Between 2020 and 2021, San Diego’s population fell by over 11,000 residents. It’s a trend that’s poised to continue. Many of the residents who chose to leave stated that high San Diego property prices factored into their decision. This leaves current and future residents with many questions about the housing market in San Diego.
How does this population decline impact San Diego real estate for current residents looking to buy a house? Is the housing market still difficult for buyers to navigate? Is it just luxury homes in San Diego, or all properties that are rising in price? How do interest rates and housing prices connect? Can we expect any changes in the near future?
We’re here to give you the scoop on the 2023 housing market in San Diego and what it means for everyone on both sides of potential San Diego real estate transactions. We’ll also offer tips for anyone looking to move to the San Diego area.
Read on for our complete housing market analysis for renters, sellers, and homebuyers in San Diego.
A General Overview of the San Diego Housing Market in 2023
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, the 2020s have thus far been a seller’s market, 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 San Diego housing 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. The median cost of housing in San Diego is now over $900,000. That’s down slightly from 2022, which itself was up over 20% from the year prior.
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 luxury homes in San Diego, especially in the area’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 Bankrate, interest rates now average at about 7.4% for 30-year fixed mortgages and 6.56% for 15-year fixed mortgages. These interest rates and housing numbers have the San Diego property market in a unique spot now, with prospective buyers, sellers, and investors all watching closely.
Not everyone looking to move to San Diego is interested in purchasing a home right now. What about the rental market? 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 couple of years, rental vacancy rates fell to about 1% while rent increased by 15%. Prices have somewhat leveled off in 2023, bringing the average rent to:
- $2,328 for a studio (4% increase annually)
- $2,879 for one bed (1% decrease annually)
- $3,788 for two beds (1% increase annually)
As we can see, these prices have seen slight changes from the year before, even with a minor decrease in one category. What does this mean for the future of San Diego property prices, specifically for the rental market in San Diego?
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 to Expect from the San Diego Real Estate Market in the Future
For people who are performing housing market analysis or analysis of the rental market in San Diego, it pays to look ahead. As we’ve shown, stats can change fast for everything from inventory numbers to the costs and interest rates of San Diego property prices.
Whether you’re looking to buy, rent, or sell, we can tell you that the market here definitely shows some promise. The best way to make an informed decision that delivers a return on investment either in money or assets is to assess the future of the market and make your decisions accordingly. Here’s what to expect moving forward.
What San Diego Buyers Can Expect
As many have already discovered, homebuyers in San Diego may encounter some difficulties when looking for a great deal. 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.
You may also be able to find a house that’s up to your standards and within your budget if you’re willing to think outside the box, and outside your area of choice – some truly fine gems exist in the San Diego real estate market beyond the region’s top neighborhoods.
What San Diego Sellers Can Expect
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 the asking price.
We expect that sellers will still have luck finding the right buyer in a reasonable 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.
Still though, don’t think of this as an obstacle – those who are savvy with their San Diego real estate can view it as an opportunity. Demand remains high, and the San Diego housing inventory could experience a crunch soon. Consider friendlier terms to stand out from the competition, and you just may have prospective buyers blowing up your phone in the future.
What San Diego Renters Can Expect
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 or at least hanging around the same level. This can 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.
However, landlords may be willing to compromise too. Don’t be afraid to negotiate to see if you can get a better deal. To swing the proceedings in your favor, consider renting during the off-peak seasons when good tenants are in high demand. If you have a good credit history, bring this up and use it to your advantage when negotiating.
Tips for Navigating the 2023 San Diego Housing Market
We know what you’re thinking: this isn’t the news you were hoping for. On the bright side, these tumultuous 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 more tips to consider that will help you to navigate the 2023 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 2023. Make sure your ideal neighborhood offers what you’re looking for, which may include:
- A family-friendly atmosphere
- Close proximity to popular amenities
- Parks and green spaces
- High safety rating and low crime
- Fun local festivals and community events
If you can find a location that offers the qualities you want, it doesn’t matter if it makes the list of San Diego’s top neighborhoods. As we said, sometimes you can find some truly great San Diego real estate options by searching outside of the most sought-after areas. And who knows? You may help start a trend that turns these areas into top choices.
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 professional 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. But while buying or renting a place may be a challenge, moving there doesn’t have to be. We’re here to ensure that your move goes smoothly and that it doesn’t break the bank.
Here at Best Fit Movers, we bring everything you could want in a moving partner. We are:
- Highly familiar with the San Diego area
- Skilled in home and apartment moves
- Fully licensed and insured
- Highly rated with past customers
- Rated an A+ with the BBB
- A member of the San Diego Chamber of Commerce
- Equipped with all necessary moving supplies
We’re prepared to offer you a full set of moving solutions including packing, unpacking, loading, unloading, professional storage solutions, and transport in clean trucks. We make the moving process a breeze, so you can settle into your San Diego residence and enjoy the journey there.
Want to find out more about how we can help you move to San Diego? Looking to learn more about our pricing or schedule your move? Contact us today and we’ll answer all of your questions and schedule services that are customized to your specific needs – we can also start you off with a free moving quote!