The 2021 Housing Market was one of the strongest on record. San Diego saw a record number of homes sold and record high home prices, as did much of the country. In total, nearly 40,000 homes sold in San Diego County at a record high median price of $760,000, a nearly 18% jump over the year prior. (Single family homes saw a median of $860,000 while condos closed at $595,000)
Roughly 3 out of 4 homes received multiple offers, driving the average home to close +3% ABOVE asking price, and saw market time drop to record low 21 days. By all definitions, this is a HOT Seller's Market.
Although San Diego has been in a "seller's market" for several years now, what made this year so strong? The short answer is basic demand vs supply:
Home Buyers Everywhere!
For anyone out searching for a home last year, it felt as if you couldn't go near an open house without tripping over hundreds of other home buyers. Where did they all come from?
Historic Low Mortgage Rates: Prior to Covid, mortgage rates were hovering just below 4%, which had been a record low. Since then, we saw 17 record lows, getting down to around 2.65%. This effectively reduced monthly payments from 15-20%. Fire Sale, anyone?
Remote Work: This had a compound effect. Urban dwellers were now pushing further out into the suburbs and exurbs as regular commuting was less of a factor in choosing where to live. Additionally, cash flush buyers from more expensive cities, such as The Bay Area, LA and New York, migrated to the San Diego area.
Any one of these factors on their own would have impacted demand, but together, they created a perfect storm.
Demand, Meet Supply....or LACK of it
San Diego, (and much of the country as a whole) has been seeing a steady decline in available inventory on the market for the better part of the past decade. There are a few factors that drove this trend as well.
In short, supply could not keep up with the pace of demand, ultimately driving up the prices to the levels we see today.
What's On the Horizon for 2022?
If the Covid pandemic has taught us anything, it is that life is unpredictable. That said, there are certain indicators we can look at that can help inform the general direction we can expect to see us head in, barring any unforeseen external event.
In short: Expect strong competition for the first half of the year, followed by possible cooling towards the back half of the year. By cooling, we do not mean a crash or even a depreciation; it means that we will go back to high single digit appreciation vs. the 20%+ appreciation we saw last year. The best homes will continue to see multiple offers; perhaps not 20, but maybe 5-10. San Diego has one of the strongest and most stable housing markets in the country, and real estate will continue to remain a sound investment.
Fortune.com published a great article on the direction of the market for 2022, and explored the different projections from Goldman Sachs, Zillow, the National Association of Realtors, among others. Be sure to check it out.
If you're a fan of charts and graphs (Like I am), then check out my detailed San Diego Market Report
For more information, you can reach me at 646.221.2830 or ehab@ehabsellssandiego.
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