I think we can officially say that the Downtown San Diego Real Estate market has made the change back to a “seller’s market.” While its still a great time to buy, it’s definitely not a “buyer’s market.” Let me break it down:
It all starts with the basic concept of “supply & demand.” In this market, at least in the Downtown San Diego market, we have an influx of buyers and a shortage of homes. This generally causes well-priced listings to receive multiple offers within the first week or two on the open market.
The surge in eligible buyers can be attributed to many things including: Record low interest rates, Favorable Mortgage Loan products (FHA Loans only require 3.5% down payment). Living in a desirable area, like San Diego, attracts homeowners looking to purchase second homes and/or vacation homes as well.
The low inventory can also be attributed to things, both within our control, and out of it. The economic recession that the country has experienced many buyers to run into financial problems, and either sell their home for less than they owe (short-sale) or even walk away completely (Foreclosure). The banks were stuck with these distressed properties, which they wanted no part of. To off-load the homes, banks would sell the homes back onto the market at EXTREMELY low prices. Usually these homes were swiped up buy all-cash investors. The result of these fire-sale prices was below market comparables (comps) being littered all over the area, thereby de-valuing all of the real home-owners actual home values. This caused (and is still causing) homeowners, that would’ve considered selling, to sit tight and wait for the market to recover.
The recession also affected the new developers as well. With home prices dropping, it didn’t make sense for developers to build new inventory until the prices rose again. This is evident in Downtown San Diego especially, where we have not seen any new condo developments since 2009, and nothing is slated until at least 2015.
All of these things have formed the “sellers market” that we are currently experiencing. What were seeing is that these multiple offer situations are causing competition. Many homes are being listed above market value, and still selling for 5-10% higher than list price. Each time one of these homes sets an above market comp, the homeowners surrounding it are deciding to sell as well and take advantage. Because of this, the inventory levels are going to return to normal soon, and the market should level out. The average market price will just be higher than perhaps anytime in the past.
Bottom line is, if you’re interested in buying, NOW is the time. Rates are low, but going up. Prices are low, but going up. You could decide to wait… to end up paying more. If you’re interested in selling, NOW is the time. For the next year or so, you’ll be in control of the market. You’ll be able to use buyer competition to your advantage and get top dollar. If you’re interested in either buying, or selling a home in the Downtown San Diego Real Estate market, please contact us here at 92101 Urban Living. We can provide you with complimentary market trends and sales data. We look forward to helping you with your real estate needs.