4th Quarter 2022 Edition- Real Estate Market Update
My little life update before my market update (if you are not interested in my life shenanigans, scroll down to the good stuff below).
For Christmas, we flew to Virginia to spend time with my wife's side of the family. That's becoming our tradition now and it's a blast since there are 3 boy cousins that our Adylina gets to play with while participating in the Christmas excitement. (By the way, this Christmas Story thing told through ice sculptures is jaw dropping. If you never went, I highly recommend it, even without kids if you don't have any.)
Now let's get into some important updates from the last few months.....
If you own a house or a rental or know someone that does:
Short-Term aka AirBnb rental landscape in San Diego has officially changed. You now require a permit and the lottery has officially taken place and some existing operators were not so lucky. This is the best website to learn about the application process, different tiers they have, and so much more: https://www.sandiego.gov/treasurer/short-term-residential-occupancy (For example: below is the current status of Tiers, applications & licenses)
If you are impacted by these changes, just know that there is a market for 30 day rentals of fully furnished apartments as well. They might not bring in as much revenue as a STR aka AirBnb would, however, it still can be very lucrative.
Usually, 30 day rentals of fully furnished units bring in a 1.5 times of what a long term tenant would bring in, compared to about 2 to 2.5 times that a STR aka AirBnb brings in per year.
Here are a few websites where you can publish and market your 30 day rentals that are fully furnished.
And lastly, if you need to sell your STR property, we can help with that
If you are planning on selling or know someone that does:
In the 4th quarter, the market was fully favoring the buyer. It shifted completely due to continued inflation, global events and still much higher interest rates. However, in the last two weeks, we have noticed an uptick in buyer activity and some listings are seeing multiple offers again. My feeling is that this won't last long as inventory starts increasing into the spring months, especially if interest rates go up or even stay where they are. It's just hard to afford a home in San Diego for most people.
The median home price dropped in quarter 4 to $750,000 from $780,00 at the end of quarter 3.
Total Active Inventory dropped a lot. End of the 4th quarter ended with only 3,132 units compared to 4,000+ in quarter 3. With so little inventory, you would think that we would have a crazy buyer bidding war on each property again like we did a year ago, but that did not happen for the reasons mentioned above so it's a very complicated market to say the least. It's important to note that lots of homes came off the market at the end of the year, but were re-listed in the beginning of 2023 so inventory is already going up. Check out the image below to see where our inventory was at before 2020, it's shocking to see!
So, if you have been or are thinking about selling, it's all about strategic pricing. You want to price your home below your competition so you can get all the attention. It's an easy formula but rarely practiced by sellers and agents alike: the more people that visit your home, the more offers you will receive, and negotiations sway in your direction. As mentioned in my Q3 update, I applied this strategy for a client selling their estate home in the so-called "buyers" market and we got 38 offers on the property.
The strategies I mentioned in the Q-3 2022 update continue to work for sellers where we offer an interest rate buy down or seller financing at a much lower rate. Go to my quarter 3 update here if you want more details on these: https://www.realtynationalsocal.com/post/3rd-quarter-2022-edition-update-on-the-real-estate-market-loans-and-so-much-more
The image below shows you the movement of interest rates in quarter 4 and as you can see, we hit the peak back in October and have been mostly trending downward since, which is good news. This is a great website to track rates: https://www.mortgagenewsdaily.com/mortgage-rates/mnd
Lastly, if you really want to geek out on all the San Diego County real estate data from December 2022, then click here for a full report.
Mortgage Rates from September 1st, 2022 to January 13th, 2023
If you are planning on buying or know someone that is:
The interest rates and current home values continue to affect buyer's affordability and many buyers are still not able to buy based on their monthly budget, unless you apply some of the strategies mentioned below.
The recent drop in interest rates is however stimulating more buyer activity in the last two weeks.
Offers below list price were still the standard in quarter 4th, along with asking the seller to buy down your interest rate or cover some of your closing costs. However, the tide is starting to turn a bit towards the seller's favor in the last two week. Still too early to tell how long this will last but if you are sitting on a fence about buying, you might want to jump in now before things potentially get out of control.
These Loan Programs were very popular in Q-4 and I see that continuing into Q-1 of this year :(I can connect you to my preferred lender and she can explain all these in detail and run different scenarios for you)
3-2-1 and 2-1 buy down programs, where you will pay a much lower rate for the first 2 to 3 years.
ARMS, which are adjustable rate mortgages. These loans will start at a lower interest rate overall and will be fixed for 5 years, as an example, then, the rate will fluctuate. This could be a great option for some buyers.
Interest Only loans. You won't be paying down any principal with this loan program, however, your monthly payment will be much, much lower and some buyers only focus on that. You will have to start paying principal but that could be 3, 5 or 7 years later so the payment will go up eventually.
And as always, If you are planning on relocating to another state even though I would be sad to see you leave, let me know and I can help locate a great agent in whatever city that you are planning to move to. I will actually identify a couple great agents there, interview them on your behalf and connect you to that agent once I feel like he or she can serve you as I would here. (Bonus: I would stay involved over-seeing your purchase transaction on top of it for you and consult you along the way. That's if you value my opinion, of course.)
Have a fantastic 1st quarter and Happy New Year! Let me know if you have anything specific that you want to discuss with me. I am here to help you navigate through it all and yes, I would love it if you can refer me to anyone that is thinking about buying or selling. Thank you in advance!
p.s. Thank you to our clients Sarah & Basil for this amazing review and Thank you to Josh & Kelly for referring us them!