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Home Prices Edge Up With Softening Predicted

Home prices in San Diego County rose by less than 1 percent from April to May –a likely effect of the pandemic.

Zillow, an online home listing service, is forecasting that there will be a surge in prices as the economy reopens followed by a drop over the summer with a market low coming toward the end of the year.

Prices should recover by late spring or early summer 2021, said Skylar Olsen, a senior economist at Zillow.

Median Price $777,045

Year-over-year, Zillow reported that San Diego home prices in mid-June were up 3.7 percent, with a median price of $777,045 despite the meager increase from April to May.

On the plus side, San Diego was the only large housing market to show an increase, according to Zillow.

The Zillow report is in line with what at least one San Diego County real estate agent is seeing on the ground.

Justin Brennan, team lead with Brennan Real Estate Group of Pacific Sotheby’s International Realty in La Jolla, said the market is tight but homes selling for less than $1 million are moving well and the market is improving a bit for pricier homes.

“As of right now, things are moving pretty well. I’m thinking the true indicator will be as we get further into the summer, by the end of July and August,” Brennan said.

By that time, people will be running through the stimulus payments they received and mortgage forbearances will be running out.

Flicker

“You’ll start to see things flicker,” Brennan said.

Pent up demand and short supply are buoying prices up in the short term, Olsen said.

Finding a house to buy in San Diego County is becoming more challenging, with the inventory of homes on the market dropping 0.5% from the first to the second week in June, according to Zillow.

Compared to a year ago, there were 28.1% fewer homes on the market in mid-June 2020 than there were in mid-June 2019, according to Zillow.

More Buyers Than Sellers

There also are more buyers active than there are sellers, Olsen said, adding that “a lot of the buyers returning to the market are your first-time home buyers. They’re persistent, they’re persevering.”

“Sellers are more pessimistic, less confident that now is a good time to sell,” Olsen said.

Once the pent-up demand from new buyers is met “the return of buyers will start to slow down,” Olsen said. “Then, the housing market will start to see prices soften.”

In the near term, no one is predicting the dramatic plunge in home prices that marked the Great Recession, but Brennan said that he expects a fairly significant decline sometime over the next four years as part of a normal housing market cycle.

When San Diego residents look for a new home, more are sticking close to home than they were a year ago,

The data is little old – coming during the height of the COVID-19 pandemic lockdowns – but as of April, 27.2 % off those searching from San Diego for homes on Zillow’s website looked outside of San Diego County, down from 37.5 % in April 2019.

“San Diego is one of the top five major metro areas where they have a lower share of searches going outside,” Olsen said. “Your searchers are staying in San Diego.”

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