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January 5, 2014

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2014 San Diego Real Estate Market Forecast

by Bob Schwartz

2014 San Diego Real Estate Market Forecast

2014 San Diego real estate market forecastAs we enter 2014  the San Diego housing market is in our traditional slower winter real estate cycle. Normally this.period runs through the beginning of March, and is the annual slowest time for real estate activity  After a strong San Diego home appreciation re-bound in 2013, just in the last three months of the year, the San Diego real estate market seems to be experiencing an above average seasonal slowdown.

The good news continues to remain that the available housing market in San Diego and for that matter nationally, has a relatively low level of homes for sale.

New research from the Federal Reserve Bank of San Francisco on housing market dynamics indicates that homeowners who were inclined toward selling their home appeared to be holding back in order to take advantage of the newly rising home prices. This report seems to refute the idea that the lack of homes for sale reflects the inability of sellers to market their home because they owe more on their home then they can net in a sale.

San Diego Real estate forecasts for 2014 to me seems quite clear. There are many factors that can affect both residential and commercial real estate in California as well as throughout the country.

Here’s what I see for the San Diego real estate market and the California real estate market in particular though naturally some of this will apply to the national real estate market as well.

San Diego home prices

San Diego real estate has been slowly but steadily improving throughout 2013. The residential real estate market inventory in San Diego is still tight.

The latest S&P/Case-Shiller Home Price Index, which came out last week, showed an increase of 0.3% from September through October. This increase was off by two thirds vs. the prior period from August through September. Also, when compared to the July through August period, this latest increase was off 1.5%! So, this definitely indicates that although San Diego housing has been appreciating nicely throughout 2013, the latest statistics confirm that there is a marked slowdown in the appreciation rate.

As I said earlier, part of the slowdown can be attributed to seasonal factors, but, I believe the majority of the cause is a combination of rising interest rates and just the fact that home prices have increased much faster than most believed would happen, so there’s some sticker shock going on.

Also, last week’s S&P/Case-Shiller Home Price Index, ranked San Diego fourth in single-family home appreciation out of the 20 cities that are followed. The index showed that up through last week’s latest report, San Diego single-family homes appreciated by 13.6%!

Although real estate pundits and would like the general public to believe that San Diego home prices are just at the beginning of another cycle of annual double-digit increases, the current facts seem to indicate that although San Diego real estate has had a nice snap back in 2013, the rate of single-family home appreciation for 2014 will be substantially less.

The middle class, who make up the majority of the San Diego home buying public, seems to be concerned about a number of economic factors. Naturally, rising home mortgage interest rates are a major concern. With the Federal Reserve’s recent announcement that it’s cutting back on its $85 billion per month, ‘money from thin air program’, are artificially low interest rates are sure to be increasing throughout 2014. Also, many are finding out that their disposable income is taking a huge hit with the increases in medical insurance brought about by the Affordable Care Act.

Here in San Diego, because utilities are trying to reach a state-mandated goal of having a large percentage of their energy creation coming from renewable sources, our utility bills have been increasing substantially.

brokerforyou.com

Just last month, the San Diego City Council voted to again raise water rates. It seems it’s an oddity to have a year go by in San Diego without a water rate increase. What makes the latest water rate increase really notable is that it is an average 15% increase in current rates over the next two years! Oh, did I not mention that our gas prices are some of the highest in the country?

When I consider all the factors affecting San Diego and California real estate in 2014, I believe we will see continuing modest improvement that will most likely end up being single digit San Diego housing appreciation for the entire year. Sorry, but the double digit San Diego home appreciation experienced in 2013 looks to just be a found memory in 2014.

For anyone who would like to see my prior year-end forecast going back to 2005, visit this link:

San Diego real estate market forecast

So far, my prior forecasts for the San Diego real estate market have been pretty accurate. I do admit that my forecast for the San Diego real estate market in 2013 was a little too conservative, as I predicted a turnaround with single-digit appreciation.

Naturally, everyone should draw their own conclusions and seek the counsel of their own real estate and economic advisers, because my opinions expressed here are just that… my opinion opinions.

 

2014 San Diego Real Estate Market Forecast

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1 Comment
  1. Jan 17 2014

    I’m not sure where you are getting your info,
    but good topic. I needs to spend some time learning much more or understanding more.
    Thanks for wonderful information I was looking for
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