The San Diego real estate market is experiencing strong demand. However, it is one of the most expensive real estate markets in the country.
The demand for houses in San Diego keeps rising year after year, even though inventory is low. The high demand continues to drive the prices of houses in the area. And the lack of affordability of such houses is concerning for many homebuyers.
Table of Contents
- How Was the San Diego Real Estate Market in 2022?
- What Will the San Diego Real Estate Market Be Like in 2023?
- Should You Invest in the San Diego Real Estate Market in 2023?
- How to Find a Profitable Investment Property in the San Diego Real Estate Market
The San Diego real estate market is considered a seller’s market. It means that there are more buyers than there are houses available for sale. As a result, buyers are seeing skyrocketing home prices, making it difficult for some of them to afford to buy a house.
However, it is a great time for homeowners to sell their houses as they can expect to receive a higher price for their property.
In this article, you will discover the trends and statistics of the San Diego real estate market. We will also give you access to the experts’ forecasts on the San Diego market in 2023.
You’ll discover if the San Diego real estate market will experience a downturn in 2023. Plus, you’ll also see how Mashvisor’s real estate tools can help you make profitable investments this year. That is if you choose to invest in San Diego’s real estate market.
How Was the San Diego Real Estate Market in 2022?
The San Diego real estate market went through a series of changes in 2022. Here are some of its biggest trends.
Increased Home Prices
San Diego experienced a downturn in the number of houses sold in 2022. It means that the real estate market in San Diego experienced rising home prices. Many factors influenced the trend. They include an increase in demand for housing in the area, a shortage of available homes for sale, and low mortgage rates.
As a result of these rising home prices, many potential homebuyers were priced out of the market. This led to a decline in existing home sales, as people could not afford the high cost of buying a home in San Diego.
Houses Spent More Days on the Market
The time spent on the market for homes in downtown San Diego increased due to the rising cost of properties in the area. The increasing prices of properties led to slower home sales. As a result, homes remained on the market for longer periods before they were sold.
Related: How Average Days on Market Should Affect Your Investment Decision
Affordability Index Reduced by 32%
The affordability index is a measure that compares the cost of housing to the income of buyers. A lower affordability index means that housing is becoming less affordable for buyers. The affordability index of buyers in the San Diego real estate market in 2022 went down by 32% as buyers could not afford to invest in properties at the current prices.
The decrease in affordability can result in significant consequences for the housing market in downtown San Diego. Furthermore, as fewer people can afford to buy or rent properties, there may be a decrease in demand for housing in 2023. It can result in a slowdown in the housing market and make it more difficult for sellers to find buyers.
Additionally, it can also lead to increased competition for affordable housing, putting pressure on low-income and middle-income earners and resulting in increased housing insecurity.
What Will the San Diego Real Estate Market Be Like in 2023?
Experts forecast what the San Diego real estate market will look like in 2023. Here are some of the forecasts:
Reduced Home Prices
According to Realtor.com, the prices of houses in San Diego will drop by 27% in 2023. The forecast is based on how few buyers can afford the prices of homes in San Diego. It ignores the number of buyers who are making substantial down payments on properties, so their monthly payments will be lower.
If it happens, sellers will not accept it, and therefore, inventory will reduce drastically or even cease. It is because most sellers are thinking that they’ve already given up a certain percentage of their prices in 2022. They would not want to give up another percentage in 2023.
It is the type of idea that participants in the San Diego real estate market may be getting. It does not matter if it’s realistic or not, market perception is all that matters.
The forecast of realtor and broker Jim Klinge is that prices will keep dropping until real estate agents tell their clients to sell in the first two weeks or risk getting lowballed. To sell their homes within two weeks, clients must update the property to make it more attractive to the buyers, both in price and aesthetics.
Home Sales Will Reduce
Redfin’s forecast states that the San Diego real estate market is expected to experience fewer home sales in 2023 than it did in 2022. It is due to a combination of factors; the first of which is high mortgage rates. When mortgage rates are high, it becomes more expensive for buyers to finance the purchase of a home.
As a result, many buyers may be priced out of the market, unable to afford the higher monthly mortgage payments. It can lead to a decrease in demand for housing, which, in turn, can result in fewer home sales.
The second reason for the forecast of fewer home sales in 2023 is that buyers may not want to go house-hunting when mortgage rates are still high. High mortgage rates can make it more difficult for sellers to find buyers.
