How is the real estate market in San Diego in 2020? Some real estate investors often overlook San Diego in favor of hotter markets like San Francisco and Los Angeles. However, these investors are forgetting that San Diego is one of the fastest-growing cities in the US and has a strong economy, making it one of the best places in California to buy a rental property. While the San Diego housing market is slowing down overall, there are several indicators that suggest that now is an excellent time to buy a San Diego investment property. For those considering investing in San Diego, here’s a comprehensive overview of the San Diego real estate market 2020.
Related: 10 Best Places to Invest in California Housing Market in 2020
1) Strong Employment & Job Market
In order to understand why San Diego makes for an excellent investment location, you must take a look at the San Diego housing market trends for 2020. The first trend attracting investors to the city is its strong economy. San Diego had greatly depended on tourism for its economy in the past. Now, the city is now known as a technology center that depends on more professional, biotech, IT, and telecommunications industries to grow its economy. With more people moving in to take jobs or start businesses, San Diego quickly became one of the best job markets in the US.
Moreover, the city of San Diego continues to outpace California’s job recovery, which is another good news for San Diego real estate investors. San Diego’s unemployment rate is lower than both the state and national average. It’s no wonder so many companies headquartered in San Diego. According to data from the Bureau of Labor, the city added 34,800 jobs in 2019 alone and its economy looks great for 2020. Furthermore, there’s also a growth in San Diego’s wages and GDP. The county’s GDP hit a record of $253 billion in 2019 and experts predict a similar rate through 2021.
2) Home Values Are Rising
The strong economic growth in San Diego is directly in line with the house price and value increase over the last year or two. San Diego house values have gone up 6% over the past year according to Zillow. Of course, that’s good news for those who already own San Diego real estate investment. The latest San Diego housing market forecast is that home values will continue to increase in 2020. However, the rate of growth will be slow, with only a predicted 1.5% increase. This means that now is a good time to put your house on the market if you’re considering selling.
House prices are also trending higher, which is another attractive trend for sellers in the San Diego real estate market. According to Mashvisor’s data, the median price of San Diego homes for sale is currently $834,184 ($525 price per square foot). The main factor pushing house prices higher is the lack of construction of single-family homes and increasing demand for housing in the city. San Diego homebuyers were hoping for a price drop amid COVID-19. But, real estate data and market trends suggest that the pandemic has not had a large impact on San Diego’s home prices.
According to experts, the San Diego housing market forecast is that home prices may remain flat or decrease by just 0.8% in the coming months. Nevertheless, the low mortgage rates make this potentially a perfect time for buying property in San Diego. If you have a Mashvisor account, you can use our Property Finder to set your budget and find affordable homes for sale in San Diego, Califonia housing market to invest in. Our tool will also show you what cash on cash return every property listing is expected to make to help you find the most lucrative investments!
3) Affordable Green Homes Available
The State of California has new building code regulations that took effect at the start of 2020. The new regulations mandate all new homes function to generate renewable energy. Moreover, properties in the California housing market are all to be “net-zero ready” where they generate as much or more energy than they use. Building codes also mandate every new single-family homes and low-rise multi-family homes to have solar panels on the roof. This is a plus for buyers because these changes don’t significantly increase purchase costs, but do save you money in energy costs.
All of this tells us that there will be more affordable homes with green features coming up in the San Diego housing market 2020. This puts these types of homes within reach of many homebuyers and real estate investors – especially beginners looking to get into this expensive market. Many developers now are planning and constructing communities implementing these new green rules. And there are definitely many benefits to going green and becoming an eco-friendly real estate investor by investing in energy-efficient homes.
Related: Energy-Efficient Homes Are the Way of the Future
4) Home Sales Continue to Be Low
Home sales volume in the San Diego real estate market saw its last significant increase in 2015. Since then, home sales volume has continued at a relatively flat-to-down rate. This is another trend we’re seeing today in the San Diego housing market. According to the California Association of Realtors, home sales in all Southern California counties declined 36% or more from last year, with San Diego dropping the most at 42.7% in May of 2020. There are a few reasons behind declining home sales, but the main reason can be attributed to the COVID-19 pandemic and shelter at home restrictions.
As sellers removed their homes from the market, the number of active listings dropped by 37.2% year-over-year according to CAR. Would-be home buyers have also withdrawn their offers until the pandemic or its threat is completely over. Generally, there’s uncertainty and lack of confidence in the San Diego real estate market and this is affecting home sales volumes. There’s also a growing divide between buyers and sellers. Sellers don’t want to budge on their prices while buyers are confident that the market has reached a price peak, making them unwilling to buy at higher prices.
