Has the San Diego Real Estate Market Hit Bottom?

You may wonder if the real estate market has hit bottom in San Diego. The quick answer would be, it depends. The reason I say this is because the market is split into first time home buyers/investors looking for a good deal and buyers that are looking to upsize or move into the luxury market. For those looking to purchase an entry level home or a great deal on an investment property, the market is extremely active and i would advise moving fast. The rest of the market has a decent amount of inventory and room to negotiate.

Let’s take a look at the Carlsbad real estate market as an example. As I write this article there are 468 active homes and 249 pending single family detached and attached properties on market. When I look at the properties priced below $700,000 than there are 198 active listings and 187 pending. This shows us that this particular market looks healthy as a whole, but looks a lot like a seller’s market if we look at mid to lower priced homes.

Sales Numbers are fairly consistent: The number of detached homes put into escrow each month has decreased a bit over the high number of sales in March and April. This slowing in July is in accordance with previous seasonal variation and may also be due to a change in MLS data recording.

Contingent REO/Short-sales: A new category We also need to take into account that our statistics have changed (starting with June numbers) because our data categorization has changed. We used to just have 3 categories: active (homes for sale), pending homes (in escrow) and sold homes. We now have a new status category called contingent in response to the growing number of short-sales and bank owned properties on market. A contingent home is a short-sale or REO (Bank Owned Property) in which the seller has accepted an offer, but the bank is reviewing the offer and has not approved it or received all of the necessary paperwork to open escrow. Currently, contingent homes appear to make up roughly about 25-35% of our inventory! In the past, some agents left these as active and some put them pending. It is hard for us to fully compare the new data to the old data because of this.

Government Incentives: 1. $8000 federal tax credit to first-time buyers (or anyone who hasn’t owned in 3+ years)

2. State Credit for New Contruction of up to $10k. This has a state budget of $100M and is running out fast

Home Loan Rates Still Low: First off, yes there is plenty of financing available to qualified homebuyers. Home loan rates have bounced from upper 4s to upper 5s in rather volatile fashion. Currently, we are seeing quotes in the 5 ” 5.5% range for the most part. This remains a low-point for home loan rates – it is truly an unprecedented opportunity for home buyers to lock in one of the best rates in history.

Will rates hold at current level? The experts are saying that inflation will play a big factor in the future of rates. The typical economic response is fighting inflation with increased rates. Also, rates tend to ride the stock market. If stocks go up usually rates to as well.

Market stratification – luxury vs. lower-end: Luxury prices continue to drop, while low-end homes appear to have hit bottom. I may mention this concept a lot, but it is the core factor of what Im seeing in this market right now. The market is based on what you’re in the market for. You have to understand your price range and the micro market of the area you’re interested in.