Rents Will Drop
The San Diego real estate market is expected to experience an increase in vacancies, which can result in a decrease in the amount renters pay for rent. With more vacancies, landlords will need to compete with each other for renters, which can lead to lower rental rates.
The change in the rental market can be attributed to many factors. One of the major factors is the increase in the construction of multifamily homes. According to RedFin’s statistics, there was a rise in the number of multifamily homes that were built in September 2022.
It means that there will be more new houses available in the market, which can increase the supply of rentals and make it harder for landlords to fill their units.
Another reason for the increase in vacancies is that real estate owners who plan on selling their homes are now opting for renters instead.
Related: How to Find Rental Rates by Zip Code
Should You Invest in the San Diego Real Estate Market in 2023?
This section lets you know whether you should invest in the San Diego real estate market or not. But first, here is San Diego’s real estate data as of January 2023.
- Median Property Price: $1,082,968
- Average Price per Square Foot: $767
- Days on Market: 61
- Monthly Long Term Rental Income: $4,008
- Long Term Rental Cash on Cash Return: 2.65%
- Long Term Rental Cap Rate: 2.67%
- Price to Rent Ratio: 23
- Monthly Short Term Rental Income: $4,595
- Short Term Rental Cash on Cash Return: 2.33%
- Short Term Rental Cap Rate: 2.34%
- Short Term Rental Daily Rate: $234
- Short Term Rental Occupancy Rate: 51%
- Walk Score: 53
Based on the data presented above, you can see whether you should invest in the San Diego real estate housing market.
If you want to buy a property as your primary place of residence, the median property price may be on the high side. But if you plan on renting the property out, based on the data presented, you can invest in the San Diego real estate market.
Pros and Cons of Investing in the San Diego Real Estate Market
If you’re looking to invest in the San Diego real estate market, you must know what you’re getting yourself into. So, below are some of the pros and cons of investing in the San Diego real estate market:
Pros of Investing in the San Diego Real Estate Market
Below are some of the pros of investing in the San Diego real estate market:
Potential to Appreciate
According to the latest statistics from Norada, the San Diego real estate market boasts a track record of increasing property values over time. It means that if you were to purchase a property in San Diego, the value of that property would likely increase in the future. The rise in value can provide a good return on investment.
Even with the experts’ forecasts of a reduction in rent prices, home sales, and home prices in 2023, you can expect that your property will increase in value over time.
Strong Economy
San Diego enjoys a strong economy with a diverse range of industries. According to statistics from Statista.com, San Diego’s gross domestic product (GDP) in 2021 amounted to $224.95 billion.
Good economic figures are beneficial to people who choose to invest in the San Diego real estate market. A strong economy can lead to increased demand for housing.
San Diego’s economy is driven by several key industries, including defense and military, healthcare, and technology. The city is home to several major military bases and is a major center for defense and military research and development.
Additionally, San Diego’s healthcare industry is one of the largest in the state, and it’s also a hub for biotech and life science companies. The technology industry is also a major contributor to San Diego’s economy, with a large number of software and internet companies based in the area.
The presence of a diverse range of industries in an economy can provide a level of stability and resilience. When one industry experiences a downturn, other industries may be able to pick up the slack and continue to drive economic growth. It can provide a stable source of income for landlords, which can, in turn, support property values.
Steady Stream of Rental Income
Real estate in San Diego can be a profitable investment opportunity for rental properties. It is because the city can provide a steady stream of rental income for investors.
San Diego is a popular vacation destination, and there is a large student population in the city. Therefore, you can expect to receive passive income consistently if you own a rental property in San Diego.
As mentioned earlier, San Diego boasts a strong economy and job market. They contribute to a steady stream of rental income as more people move to the area. They can be beneficial for long term investments, as the consistent demand for rental properties can help to increase the value of the property over time.
Cons of Investing in the San Diego Real Estate Market
Here are some of the cons of investing in the San Diego real estate market:
High Prices of Real Estate
The San Diego real estate market is expensive. One of the main reasons is that San Diego is a highly desirable place to live in. It enjoys a great climate, and it’s close to the ocean. They attract many people and drive up demand for housing. The high demand can lead to higher property prices.
Another factor that contributes to the high prices in the San Diego real estate market is the low inventory. The city is seeing a relatively high population density and a shortage of land for new construction. If people keep coming into the area, the forecast is that prices for existing properties will skyrocket.
