We love top ten lists, and we want to be on them. So San Diegans, take a bow. You have made the list of the hottest real estate markets in the U.S., coming in at No. 6 in the month of November 2015. For 2016, San Diego made the Realtor.com of “markets to watch”, this time at No. 3. The latter measured markets where growth topped U.S. averages.
The attribution for these stellar ratings is threefold: One, San Diego has seen its population increase by 5 percent. Two, as we reported in a previous article, inventory in the county is low, with only a two month supply of available homes on the market, and three, as you can expect, the low inventory creates a pent up demand. This is great news for real estate brokers, sellers, lending institutions and the like. Desperate buyers, not so much.
Not only San Diego, but California in general is hot. That top 10 list in November included eight California cities. It appears that sunshine is still driving folks westward; the hardships of the wagon train having now been replaced by the rush to see every new listing that pops up, and then the opportunity to bid higher than the asking price for a home you still have to renovate.
California builders have taken note, and are now busily in the process of constructing some 24 communities in San Diego County to meet the demand. Even so, with all this sawdust in the air, it’s still not enough. A good balance between supply and demand is considered to be about a six month inventory with builders meeting about a third of the demand.
This shortage causes upward incentive on prices. Of the 24 projects under construction in 2016, two were located in communities with median prices over $1 million; 11 in zip codes with medians between $500,000 and $1 million and another 11 under $500,000, but most just under. Most of the sales prices on these new homes were well over $500,000, many close to and topping $1 million.
With this kind of demand, it’s difficult to find builders to build affordable units. Incentives would have to come from government, and no one is driving that cause. The result: more and more for the better off. It is reported that only 229 single family homes were built in the county for under $500,000, and it’s safe to guess that most of these were close to that ceiling.
Good news is that builders are incorporating environmentally-friendly and cost-saving features into these new homes, which is especially welcome in such costly times. Every penny in savings counts when initial home costs are this high. Still low mortgage interest rates also take these purchases into the realms of possibility.
What can we say? If you want to be in the top ten, you’ve got to pay the freight. A teeny cool down might be in the offing though; home values have been up over 6 percent in the last year, and Zillow predicts they will only rise a little over 2 percent in the next. Whew! Isn’t that a relief!
