How Affordable is the San Diego Housing Market?

In case you were wondering, or if you have been sitting on the sidelines waiting to purchase a home in San Diego county, here is some fantastic news: housing affordability in San Diego reached a record high last quarter. Combined with other factors, it is an ideal time for buyers right now in San Diego, especially first-time buyers.

According to data published in the San Diego Union Tribune, 62% of first time homebuyers can afford to purchase a home in the county, the highest percentage going back to 2000. Affordability has tripled since 2006, when it was at an all-time low. Other factors come into play making the timing ripe for buying.

Interest rates, while estimated to climb slightly this year, still are at an all-time low. Even if rates climb a point this year they will still be at historically low levels.

Inventory will likely rise heading into the Spring selling season, although we are still at low levels comparatively speaking. Homes that are already on the market will have more competition with inventory increases, making it a great time to negotiate with those sellers. I have seen a rise in inventory in the last month alone along the north county coast, and overall most sellers are listing their properties comparably.

Short sales and REOs (lender-owned inventory) make for great negotiation possibilities, as long as a buyer is willing to wait a while when considering a short sale. I also see lenders making a return to the market, which is a good sign for housing, but could be competition for buyers as more well-priced inventory makes it’s way to the market.

Loan Products give first-time buyers choices and can make a big difference in the down payment and affordability factor.  FHA loans, for example, only require a small down payment, and is a fantastic product for those who qualify otherwise but do not have 20% of the purchase price laying around in a bank account. This reason alone is one of the strongest in the affordability equation for first-time buyers. As long as the buyer has a job and is not self-employed an FHA loan could be a good choice.

Rent increases. Rents have risen across the country and in San Diego county lately, and renting and buying are getting closer from a cost-perspective. This Fall rent increases ranged from 1% to just under 4.5% in the county, leading to more vacancies as well (many people are moving to the outskirts of the county in search of cheaper rents). For many first-time home buyers who do the math it can be enlightening– so if you are still not sure about a home purchase look at the numbers and see if it makes sense for you.

Realtors have been saying for some time that now is a great time to buy, mostly because of the theory that buying when in a down or slow market is a strong financial tactic. But the above points show that there are many factors in play that make this a great time to buy. If you need further information on the local North San Diego market please do not hesitate to contact me.

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