Natural Disasters
San Diego is located in a region that is prone to several types of natural disasters, including earthquakes, wildfires, and floods. According to statistics, San Diego’s natural disaster risk score is 57%. It means natural disasters can cause significant damage to properties, which can, in turn, negatively impact the real estate market.
Be aware of such risks and take them into account when looking to invest in the San Diego real estate market. Invest in properties that are built to withstand natural disasters. Also, you should get proper insurance, so the above statistics don’t scare you.
High Competition
According to trends and statistics from Redfin, San Diego real estate market’s competition score is 68 (out of 100). The high competition score makes investing in San Diego’s housing market a bit more challenging.
It is because many other investors are looking to buy properties in the same market. The increased competition can drive up prices and make it harder for investors to find properties that are being sold at a discount.
Investors in the San Diego real estate market will be facing stiff competition in 2023, and it might spill into 2024. It is because there is still a high demand for properties in the area. Whether you are buying or selling, you should be on alert to pounce on investment opportunities as they arise, as they can save you thousands of dollars.
How to Find a Profitable Investment Property in the San Diego Real Estate Market
Finding a profitable investment property in the San Diego real estate market in 2023 can be challenging due to increased competition. But if you adopt the right strategy and use the right tools, it is possible.
Below is a step-by-step guide on how to find a profitable investment property in the San Diego real estate market in 2023:
1. Conduct Your Research
Before investing in a property, it is important to research the market you want to invest in. Look at the latest trends and numbers to get a better understanding of the market. If everything comes out as you would like, it’s safe to consider investing in that area.
In this case, you would want to know the median home price of properties in San Diego. You also want to see the vacancy rates, rental rates, cash and cash returns, and cap rates. You can find the said numbers and many more from the San Diego location data already provided above.
Also, update yourself on the laws and rules of the market so that you are not caught unawares by state and local authorities. A good real estate lawyer should be able to help you.
2. Find Good Neighborhoods
Also, take a look at the neighborhood you want to invest in. Not all neighborhoods are the same. You can use Mashvisor’s real estate heatmap to find top-performing neighborhoods based on your preferred metrics. It will help ensure that whichever place you choose will provide you with the best return on your investment.
If you choose to find a good neighborhood yourself, you will need to painstakingly check to see if there are good schools, amenities, and security in the neighborhood. But if you use Mashvisor, you can find neighborhoods with all the necessary amenities in place.
Related: The Best Real Estate App of 2023 for Investors
3. Find Profitable Properties
After choosing the best neighborhood, your next step is to find profitable properties to invest in. It is made possible by using Mashvisor’s Property Finder tool.
Mashvisor’s Property Finder can help investors find properties in any real estate market in the US. The tool reduces the time spent looking for properties so that you do not need to spend weeks or even months searching.
You can use Mashvisor’s Property Finder to search for profitable properties in the San Diego real estate market.
4. Inspect the Property
After finding the best investment property, your next step is to inspect the property. It is to ensure that what you saw online is the same as the actual property. Sometimes, the property might have undergone some changes that were not mentioned online.
Inspect the property and make sure to adjust the prices accordingly.
5. Make an Offer
After finding a great neighborhood and a profitable property in San Diego, it is time to make an offer.
It is usually the last step in the process. As long as you use Mashvisor’s tools, you will be able to find profitable properties at great prices.
Start investing in the San Diego real estate market with a 7-day free trial on Mashvisor.
Final Thoughts on the San Diego Real Estate Market
The San Diego real estate market is a strong market with a high demand for housing. There is a growing population in San Diego and it’s not stopping soon. The said population growth can drive up demand for houses and boost the housing market in the area. And as mentioned earlier, it is a seller’s market with low inventory and high demand.
San Diego is also a popular tourist destination, which can increase the demand for vacation homes. Plus, it boasts a strong and diverse economy. It can provide a stable source of income for investors and also help support property appreciation.
The statistics and trends mentioned above should shed some light on the state of San Diego’s real estate market. Also, the forecasts should let you know where the market is heading in 2023 and maybe in 2024.
The San Diego real estate market can be challenging for some investors. However, you can avoid the challenges by using the best platform in the real estate market, like Mashvisor, to get the most profitable property available.
Schedule a demo today to profitably invest in the San Diego real estate market.
