16 May San Diego’s Housing Crisis
Low inventory, high demand, & soaring prices in America’s Finest City
Near-perfect year-round weather, breathtaking beaches, Mexican food unrivaled this side of the border – the list could go on and on. For these reasons and more, San Diego is beloved by residents and visitors alike. Living up to its moniker of America’s Finest City, the area’s desirability is well demonstrated by a robust real estate market with housing prices far above national averages.
San Diego, along with other desirable cities throughout the state and nation, have always come with a higher cost of living. As low inventory and high demand rapidly drive up prices, San Diego is not alone in this problem that is plaguing many sought-after markets throughout the U.S. and particularly California. The state is home to four of the top five markets to have gained the most value post-recession including San Jose, San Francisco, Los Angeles, and San Diego.
The good news is that the market has recovered what was lost when the housing bubble burst in 2007. The bad news is that prices have skyrocketed so quickly that affordability, even for families who should be able to afford a single-family median-priced home, aren’t able to.
The American dream of homeownership aside, renters are not protected from the affordability problem. In March, the average rent in San Diego hit a record of $1,887 per month.
Perfect storm; imperfect solutions
Years in the making, the housing crisis cannot be fixed overnight. Similar to other areas of the state, proposed solutions abound from citizens, lawmakers, economists, and urban developers. At the center of the issue is the age-old adage of supply and demand. As the economy has improved post-recession, San Diego has added more jobs and residents but has not developed on pace to keep up with the growth.
With 1.7 months of single-family supply, a simple solution is not readily available due to land and entitlement costs, rising construction costs, land availability, access to credit, and opposition to development from residents and environmentalists. The result of these issues compounding over the past decade has resulted in historically low approval numbers for new housing units, specifically in the low- and mid-market segments. San Diego, along with other impacted communities require their own assessment of proposed solutions that match up with local viewpoints, laws, and demographics. We will continue to explore this growing issues in future blog posts; in the meantime, below are our top recommended articles on the topic.
Moving out and moving on
Those facing the daunting reality of San Diego’s housing market are facing difficult decisions. According to a poll conducted by U.C. Berkeley’s governmental studies school, 57% of those polled had considered moving out of the state due to high housing costs. Many Golden State residents are fleeing to Nevada, Arizona, and Texas. The study also found that lower-income households are seeking cheaper rentals or the ability to buy a home while wealthier individuals are looking to escape high taxes.
For those who refuse to give up completely on San Diego’s sunny weather, many are sprawling out past the city’s traditional suburban areas. One popular area for aging millennials starting families is Otay Ranch. “Development in the Otay area is progressive and smart, and the location is still accessible to the beaches and downtown areas,” said Province West Principal Marc Kleiman. “Developers in that area have done a great job of tapping into what younger buyers are looking for regarding home products and overall planning of the community.” With homes still available in the $400s, the area is more approachable for many first-time buyers.
In the northern areas of San Diego County, El Corazon in Oceanside and areas of Fallbrook have newer and upcoming neighborhoods at similar price points. “These areas allow buyers to afford a home or rental where they can still enjoy everything San Diego and Orange County has to offer without compromising on their home or lifestyle,” Kleiman said. “As the Southern California population continues to grow, we have to work to fix the problem, not contribute to it and that includes building a variety of home products in various communities so that we can meet the lifestyle and financial needs of the residents that want to continue to call these beautiful areas home.”