A Property Manager’s Perspective on the San Diego Housing Market 2023
The San Diego housing market has seen some interesting shifts recently, according to a new report by Redfin. As local property managers, we analyzed the data and want to provide our unique perspective on what it means for San Diego real estate investors and homeowners.
Fox5 San Diego reported that the Redfin study looked at housing data from the past few months in 50 major metro areas. It found that San Diego sellers were the least likely in the nation to lose money on home sales. Only 1.1% of San Diego homes sold at a loss from May to July 2023.
This is significantly lower than the national average of around 3% of homes being sold for less than their purchase price during that period. For context, San Francisco had the highest rate of sales at a loss at 12.3% - more than 10 times the rate in San Diego.
For those few San Diego sellers that did sell their home for less than they paid, the average difference was about $66,500 between the original and sale prices. This was far below cities like San Francisco, where sellers lost over $100,000 on average if they sold their home for a loss.
What does this mean for San Diego real estate?
The Redfin data confirms that the San Diego housing market has remained remarkably resilient, despite rising mortgage rates slowing sales nationwide since early 2022. Home prices here simply have not fallen significantly like they have in other overheated markets.
In fact, the typical San Diego home seller from May to July still netted around 88.9% or $400,000 more than they originally paid for their property. The national profit margin was 78.4% or $203,232. San Francisco saw gains of 70% or $625,500.
So why has the San Diego market not seen prices correct downward as dramatically as areas like San Francisco and New York? There are a few key factors at play:
Limited Housing Supply San Diego continues to suffer from a shortage of homes for sale, especially relative to surging population growth. When supply is limited but demand keeps increasing, prices tend to remain elevated. There are simply not enough homes hitting the market to fully satisfy purchase demand.
Strong Local Economy The San Diego job market and broader economy remain highly attractive. Major industries like military, tourism, biotech and more continue expanding. This fuels ongoing population growth and homebuying demand. San Diego added over 20,000 new residents just from 2021 to 2022.
Desirable Lifestyle America’s Finest City is renowned for its idyllic climate, coastal setting and outdoor lifestyle. For many buyers, especially from expensive urban cores like San Francisco and New York, San Diego represents an appealing lifestyle upgrade and more affordable alternative. This sustains a steady stream of motivated homebuyers.
For these reasons, analysts do not expect San Diego home values to drop substantially like other markets. Prices may see slower growth moving forward, but are unlikely to crater.
Should San Diego Homeowners Rent or Sell?
For current San Diego homeowners, the data offers some reassurance. The equity in your home is likely still growing moderately. This gives you options.
If you do decide this is the time to sell and realize your home’s gains, you can likely still walk away with a sizable profit. Just be aware that bidding wars and ultra-fast sales seen in 2021 and early 2022 have cooled. You may wait a little longer to find the right buyer.
But there are also good reasons to keep holding your property for now if you can. Why leave behind a market where home values are still appreciating for areas like San Francisco where prices are falling?
Rather than selling, consider renting out your San Diego property instead. Work with a professional property management company to tap into surging rental demand. You can start generating passive income through your real estate investment each month.
Key Benefits of Renting Out Versus Selling Your Home:
- Take advantage of sky-high rents and low vacancy rates
- Earn 5-10%+ return on your property’s value each year
- Appreciate the tax benefits of investment real estate
- Avoid capital gains taxes that apply when selling
- Retain your equity instead of cashing out now
- Benefit from future home price appreciation
- Keep your foot in San Diego’s exceptional real estate market
- Leverage property management to handle day-to-day
By renting out your home with a property manager overseeing, you can take advantage of red hot rental demand without the work of landlording. This path allows you to keep benefiting from your asset’s growth long-term.
The Bottom Line
While parts of the country have seen notable home price declines in 2022, San Diego remains a steady market. Home values are still rising here, just at a slower pace than the frenzy of 2021.
For homeowners, now may not be the optimal time to cash out your equity, unless you absolutely need to. Consider rental income instead. But if you must sell, rest assured you can likely still walk away with a substantial gain.
San Diego offers homeowners options. Work with Harland Property Management to determine if renting out or selling makes the most sense in light of your personal financial situation and future plans. The housing market may be shifting, but our city still provides property owners with a stable environment full of potential.