Thoughts and advice concerning the San Diego housing market in 2018
Many of us welcome the chance for a fresh start as we experience the first days of 2018. Although it's easy to get excited about the future, it also comes with some curiosity and concern about what to expect in the real estate world. I firmly believe real estate changes come in waves and many factors can cause movements big or small. Just like our California coastline and its ever-changing tides, there are times when housing prices are on the rise, and there are times when they retract to more affordable levels.
One of the key factors is the concept of supply and demand. Typically, as supply decreases, and/or demand increases, prices will rise. Alternatively, if supply increases, and/or demand decreases, prices will drop. This is the case with real estate, especially in San Diego since it's a highly-desirable place to live. We have stunning beaches, mountains, deserts and amazing weather all year long -- features that create crazy demand. Thus, the more scarce and coveted San Diego homes are, the more likely prices will increase.
The need for housing can also be correlated with jobs and businesses in the local area. Large, growing companies with many employees can really drive the local housing market. With San Diego expanding its tech industry, it attracts employees, many of which are millennials who make up a large percentage of buyers. Carlsbad recently made it in Sunset Magazine's top places to live in the West, and was nicknamed "A Seaside Silicon Village," a nod to Silicon Valley's tech-savvy businesses and residents.
When you combine the facts that 1) San Diego is a popular place to live and 2) local corporations can influence the home-purchasing demographic, one resulting issue is that many young professionals can't afford to live near the workplace. Many times, they end up buying or renting on the outskirts of town, since that's all their early-career paychecks can handle.
The housing market can also be correlated with politics. Whether you lean one way or the other (or you hang out somewhere in the middle), we can all agree that recent events can be considered, lets just say, controversial. Some sellers and buyers weigh big government changes as part of their decision-making process. Some may be concerned about economics and purchasing homes at the height of the market, resulting in their home value potentially fluctuating. Some may be concerned about the stability of their jobs. Others may choose to hold off on selling because their home could rise in value and produce more return later on. While it all sounds like a big game of "what if," these scenarios can be legitimate, and can affect supply and demand in the housing market.
Another hot topic causing concern is the new tax plan and its changes. Personally. I don't think they'll have a drastic affect on the market, but let's dive in. Per the new plan, there's now a limit on mortgage interest deductions. Specifically, homeowners can deduct mortgage interest on their home up to a principle balance of $750,000. Any interest over that amount is non-deductible. Typically, homeowners with these mortgage balances have more involved tax preparation needs and may be able to find other areas where the new tax law may benefit them. For more information on tax plan updates and how they may affect you, please seek an accountant or tax professional for advice.
When taking everything into consideration, I think the most important thing to determine when buying or selling is: is it the right time for you and your family? Sure, home values will always shift and everyone wants to buy low and sell high, but I urge my clients to consider their personal reasons to buy or sell as a key aspect of the decision. This advice rings true for the majority of clients.
However, the advice changes if you're wanting to flip a property for profit, or buy a home then sell it quickly. The market should be carefully considered if you're in those positions. I like to attribute the housing market to the stock market: there are little dips and bumps if you look at a small window of time, but if you look at it over a larger timeline, it tends to move in the upward direction.
While there's unfortunately no crystal ball to guide us, I personally believe property values in the San Diego area will continue to rise. I don't feel they will rise at the same rate they did this past year, but they'll rise due to supply and demand. At the end of the day (and thanks to where we live), purchasing a home in San Diego is a great investment opportunity, whether you plan to keep it for a few years, or several decades.
If you need real estate advice to purchase or sell a home in San Diego County, email or call Michael Biondo at 619-993-9559 to get started.