier to find great places to live that aren’t already jam-packed. We recommend taking a look at El Cerrito, La Mesa, South Park, and North Park, as these are some of the most exciting neighborhoods that are gaining popularity in 2022.
Work With the Right Professionals
Buying, selling, and even renting a home is never something you should have to tackle alone. If you’re buying a home or selling a home, work with a real estate agent that knows your neighborhood well.
Finally, make sure that you aren’t overpaying for moving services. Finding a new place to live comes with enough costs as it is. Make sure that your moving company charges you a fair price for the services you need, and not for services you don’t want.
Let Us Help You Move to Your New San Diego Home
The next few years are going to be tough ones for San Diego residents, both new and existing. The housing market is getting tricky to navigate for sellers, buyers, and renters alike. We’re here to ensure that your move goes smoothly and that it doesn’t break the bank.
Want to find out more about how we can help you move in San Diego? Looking to learn more about our pricing or schedule your move? Contact us and we’ll answer all of your questions and schedule services that are customized to your specific needs.