State of the San Diego Housing Market September 2022 - Everything you need to know

High inflation, high mortgage rates, and falling home prices - Oh My! What is going on in the San Diego housing market and What does all this mean for you if you're looking at buying or selling a home here in beautiful San Diego? Watch the video below 👇 to find out everything you need to know about what’s happening with the San Diego housing market in September 2022.

Real quick, my name is Curtis Chism with the Chism Team - helping you both buy or sell homes here in the San Diego area. If that's something that you're looking to do, please reach out to me. My team and I would absolutely love to serve you on your journey of either buying or selling a home here in wonderful San Diego.  So just reach out via phone text (858-281-2568) or email (info@chismteam.com) and let's have a conversation all right

Home Prices in San Diego - September 2022

Let's get into what's going on with the housing market here in San Diego especially with all the concerns around high inflation, unstable mortgage rates, and falling home prices. Let's first take a look at the home prices here in San Diego. Home prices did drop again this past month in August.

Prices went from $969,000 as a median price down to $910,000. That is a fall of about 6%.

We're actually down about 9% from the high, a few months ago of $1 million. We were at a $1 million about 5 months ago, and for 5 months straight now we continue to have falling home prices down to $910,000 or at 9% fall.

Now we are up, 7% overall from year over year. We haven't lost all the gains from last year and certainly not all the gains from the year prior, but as far as where we were at the high, just five months ago, we are down 9%.

Condos are actually faring a little bit better. They are down from a high of $670,000. About 4 months ago down to 625,000. The prior month in July, they were $630,000. They only fell $5,000. Just over this about 1% or so, a little over 1% that they fell month over month, over down about 6.7% from the high of 670,000 to $625,000.

The days on market are also rising. We were at about 20 days. They've been steadily increasing. We're at 28 days, days on market. That's the average that every single home in San Diego county takes to sell is 28 days. I've been saying for quite a while that any hot home is still selling over the first weekend, that still remains true.

If it's a really well, marketed home, very well priced, it is still selling very quickly.

Most homes are at least taking a couple of weekends to sell. That was unheard of for the last couple years, but that's actually more of a normal market to take a couple weeks, a few weeks to ultimately sell a home.

For quite a while, during the whole COVID pandemonium that we were having in the San Diego housing market and nationwide, we were seeing anywhere from 101% to 107% final sales price to list price. That meant if you were selling a home for a $1 million at the height, you were getting $70,000 on average for that home over the original list price.

Right now that's actually fallen quite a bit last month. It was just over 98% of a sales to list price. And now it's at 96.4%. That's actually down quite a bit. Now a normal balanced market is typically right around 98%. When I see 98%, I think that's just a balanced market. Following below 96% shows me that there's more of a buyer's market happening right now.

I do believe that a lot of this has to do with homes that simply were way overpriced to begin with. And I've been saying this for a couple months, I've been talking about the housing corrections since March and April of this year that it was coming and it started to catch up to us in May and June

We're starting to see these numbers from June where we're sellers were pricing their house in June, based on earlier data thinking they could get a ton of money for their homes. And they just got caught in the cross hairs of everything going on with inflation mortgage rates. And now of course, the falling home prices that they've had to rapidly and drastically reduce their prices.

That's where you're seeing these more drastic drop offs in the median price and in the final sales to list price, showing more of a buyer's market. I do think that we are going to start seeing that balance out and trend back up into the 98% range.

I don't think we'll get back over a hundred anytime soon, because we are certainly much more into a balanced market at this time and fast. What we're seeing boots on the ground, talking with fellow industry professionals, the offers that I'm making for folks as well.

There is a lot more buyer activity happening right now than there had been for the past few months prior. And that's because people are still seeing the overall value in real estate that ultimately it is a good investment. If you're not trying to time the market perfectly, people still have to have a place to live. People are still making moves.

We are seeing overall lower activity in the market, even though buyers are starting to come back in, the data is showing us overall we're down about 30% in both pending sales and closed sales, but new listings are also down too by 24%.

New listings down 24% and closed and pending sales down to 30% as well. Again though, we are seeing buyers starting to pick back up in the market. I think it'll be interesting to see where that trends, but overall we're down, which actually is just more consistent with pre COVID numbers.

These are scary things to me, of course, having a 9% drop in median prices of serious bummer if you bought at a $1 million, but this is where I continue to harp on.

Do not try to time the market because real estate does go down.

And I've been talking about a housing correction coming and it's happening right now. Now how much further is it going to go? That's the big question. And if someone tells you that they know what's going to happen, they're lying to you. You need to fire that agent.

