As we head into what is traditionally the start of the home buying season we are faced with a highly competitive market, shaped primarily by lack of inventory. Active listings throughout California fell an average of 52% in February as compared to one year ago. The market was also driven by lower interest rates. In February of this year a 30-year fixed mortgage was 2.81% compared to February 2020’s rate of 3.47%.
The lower rates mean that people can afford to pay more, which they have to if they want to purchase a home in San Diego. In January of this year the median single family home price in San Diego was $730,000. In February it rose by 4.8% to $765,000. Year over year this represents an increase of 14.2%. Statewide the average price per square foot for a single family home was $338, the highest price since July 2007.
So if you want to sell your San Diego home, now is a great time. You will likely have multiple offers over asking price and possibly other concessions such as limited buyer inspections and appraisal contingencies waived. Some buyers are becoming very creative with ways to sweeten their offer including paying some seller closing costs, free seller rent-backs and travel incentives.
If you are a buyer it is a good time as prices are still expected to increase and though inching up, Interest rates are still historically low. The rising rates might, however, take a some people out of the market potentially easing the strain on inventory. That being said, be prepared to battle! Don’t bother looking at a home unless you are totally prepared to write an offer immediately. This means having a full DU approval and proof of funds ready to go and being ready to write more than one offer at a time. I also advise that you don’t become emotionally attached to any one home as you will undoubtedly be competing against other buyers.
I’ve also had questions from several investors about timing for a 1031 exchange. Before selling, I would carefully do the numbers to see if buying up really makes sense. Rental prices have also skyrocketed in the past year and are expected to continue to rise. Perhaps your current investment with the prospect of charging higher rents is the better choice versus buying in today’s market which will mean among other things, higher taxes.
Whether you’re buying or selling or just have questions about your current situation, please don’t hesitate to give me a call.