It’s well-known that as an investment location, the California real estate market is among the most expensive in the nation. The state’s housing costs are one of the reasons its residents are leaving the state, and 53 percent of them have a desire to do so. Is all bleak in The Golden State? Fortunately, the answer is no. Investors can still find affordable real estate in California and plenty of people eager to rent!
If you’re interested in a smaller city with relatively inexpensive properties, check out Bakersfield. If you’re looking for a larger investment location with relatively affordable real estate, then keep reading as we talk about the market of the second most populous city in CA: The San Diego real estate market.
Related: The 10 Best Places to Buy Rental Property in California in 2019
The Costly Case of California
If we’re to understand the relative affordability of the San Diego real estate market, we need to talk about California’s housing price problem. A complete, detailed answer would obviously be complex, but the issue can be explained with enough nuance in simple terms.
The problem boils down to supply and demand, which has led to surging investment property prices. More specifically, the mix of high demand from the increasing state population and a shortage of investment properties has contributed to the inexpensive housing costs. It’s estimated, according to the California Department of Housing and Community Development, that California property prices would stabilize with 180,000 new units developed annually. Over the last decade, the number of new properties has averaged less than 90,000, half of the required number.
The impact of the supply and demand imbalance is as clear as day. As a result, the California real estate market has a median property price of $693,843, according to Mashvisor’s data (learn more about Mashvisor here). This is the third highest state median price and is more than double the national median.
San Diego Real Estate Market Statistics
So, how does the San Diego real estate market compare to California in terms of affordable real estate? Here are the San Diego real estate market statistics, according to Mashvisor’s rental property calculator:
- Median Property Price: $801,651
- Price per Square Foot: $504
- Price-to-Rent Ratio: 24
- Rental Income: $2,733
- Cap Rate / Cash on Cash Return: 1.3%
The Relative Affordability of the San Diego Real Estate Market
As seen, the median property price of the San Diego housing market is $801,651. While this median is higher than the state median, it is lower than other major CA cities. San Francisco, for instance, has a median property price of a whopping $1.5 million. The cost of living in San Diego is also 23 percent lower than San Francisco’s. Not only that, but many San Diego neighborhoods are well-below the city average and are relatively affordable in the State of California.
Best Neighborhoods in San Diego for Affordability and Profitability
So, where exactly can you find cheap houses in San Diego? According to Mashvisor, the best neighborhoods in San Diego for affordable and profitable real estate are Torrey Pines, Mountain View, Logan Heights, Emerald Hills, and Lincoln Park.
- Median Property Price: $379,900
- Price per Square Foot: $135
- Price-to-Rent Ratio: 5
- Rental Income: $6,547
- Cap Rate / Cash on Cash Return: 12.8%
- Median Property Price: $487,175
- Price per Square Foot: $287
- Price-to-Rent Ratio: 19
- Rental Income: $2,098
- Cap Rate / Cash on Cash Return: 2.0%
- Median Property Price: $425,000
- Price per Square Foot: $358
- Price-to-Rent Ratio: 17
- Rental Income: $2,040
- Cap Rate / Cash on Cash Return: 1.9%
- Median Property Price: $459,800
- Price per Square Foot: $350
- Price-to-Rent Ratio: 19
- Rental Income: $2,012
- Cap Rate / Cash on Cash Return: 1.6%
- Median Property Price: $350,000
- Price per Square Foot: $255
- Price-to-Rent Ratio: 14
- Rental Income: $2,114
- Cap Rate / Cash on Cash Return: 3.5%
Related: Here’s Where to Invest in the San Diego Housing Market 2019
Why You Should Invest in the San Diego Real Estate Market
Affordability is not the only key feature of the San Diego real estate market. Here are some other reasons to invest in San Diego investment properties.
The profitability of the average San Diego real estate investment is no surprise. All major California cities benefit from high rental income. The high rental income coupled with relative affordability, however, is what makes the San Diego real estate market forecast 2019 very bright.
Related: Traditional Rental Strategy: Best Cities for Rental Income 2019
Appreciation is another one of the San Diego real estate market trends that incentivizes real estate investors. The city has been in the top 10 percent in national appreciation rates over the last 10 years, appreciating 59.72% during that time. During the last 12 months, the average San Diego investment property appreciated by 8.04%. This was higher than approximately 80% of cities and towns in the US housing market. The last quarter experienced a rate of 1.19%, which equals an annual rate of 4.86%. So not only is cash flow a guarantee with San Diego rental properties but high appreciation as well.
The San Diego housing market is perfect for traditional investing for a multitude of reasons, and its job growth is one of them. The expected 10-year job growth of the city is 34.5%, which is higher than the 33.5% national average. San Diego’s unemployment rate is 3.2%. This is lower than the state unemployment rate, 4.3%, and the US rate, 3.8%.
To sum it all up, the San Diego real estate market provides affordable real estate opportunities in a rather expensive state market. The best neighborhoods in the city offer both profitable and cheap houses in San Diego. If you’re wondering where to invest in real estate in CA, San Diego is a must-consider.
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