For decades, the San Diego real estate market has consistently been one of the most compelling and sought-after markets in the country for a multitude of reasons.
Known as “America’s Finest City,” San Diego attracts countless visitors and new residents every year thanks to its prime coastal location, picturesque scenery, myriad family-friendly attractions, and unparalleled lifestyle. The city offers an outstanding quality of life with its top-ranked educational institutions, diverse employment opportunities, and thriving economy.
Although it does come with high real estate costs, San Diego still remains relatively more affordable compared to other major California cities like Los Angeles and San Francisco. Due to a steady demand for new homes and a constant influx of new residents, taking time to research, establish clear goals, and plan a strategic approach will help you make smart, well-informed decisions when investing in the San Diego real estate market.
To help you start, here’s an in-depth look at some of the current trends and what you can expect from the San Diego real estate market in the near future.
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San Diego Real Estate Market Trends
San Diego’s median home price increased by over 14% in 2022. Last February, the median list price for San Diego county homes was up more than 16%. The demand for homes had been outpacing the supply. As the market has started to slow down, we are transitioning from a seller’s market towards a buyer’s market. New listings for attached homes dropped by 23% and 15% for detached homes.
Residential construction is currently at a high in San Diego, but the pace at which new construction is going tends to be slower due to the impact of a post-Covid economy. This increased construction could temper the real estate market.
According to the Greater San Diego Association of Realtors, the median home prices in San Diego for September 2022 increased 7.6% compared to the previous year. The median sales price for detached homes was $915,000 and $600,000 for attached. The average time on the market is 30.5% higher for all homes on the market compared to last year.
New home construction in San Diego
While there’s a very high demand for new construction in San Diego, there are several factors that could impede construction timelines. The impact of the pandemic has resulted in high construction costs, labor shortages, and scarcity of construction equipment and materials, which significantly extends the time it takes for new homes to enter the San Diego real estate market.
Despite the challenges, plenty of new construction is underway, with about 9,000 new residential units to be completed by the end of this year.
In addition, a number of non-residential construction projects such as the San Diego airport expansion and development of industrial and science sectors throughout the city mean builders will have packed schedules in 2023 and beyond.
With more prospective buyers in the market for San Diego real estate options, there will eventually be a wider selection of homes to choose from as long as new construction developments meet their expected completion targets.
Can we expect home prices to drop in San Diego?
The median home price in San Diego County dropped by 4.8% from August 2022 to $885,000 in September 2022. According to the California Association of Realtors (CAR) August 2022 resale housing report, this shows an increase of 6% over last year. Another notable trend included in the report is a 27.7% year-to-year decline in single-family home sales, which bounced back by 16.3% from the previous month. While we are seeing a current drop in home prices, overall we are still seeing an increase in median home price and an increase in the number of sales compared to the previous year.
Condos in San Diego also experienced a significant increase in median price compared to the previous year, from $555,000 in 2021 to $617,000 in 2022, which shows an 11.2% increase year-to-year.
CAR’s 2023 California Housing Market Forecast predicts the median price of homes in California to drop 8.8% to $758,600 in 2023, following a projected increase of 5.7% to $831,460 in 2022 from $786,700 in 2021. According to CAR, a normalization in the mix of home sales and a less competitive real estate market will curb the median price increase in 2023.
Best time to invest in the San Diego real estate market
Historically speaking, April is generally not the best month to purchase San Diego real estate. This is mainly because spring is a prime selling season, creating a highly competitive market where prices are at their peak.
October is often a great month to buy real estate in San Diego. During this time of the year, buyers can expect to save about $8,000 on a $300,000 home. Additionally, there’s less competition especially late in the fall, which makes it easier to find an ideal home that matches your requirements at a low price. Enticing deals can also be found during the winter, but remember to keep an eye on increased mortgage rates.
Reasons to Invest in the San Diego Real Estate Market in 2023
The San Diego real estate market has built a solid reputation for being a highly attractive choice for investors seeking excellent returns. The coastal city’s unique combination of economic strength, consistent demand, and value have catered to real estate investors for years.
If you’re planning to invest in the San Diego real estate market in 2023, below are some of the many benefits and advantages you can look forward to.
Price stability
While San Diego’s real estate market is very active, it is still more reasonably priced than other cities in California. In Los Angeles, the current median home price is $1 million, and is $1.3 million in San Francisco. Compared to these other major markets, San Diego isn’t as expensive. Additionally, there are San Diego neighborhoods where home prices are half of the city’s average.
Prospective buyers should consider other factors when looking to purchase a home including inflation and interest rates. Interest rates have increased in the past few months, but there are currently no indications they will go much higher. While inflation has also risen, it is important to consider that more than half of many people’s monthly expenditures are locked in at a fixed rate so they are not affected by the fluctuations in inflation.
Real estate appreciation
The San Diego real estate market is among the top 20% of US markets when it comes to home value appreciation. In the past decade, real estate in San Diego appreciated by 115%, equivalent to an annual appreciation rate of about 8%. In the last 12 months, the appreciation rate in San Diego has been about 16.3%
In the third quarter of 2022, the appreciation rate in San Diego has been 2.8%, on track to an annual rate of 11.6%. However, the appreciation rate will be lower compared to 2021 when mortgage rates were below 3%.
