Welcome to San Diego Blog | May 12, 2021
San Diego County Housing Report: On the Endangered List
The lower price ranges are disappearing with far fewer homes available to purchase, and it is impacting the number of affordable closed sales.
Vanishing Lower Ranges
A mind-blowing 32% fewer homes have come on the market below $750,000 so far this year.
For the most part, prices do not remain the same. Over time, just about everything becomes more expensive. After a while, society digests the higher values. Gasoline was $1.12 per gallon back in 2002, compared to $4.20 today. A visit to the Magic Kingdom would set a Mickey Mouse fan back $41 back in 2000, a lot cheaper than the $114 Disneyland ticket this month. In 2010, mouth-watering, sliced bacon was selling for $3.86 per pound versus $5.85 today. Change is inevitable, and so are higher prices.
Housing is definitely not an exception to increasing prices. In the first quarter of 2013, there were 4,675 closed sales below $750,000, 89% of all sales. It was 83% of all sales in 2016, and 71% last year. In 2021, only 61% of all sales were below $750,000 in the first quarter. As home prices have appreciated over the years, the lower price ranges have dwindled and became a smaller percentage of the housing stock. It is not merely the fact that fewer homeowners within these more affordable price ranges have not placed their homes on the market; instead, it has more to do with home values appreciating and surpassing the lower range thresholds. These ranges are vanishing.
The data illustrate just how staggering the shortage of lower range homes has become this year. Through April 15th, compared to the average of 2018 and 2019 (year over year data in housing is not accurate this year due to COVID-19 skewing housing in 2020), astonishing 49% fewer homes have been placed on the market below $500,000 and 15% fewer for homes between $500,000 and $750,000. Overall, in San Diego County, there are 18% fewer homes that were placed on the market. Yet above $750,000, there were 14% more FOR-SALE signs. Due to record-low mortgage rates, the active listing inventory is at unprecedented ultra-low levels in every price range, but the differences are more staggering below $750,000. There are 1,022 homes available today below $750,000, which is 44% of all active listings, compared to the 2018 to 2019 average of 3,826 homes, or 54% of all listings.
Closed sales in San Diego County are off the charts. It is the strongest start to a year since 2005. Compared to the average from 2018 to 2019, sales were up 18%, an extra 1,584 closed sales. Yet, homes below $500,000 were off by 34%. From $500,000 to $750,000, sales were up by 23%. The number of closed sales above $750,000 is mind-blowing. From $750,000 to $1.5 million, sales were nearly double. All price ranges above $1.5 million experienced more than double the number of closed sales. Above $4 million, ultra-luxury, it was nearly triple the number of sales, up 174%.
The erosion of more affordable housing has been going on for years. This trend will continue as long as the market remains hot. With a depressed, unfathomably low inventory and unrelenting demand fueled by record-low rates, this sizzling market is poised to continue for quite some time. The torrid pace will remain through the end of 2021 and is poised to endure through 2022 as well.
For buyers anticipating more homes in the affordable price ranges coming on the market soon, it is just not going to happen. The number of opportunities is diminishing over time. Buyers who wait will be confronted with fewer available options to purchase. More and more homes are surpassing the $500,000 and $750,000 thresholds. In 2013, there were 3,254 detached single-family residential home sales below $500,00 in the first quarter, 58% of all detached closed sales, compared to 518 this year, 9% of all closings. In 2013, there were 1,421 detached closed sales in the first quarter between $500,000 and $750,000, 25% of all detached closings, versus 2,181, or 40%, this year. That means that 83% of all detached sales in 2013 were below $750,000. This year, it was just shy of 49%.
The bottom line: while it may be challenging to find a home in the lower ranges today, as homes appreciate, it will only become more challenging in the future.
Copyright 2019 – Steven Thomas, Reports On Housing – All Rights Reserved. This report may not be reproduced in whole or part without express written permission by the author.