Weekly Housing Market Update San Diego Real Estate January 23, 2023

This week in San Diego Real Estate

Pending home sales are DOWN this week from last week, mostly due to the lack of ineventory. Home buyers are starting to see homes receive mulitple offers as mortgage rates have dipped down slightly increasing home buyer activity in San Diego.

Mortgage rates dropped to their lowest level since mid-September. While recent lower mortgage rates have improved home buyers’ sentiment slightly, they remain more than twice as high as they were one year ago, and still create financial barriers for many buyers, especially first-time homebuyers.

According to Realtor.com, the Housing Market Index shows that builder confidence rose for the first time in 13 months as lower than expected mortgage rates raise hopes. Even though builders continue to offer pricing incentives their ratings of current and prospective business improved in January.

Meanwhile, total construction slowed in December and compared to last year both single-family and multifamily starts are down, however single-family housing starts improved in December to the highest pace seen since August. Notably, there is a mammoth supply of multi-family units under construction which will eventually help boost housing supply for renters.

Home equity hits a new high

With mortgage debt climbing at a slower pace than the value of real estate, homeowners continued to see equity increase to a new high mark. The total value of equity that homeowners had in real estate was just less than $29.6 trillion in the third quarter, $0.5 trillion more than the second quarter and $4.2 trillion more than the previous year. In fact, equity as a share of real estate value held steady at 70.5%, tying its highest share since 1984. It’s well above the lows seen in 2012 (46.0%) and also above the 60-65% share it saw through much of the late 1990s and early 2000s. It continues to mark a striking contrast to earlier periods. Although there are good reasons for concern about the lack of affordability in the housing market–this is a one-data-point summary of how different this housing market is from the early 2000s.

With the Fed tightening its monetary policy, the U.S. housing market has been under significant pressure. While our 2023 forecast anticipates ongoing inflation causing upward pressure on rates, recent favorable data has helped to pull mortgage rates down. As the economy weathers the easing in inflation, mortgage rates may continue to fluctuate in the short term, within the 6%-7% range that we have seen over the past five months. While recent lower mortgage rates have improved home buyers’ sentiment slightly, they remain more than twice as high as they were one year ago, and still create financial barriers for many buyers, especially first-time homebuyers. Acknowledging the particular challenges faced by this group, Realtor.com’s Best Markets for First-Time Homebuyers report highlights 10 housing markets with a great mix of more affordable homes, job opportunities, and amenities for first-time homebuyers which make them attractive for young families.

For people who are thinking about selling their home, current market conditions may be causing them to hold off. Recent data show that December home sellers faced more competition from other potential sellers, longer time on market, and a greater likelihood of having to lower their asking price. Homeowners looking to sell and buy at the same time, who are likely to have a good rate on their current mortgage, may be hesitant to list their homes for sale and face today’s high mortgage rates and home prices. Some are waiting to see if the market improves before putting their home up for sale.

If you are not sure about buying or selling in today's market, let's discuss!