I believe that they were going to continue to correct downwards. I had said a couple months ago, I believe we were going to be correcting by at least 10%. And that's where we're at right now. We're at basically a 10%, correction, 9% technically.  I believe that it will continue to correct, especially as this new information comes out and people are concerned about, there's a lot of headlines out there right now about this huge burst in the real estate housing market.

Why it's not going to fall drastically? There are a lot of institutional buyers in the market. There's actually a large investment company right now, Blackstone that is pairing a $60 billion fund to buy single family residences as housing prices fall.

A lot of investors have put buy in on hold because they're waiting for prices to come down. Then they can start snatching them up. There's also local investors. There's a big  investor I work with here in town. They flip about 120 homes per year. And they pause buying for several months while they kind of waited for things to settle out, but they are back buying again.

They are factoring in some more declines in prices in their purchasing, in their numbers. They're not offering crazy amounts of monies for home because they have to hedge their bets, but they are back in the market buying. And that is going to be a big factor in preventing home prices from falling too far, because there are institutional and investors.

Wall street, investors and smaller "mom and pop", smaller investors that will be buying up homes. And that's going to keep prices from falling too far. There are still going to be buyers. The reason why prices would fall significantly is simply because there are not enough buyers in the market, supply and demand. Demand is definitely down. Supply is also coming down again, but the demand will not go away completely because of these investors that are coming into the market.

Inflation and Mortgage

We don't have the newest inflation data, it does look like it's going to drop just a little bit down, they're estimating about 8.1%. The Fed is committed to targeting a 2% inflation rate. They are going to continue to increase rates, to try to dampen down the economy, to get down to that.

Mortgage rates are back up to 6.25% a month ago, they were down at right around 5.1%. It's highly, highly vulnerable and volatile. They are changing. Mortgage rates are changing rapidly day by day.

There are quarter point swings day to day. Just 2 days ago, when I was looking at rates, there are 5.75%. Now there's 6.25% up, half percent in just 2 days, but they could be down to 5.75% in another day or two. It's really quite volatile.

A lot of this has to do with the bond market. There's so many things that affect mortgage rates. It is not the Fed. That's the sole driver of interest rates. It's not even inflation, that's the sole driver of interest rates right no, it's the bond market that's driving interest rate rates right now.  And it's extremely volatile.

I do know of a program right now that is an adjustable rate mortgage. I had one product through another credit union. That's gone away. They've used up all their funds. I have a new product through another credit union that's offering some really fantastic arm credit, mortgage rates right now and what they're offering.

I just had a client locked in on this and it's a 3.75% arm. APR is more like 4.5%, but still 1.5% below 6%, 6.25, 1.75% below that.

Here's the thing about these arms. This is not like the old days where you had these arms that would adjust after 3-5 years and you have these massive mortgage payments you got to make. These are much more stable loans that are being made right now. This is a 5/5 arm.

What that means is that for the first 5 years, it's locked in at that 3.75% or the 4.5% APR. And then at 5 years, it can adjust up by a max of 2%. For round numbers, if you're at 4.5% APR, the max that it can adjust to in 5 years is 6.5%. A combined average over 10 years, you're going to have a 5.5%  interest rate.

If rates are down, it can adjust down too. Most people only stay in their homes an average of 7 years, as of late, it's actually gone up more. People are staying around 10 years, but in 7-10 years, you're most likely going to have moved or refinanced.

And here's the big thing right now is that most people, most experts, they're expecting mortgage rates to drop to about 4.5% by 2023, mid 2023, for 30 year fixed mortgages.

You could get into an a 5/5 arm where you know, you have a fixed rate of an APR of 4.5% for 5 years. And then in a year you could refinance into a 30 year and walk in that 4.5% for 30 years. And of course you can always refinance again at a later date.

What does all this mean if you're looking to buy or sell a home?

The big thing if you're looking to sell a home right now is that you have to price very strategically and aggressively in order to sell your home. You definitely do not want to treat this as if you're selling a car. You want to treat this as if you're selling a home.

A lot of people will go into this and say, "I'm going to try to price it way up here and see what offers I get"  And then  I'll get negotiated down. That is not the way to sell a home. You want to start on the lower end and start driving up the price that brings in a bigger pool of bidders to drive the price back up.

When the home sits on the market at a high price, your buyer pool is very small. You're not getting a lot of views and traction and, and your just home is going to sit and it's going to drive the price down significantly versus starting lower and driving it back up.

Curtis Chism, Realtor
858-281-2568 | Mobile
mailto:info@sandiegohomes.io
Chism Team | DRE #02105113
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