1. Median home prices in San Diego County from this time one year ago have increased by 6.4% while the inventory of homes for sale plunged 28% from one year ago. Metrics for the College Area are similar. As the San Diego economy improves, jobs are created and people continue to move here, keeping pressure on local home prices. Also, local residents are staying in their homes for a longer period of time resulting in less inventory available. Additionally, there is an expectation among buyers that borrowing rates will soon increase as the economy heats up. This creates further demand, with buyers trying to purchase now to lock in a lower mortgage rate (currently around 4% for the highest credit scores). However, it’s been reported by the California Association of Realtors that current homeowners locked into a mortgage in the low to mid 3% range are reluctant to sell their property and switch into a mortgage on a new property at over 4%. This is contributing to people staying in their homes longer.
2. California Demographic Changes: You may be familiar with certain northeast states experiencing a net outflow of residents each year. Such states as Illinois, Michigan, Massachusetts, and New Jersey lose a small portion of residents each year to such states as Florida, the Carolinas, and Texas whose populations keep growing. For instance, last year, Illinois lost a net 37,000 of its residents. Chicago is now on track to lose its designation as the third largest city in the nation to Houston over the next ten years.
According to the California Association of Realtors, California loses more long-term residents than any other state. Last year nearly 130,000 California residents left California for such states as Arizona, Nevada, Oregon, Washington, and Texas. The residents leaving generally have a lower than average personal income and net worth. The number one reason cited by California residents leaving for another state was the high cost of living in California. But what is interesting about the California net loss of current residents is that they are all replaced each year, causing the population of California to actually rise.
According to The Wall Street Journal, for as many residents that left California, at least that many new foreign-born people moved to California from other countries, bringing with them typically a higher personal income and net worth. This is one primary factor why home prices in California have continued to increase relative to home prices in other states, and this trend looks to continue for some time as lower income people move out and higher income people move in to the state each year.
3. Granny Flats: Last year, California state laws mandated that local jurisdictions review and reduce restrictions on granny flats. In May, the San Diego Planning Commission unanimously approved the relaxation of regulations on granny flats (officially known in the regulations as “companion units”). In June or July, the San Diego City Council will vote on the Planning Commission recommendations with an expected approval. While the granny flat regulations are designed as a quick way to increase housing inventory and density in San Diego, there are many issues and potential problems that could result. In my July column I will review and explain the pros and cons of allowing a secondary unit to be built on many San Diego properties.
If you are buying or selling San Diego property this year, give me a call for a no obligation, no pressure meeting outlining the many factors you need to consider when buying or selling real estate in San Diego. Also don’t miss my free buyer’s workshop on Sunday, June 25th. Call or text me to sign up. Hope to see you there.