Successfully investing in real estate—with “success” covering a wide range of outcomes that generally all involve financial returns—requires careful research and planning. The old adage that the three most important considerations in real estate are “location, location, location” certainly holds true for San Diego real estate investing. Familiarity with the area in which one intends to invest is essential, along with knowledge of current market conditions and trends in both the area and the broader region. As of late 2017, the San Diego residential real estate market appears to offer many potential opportunities for investors, but as with any venture, it also presents risks. A few factors for prospective investors to consider are how the area compares to similar locations in other cities, property values and prices, trends in new construction, and the potential for rental income.
A “Hot” Real Estate Market
In September 2017, the National Association of Realtors (NAR) ranked San Diego at number five on its list of “hottest” real estate markets in the country. By October, San Diego had moved up to fourth. The NAR looked at the average length of property listings—i.e., how long a property remained on the market before being sold—in determining its rankings. The national median is reportedly 73 days from initial listing to sale, while San Diego’s average in October was 40 days.
A USA Today report placed San Diego 23rd on its list of the 25 “hottest housing markets.” While this might appear less impressive, it still puts San Diego ahead of most U.S. markets. This list was based on vacancy rates, meaning the number of residential properties available on the market. San Jose ranked first on this list, with an 0.23 percent vacancy rate. San Diego boasts an 0.65 percent vacancy rate.
Median Home Prices
The median price of residential properties in San Diego County reportedly hit an all-time high of $543,500 in July 2017. This type of figure can be subject to significant fluctuations from one month to another. One newspaper reported a median sales price of $585,000 for the county in September. Another newspaper reported in October 2017 that the median had dropped to $535,000, but it also reported that San Diego’s residential prices showed one of the highest rates of increase in the country.
A Housing Slump?
At around the same time that San Diego residential real estate prices were reportedly growing to record-setting amounts, the actual number of home sales was actually decreasing. San Diego’s NAR chapter reported only 1,900 sales of single-family homes in September, albeit at an even higher median price exceeding $611,000.
However much the demand for residential property in San Diego might have risen over the past year, the supply has remained roughly the same. Construction of new homes has apparently decreased throughout San Diego County, based on the number of new building permits.
A fundamental principle of economics is that increasing demand, when matched with a steady supply, results in higher prices. The low rate of residential construction is almost certainly part of the reason for high prices. A housing shortage also affects rental markets. San Diego rent prices hit a record high in September, averaging $1,875 per month, which showed an even greater rate of increase than home prices.
More Blog Posts:
What San Diego Real Estate Investors Should Know About House Flipping, Titles and Deeds, November 13, 2017
California Real Estate Agents’ and Sellers’ Duty of Disclosure to Prospective Buyers, Titles and Deeds, September 18, 2017
Vacation Rentals and San Diego Real Estate Investors: A Match Made…Cautiously, Titles and Deeds, August 26, 2017