History of San Diego's Real Estate

Who needs the stock market when you own a home in San Diego? Over the last decade, this has been the attitude of these Southern California residents. Although the volatile stock market has soared up and down, home prices in San Diego have only gone one direction, UP! The numbers are truly amazing when looked at; according to statistics taken from ReReport.com, the average San Diego single-family home in 2000 was $357,000 and at the end of 2005 the average was up to $712,000. This is about a 100% increase in just 5 years. Although San Diego is an expensive place to buy a home, it must be taken into account that there are a few areas helping to push this average higher. These areas include; La Jolla, Del Mar, and Rancho Santa Fe. The combined average priced home for these three areas in 2005 was $2,275,000. With the median price of all homes in the U.S. being at just under $225,000, San Diego has definitely been above and beyond the norm.

Along with increased home prices also came increased condo prices. In 2000, the average condominium price in San Diego was $193,000. At the end of 2005 this number had rose to just over $441,000, this equates to a 128% increase.

So how much longer can a run like this go on? With help from the FEDs short-term interest rate increases, mixed with the current prices of homes, we have already seen a decline in the purchasing of homes. In January ’05, there was just over 1,500 homes sold in San Diego County. Just one year later in January ’06, homes sold in San Diego have gone down to just over 1,100. This is around a 25% decline in the amount of homes sold for the month of January.

Not to worry though, a 1-month decline does not mean the amount of homes and prices will continue to decrease over the long run. Long-term interest rates remain low and the economy remains strong without a look of decline anywhere in the near future. Real estate anyalysts do however, have a mixed opinion on what exactly is happening to the housing market at this time.

Bradley Fikes, writer for the NCTimes, discusses how although home prices have been increasing at record rates, rent increases are almost non-existent. The average rent paid in 2000 was $1,027 and by 2005 only rose to $1,177. This means rents only went up 15%, barely keeping up with the inflation rate. This large gap between rents and home prices will not be able to go on forever, which means either home prices will need to lower, or rents will need to rise. Gleb Nechayev, a senior economist at Torto Wheaten, says that San Diego County will begin to see a decrease in home prices by 2006 or 2007. Nechayev believes that depending on interest rates and the economy, prices could be steady for a few years before once again rising. Other analysts do not agree with Nechayev saying that San Diego is such a desired market, that the only way the market will slow is buy a collapse in the economy, making people unable to afford the homes.