The rising house prices and the disparity between what sellers are eager to sell at and buyers are willing to pay is causing this relative dip in home sales. These trends are also making San Diego houses for sale stay longer on the market. The average time on the market is 38 days according to Mashvisor’s data. Thus, the San Diego housing market forecast is for home sales to stay low in 2020 – 2021. As a result, real estate investors can expect the demand for rental properties to be high this year and beyond. This explains the next market trend in San Diego.
5) Rental Prices Are Growing
Growing rental prices has been a trend in San Diego for a number of years now. Rent prices in the San Diego area are already some of the highest in the nation. According to data, renters over 40% of their income toward housing in four of the largest US markets, which includes the San Diego real estate market. The main reason for the growing rental prices in the city is the ongoing shift toward rentals rather than homeownership. The homeownership rate in San Diego, CA is 46.8%, which is significantly lower than the national average of 65%.
The low homeownership rate is another reason to invest in San Diego real estate as it indicates that there’s a strong demand for rental properties. As home prices and value continue to trend higher and home sales volumes continue to decline in the coming years, San Diego housing market experts don’t expect the homeownership rate to rise significantly. Until home buyers regain their confidence, San Diego real estate investor will have the benefits of less competition for homes for sale (hence, no bidding wars), strong demand for rentals, and growing rental prices in 2020.
According to Mashvisor’s data, the price to rent ratio in San Diego is 26 which is an indicator that renting a property is more affordable than buying one for residents. Furthermore, our data show that a San Diego rental property can generate a monthly rental income of $2,646. Keep in mind, this is just the city average and you can find properties that generate even higher income and cash on cash return depending on the neighborhood you’re investing in. We list 3 of the best San Diego neighborhoods for real estate investors below.
To start looking for and analyzing the best San Diego rental properties, click here.
Is San Diego a Buyer’s Market or a Seller’s Market?
When taking a close look at the previous San Diego housing market trends and forecast, it might be confusing to tell whether it’s going to be a buyer’s market or a seller’s market. According to Zillow, the San Diego real estate market is going to be a balanced or “neutral” one for the remainder of this year. In other words, it may be a good place to invest in real estate for both buyers and sellers in 2020. When it comes to sellers, the decline in new listings keeping the market in their favor. San Diego might become a buyer’s market if the supply increases to more than five months of inventory. But, experts believe that’s not going to happen due to persistent imbalance in supply and demand.
However, there are numerous trends favoring those thinking of investing in San Diego real estate. To start, sales are likely to decline over the coming months. Thus, home prices may remain flat or drop a bit to favor buyers in the coming months. Also, if listings stay on the market for longer, this gives buyers a special edge in negotiating sales prices. This means you can probably buy a home for less than the listing price. And don’t forget the fact that mortgage rates are at their lowest. These are all positive signs that now is a good time to buy a San Diego rental property. Plus, buying now could mean a greater ROI once the market bounces back in 2021. This presents a great investment opportunity that you should definitely consider.
Related: Housing Market Predictions 2021: Experts’ Forecast Post COVID-19
Best San Diego Neighborhoods for Traditional Investments
Now that we covered the San Diego housing market 2020 trends and forecast, investors must be wondering about where to invest in real estate in San Diego. As previously mentioned, buying real estate investments in the best neighborhoods will get you a higher ROI in terms of rental income and cash on cash return. According to data and predictive analytics provided by Mashvisor, you’ll find the best San Diego houses for sale to buy and rent out in the following neighborhoods. Learn more about our product here.
#1 La Jolla
- Median Property Price: $760,853
- Price Per Square Foot: $424
- Price to Rent Ratio: 15
- Average Days on Market: 38
- Monthly Traditional Rental Income: $4,330
- Traditional Cash on Cash return: 3%
- Median Property Price: $516,233
- Price Per Square Foot: $368
- Price to Rent Ratio: 16
- Average Days on Market: 310
- Monthly Traditional Rental Income: $2,685
- Traditional Cash on Cash return: 2.7%
- Median Property Price: $611,190
- Price Per Square Foot: $327
- Price to Rent Ratio: 23
- Average Days on Market: 70
- Monthly Traditional Rental Income: $2,212
- Traditional Cash on Cash return: 2%
Start your 7-day free trial with Mashvisor now to find and analyze the best San Diego investment property for sale in your neighborhood of choice in a matter of minutes!