San Diego’s recovering tourism industry
Following the impact of the COVID-19 pandemic, San Diego’s travel sector is currently in the midst of a strong rebound. Although tourism activity is still below pre-pandemic levels, it’s catching up quickly according to the latest San Diego Hotel Forecast Update report released by the San Diego Tourism Authority. The recovery is credited to wider vaccination programs and recent gains in economic and travel activity, which have helped dispel lingering uncertainties surrounding future predictions.
Prime area for real estate investment
The San Diego real estate market is a terrific choice for investors looking for a good return. Here are some of the top reasons why:
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Job growth – San Diego is home to a dynamic employment scene that offers numerous opportunities in a wide array of top-earning professions. Demand for rental properties is currently high, which is seen in the increase in multi-family housing stats.
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The thriving tech industry – San Diego ranks fourth in the US for startups and is currently establishing a reputation as a top tech city. Combined with the city’s lucrative business environment, real estate investors will be able to look forward to a steady influx of high-earning tech employees on the lookout for housing options.
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World-class attractions with millions of tourists – San Diego’s picturesque beaches, incredible museums, and other top-quality attractions attract millions of tourists every year. As a result, vacation properties and short-term homestays like Airbnb benefit from high occupancy rates, making them a reliable source of profit for investors.
Upcoming Major Developments and Construction in San Diego
Many exciting projects are currently underway in San Diego including entertainment venues, mixed-use districts, and infrastructure enhancements, paving the way to a brighter future for the city.
Below are some of the biggest developments you can expect in years to come.
Real Estate
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The first phase of the Riverwalk San Diego in the Mission Valley neighborhood started this October 2022. The $4 billion project is envisioned as a transit-oriented live-work-play environment that will feature over 900 rental homes, retail spaces, and over a hundred acres of green space that will include a 60-acre regional park along the San Diego River.
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As part of San Diego’s commitment to providing affordable housing solutions, Mayor Todd Gloria announced “Homes For All of Us” in July 2021. The project is a package of housing initiatives that incentivize the construction of affordable entry-level homes.
Tourism
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The $1.5 billion East Village Quarter redevelopment project aims to maximize Petco Park’s surrounding area (commonly known as “Tailgate Lot”) for use as a residential and hospitality district with shops, restaurants, parks, and other amenities. The property is owned by the San Diego Padres and is currently being used for parking and special events.
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The $3.5 billion project from private developer 1HWY1 that aims to redesign Seaport Village and the Embarcadero is set to break ground in 2025. Key parts of the development include a living shoreline, an urban beach, hotels, a convention venue, and an observation tower that will serve as a new addition to San Diego’s skyline.
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Balboa Park’s iconic Botanical Building is undergoing an extensive renovation that will add a new welcome gallery, information desk, energy-saving upgrades, and a new irrigation system. The project also includes an upgraded landscape design and structural restorations. The Botanical Garden was closed to the public at the start of 2022, and Phase 1 is expected to finish by spring or summer in 2023.
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The recently opened Snapdragon Stadium is now the new home of San Diego State University’s Aztec football team, the San Diego Legion, and the San Diego Wave FC. The sprawling 35,000-seat arena also hosts a variety of concerts, performances, and other events.
Transportation and Infrastructure
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In recent years, San Diego has boosted efforts to improve the city’s bikeabilty, with various projects under the San Diego Regional Bike Plan slated through 2050. Two of the biggest developments are the Uptown Bikeways and the North Park / Mid-City Bikeways, which are set to add over 25 miles of bike paths. Construction for both projects is scheduled through 2026.
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Thanks to new High Occupancy Vehicle (HOV) lanes in short stretches made possible by the North Coast Corridor Program, San Diego motorists can expect faster travel in less traffic. Last February, nine new miles of carpool/HOV lanes opened on Interstate 5 between Carlsbad and Solana Beach. The development was part of Phase 2, which is scheduled for completion in 2030, with Phase 3 starting sometime in 2031.
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With the increasing prevalence of electric vehicles, you can expect to see more charging stations and new tech in San Diego. The city drafted a Climate Action Plan towards 2035, promoting more adoption of electric vehicles to improve air quality.
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Construction on the new $3.4 billion T1 Project to replace San Diego International Airport’s Terminal 1 began in early 2022 and is set for completion by 2028. The new project will add 30 new gates, more food vendors, retail establishments, and parking to the airport.
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Construction on the new West Mission Bay Drive Bridge started in April 2022 and is scheduled for completion by early 2023. The project will provide wider lanes, more bike paths and sidewalks, and more convenient access to SeaWorld.
Navigate the San Diego Real Estate Market with the Altman Brothers
Whether you’re in the market for a new residence, a vacation home, or the perfect investment property in San Diego, our elite team of real estate agents from The Altman Brothers are ready to go above and beyond to help you navigate the market with ease.
Led by Los Angeles luxury real estate experts Josh and Matt Altman, we are a team of full-service real estate agent who have established a stellar reputation for providing unparalleled service to a diverse range of clientele, from luxury sellers and buyers to clients with varied portfolios and real estate interests.
Expect first-class service from start to finish and nothing but the best results when you work with The Altman Brothers team.
Get in touch with us today at 858.429.9220 or send an email here.