1st Quarter 2023 Real Estate 🤪 Market Update
My quick life update before my market update (if you are not interested in my life shenanigans, scroll down to the good stuff below).
Well, my wife, Alycia and I are in the thick of it when it comes to growing a family. Our first baby girl, Adylina, is turning 2 in May and we will also be welcoming another baby girl into this world in the next week or two! We are excited and nervous at the same time. I am sure most parents reading this can relate.
oh, and I took Adylina to see snow for the first time! :)
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:
Have you ever wondered what you might be able to additionally build on your property?
Search and discover what is possible on any property. Browse property and permit details. Apply for permits and rebates. Learn if an ADU is possible
Short Term Rental Laws Officially Come into Effect on May 1st, 2023
Tier 4 Permit applications, for Mission Beach, has been closed. There is currently a wait list of over 180 applicants.
Tier 3 Permits, which is for non-owner occupying properties, still have 1,915 applicants available in the City of San Diego.
Tier 2 Permits are unlimited. The application process is open. This is for owner occupied properties of 1-4 units.
ADUs cannot be rented as a short term rental unless built before September 2017.
Minimum days to rent properties in Mission Beach is 2 days for Tier 4 permit holders.
The STRO ordinance requires a host to post a notice on the exterior of the dwelling unit in a location visible to the public from the sidewalk or public right-of-way, whichever is closer. That notice must include the Transient Occupancy Tax Certificate number, STRO license number, contact information and telephone number for the host or designated local contact and contact information for the City of San Diego Code Enforcement Division. The host shall maintain the notice in good condition while the dwelling unit is operated for short-term residential occupancy. This notice shall be 8.5 inches by 11 inches and use all capital letters in black, bold font in at least 20-point font.
To View All STR Regulations for the City of San Diego or to apply for a license, Click Here
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 is thinking about it:
The shift in the market in January continued on through the whole quarter and I can firmly say that it was in favor of the seller, unlike the 4th quarter of last year. Most other real estate experts and myself did not expect this at all. We were thinking that the inventory would increase heading into the spring months, and the higher interest rates would drive the market back towards a buyer's market. However, that was NOT the case at all.
The median single family home price jumped to $940,500 at the end of March. That's nearly a $100,000 increase in the last two months. That's mind-boggling and deja vu from last year. Seriously.....that's 10.7% appreciation in just 2 months.
According to the data set I'm using from SDAR, the detached median price peaked in April of 2022 at $1,000,000. We now sit at $940,000, so we're $60,000 below the peak (-6%).
The attached median price peaked at $670,000 in May of 2022. We now sit at $635,000, so we're $35,000 below the peak (-5.2%).
Demand is still outpacing the supply of new listings, and inventory is steadily declining because of it, all during a time of year that normally sees inventory increasing.
For context, in March, 1,431 new detached listings hit the market compared to 2,568 last year in March. That's a -44.28% decline! Unreal! And we see similar results in the attached homes going from 1,268 in March 2022 to 803 new listings in March of 2023. That's a -36.67% drop!
The average time on the market graph paints the clearest picture of the turnaround we've been feeling for the last several months. Look at the difference between these two trend lines.
In summary, if you list now, expect multiple offers in most cases in San Diego County and Southern California in general for that matter.
So, if you have been or are thinking about selling, this is your time to shine but again, who knows how long this trend will last, it's honestly anyone's guess at this point.
The image below shows you the movement of interest rates in quarter 1 and as you can see, we hit 7% for conventional loans on the beginning for March and have been trending down since, however, the overall volatility is just wild and hard for many buyers to keep track of as they submit offers and try to lock in their rate.
This is a great website to track rates: https://www.mortgagenewsdaily.com/mortgage-rates/mnd
As far as the few banks that collapsed in quarter 1, the overall national and local impact of that was short lived as the government stepped in to calm the waters, and it seems to have worked, especially when it pertains to the real estate market.
Lastly, if you really want to geek out on all the San Diego County real estate data from March 2023, then click here for a full report.
Mortgage Rates from January 1st, 2023 to March 31st, 2023
If you are planning on buying or know someone that is:
Buyers were out looking and submitting offers in quarter 1, stimulated by the price drops in quarter 4 of last year and lower interest rates at the beginning of this year. Solid buyer activity continued throughout the first quarter, however, affordability once again was impacted in a negative way by the end of the quarter with house values increasing rapidly and interest rates rising.
California did launch an interesting loan program called "California Dream" that allowed buyers to get a 20% down payment assistance. However, the $300,000,000 that was allocated towards this program was reserved within two weeks of it's launch.
Learn more about the program here: https://www.calhfa.ca.gov/dream/index.htm
Big take-away: It was a very popular program so when you see another roll out of this program or something similar, I suggest you reach out to us quickly so we can jump on it. If you think about it and apply the 20% of our median detached home price of $940,000 for San Diego County, that's only around 1,600 families that would have been able to take advantage of this program for all of California that has a population of 39 million people. So, yeah, it's no surprise then that the funds were reserved so fast.
Offers at or above list price became the norm in quarter 1 once again so buyers had to adjust their strategy accordingly because the things we were doing in quarter 4 were no longer valid.
Here are a couple examples of those strategies:
Buyers were buying down the interest rate on their own, instead of asking the seller to pay for it.
Buyers started waiving appraisals once again.
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.)
Tip: Just because the San Diego market turned into a seller's market in quarter 1, don't assume that this is happening all across the nation. So, this could be great news for you if you are selling now in San Diego and moving to any of the cities that are experiencing a buyer's market. The chart below gives you some perspective about this. Notice where inventory has increased a lot compared to last year, that's a sign that the real estate activity in that city is most likely in favor of the buyer.
The average of the 40 markets is 61.8% more inventory year of year.
San Diego is sitting at -9.9%. Only Sacramento is lower. It's safe to say the experience in our market is "unique."
Have a fantastic 2nd quarter! 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 client Greg for this amazing review!