By Kathy McSherry | Ask Kathy
I keep hearing that there is no inventory here in San Diego and that is why prices have continued to go up. I also heard that affordability in San Diego is so high that people must spend over 45 percent of their income on housing making it more difficult to buy. What is the latest information on the real estate market regarding these two issues?
That is a great question, considering a new administration and rising interest rates in “America’s Finest City,” San Diego. With San Diego being one of the most desirable places to live in the country, we should expect higher than average housing prices. According to the California Association of Realtors, the median price for a single-family home in San Diego for December 2016 was $568,000.
As prices rise, fewer people can afford their first home. Even if one can afford to purchase a home, studies show they must spend a larger portion of their income to acquire the home, thereby having less money to spend in other areas. These higher prices are great for people that own a home but can drive rents up as the affordability remains high.
Essentially, the median home in San Diego is unaffordable for the median income. In addition, companies must pay higher wages to attract people to come here which will now add to their labor costs. Higher housing prices may discourage good talent from moving here, which again can drive up rents for young professionals and students. Quality of life and commute must now take a back seat to affordability.
One element that has helped affordability for many Californians has been our historically low interest rates these past few years. In 2000, many people were paying over 8 percent; and up until recently that number was in the mid threes.
What many people fail to recognize is that interest rates have a direct impact on payments. Even if the price is higher than you would like, if you can afford to make the payments, you will have still gotten into the game of real estate. Home ownership can provide you with equity and long-term wealth building.
Your other concern was inventory. Supply continues to be low. Clearly when supply is limited, then the demand is greater and that makes us still in a seller’s market.
High density, sustainable, urban communities where people can work and live and walk are proving to be successful. Civita, in Mission Valley, has been an amazing success with several more years of growth and planning yet to come. When Origen, it’s first new home community, opened in 2012, pricing was in the low $400,000s. Now, you will not find any homes in the Civita Master Plan priced under $600,000.
With that being said, where else can you have sunshine and great weather year-round, with beaches, restaurants, culture, renowned zoos, parks, breweries, wine, year-round sports, and much more?
With new guidelines in place for different loan programs, there are many ways to purchase a new home. Speak to a lender for all the latest requirements regarding borrowing money for a home loan. Borrowing limits may have gone up and mortgage insurance premiums may have lessened, all depending on the type of loan you need, which again can help you afford a home.
You know my favorite real estate quote: When is the best time to buy real estate? Answer: Yesterday. When is the second-best time to buy real estate? Answer: Today.
Rates are still historically low and it’s never too late to get into the game of real estate!
For a good resource on market trends in San Diego, visit the market data page of the California Association of Realtors website at car.org/marketdata/.
—Kathy McSherry is a Realtor at Coldwell Banker Residential Brokerage. Email your questions to Kathy@kathymcsherry.com or call 702-382-9905.