Investing in the San Diego Real Estate Market—Stats & Trends in 2023

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The San Diego metropolitan area features a robust housing market—with some of the highest historical rent and price appreciation in the United States. Anchored by a growing economy, low unemployment, and a significant military presence, the San Diego real estate market offers investors a stable base with strong long-term growth prospects.

Is Buying Real Estate in San Diego a Good Investment?

Depending on your goals, it can be a great market to invest in! The positives are that it has great long-term growth prospects, solid long-term demand, and a great job market. The negatives are that the cost of entry is much higher than in most markets, and cash flow isn’t the easiest to come by. Below, we’ll go over everything you need to know to make a decision on whether you should invest here or not.

Economic Overview

San Diego, located in Southern California, is the eighth-largest metropolitan area in the United States, with a population of about 3.3 million people. From 2010-2022, San Diego County grew nearly 7%, and recent estimates suggest that the latest dip in population growth is recovering. This is a great sign going forward. For context, the state of California overall had an estimated decline of 0.8% during the same period.

Wages in San Diego are very high, with the median household income coming in at just above $82,000, compared to a national average of $65,000. Poverty rates are relatively low at 9.5% compared to the national average of 11.6%. These strong economic indicators are partially driven by a highly educated workforce, with nearly 40% of citizens holding a bachelor’s degree or higher. 

One of San Diego’s greatest strengths is its labor market. Unemployment rates remained solidly below the national average for many years pre-pandemic and have returned to very low lows in 2023.

An important economic factor for real estate investors is the diversification of employment in a target market. When an area is highly dependent on one industry, it makes the market more susceptible to economic cycles. San Diego, however, has a well-diversified economy with a strong representation in education, hospitality, trade, professional services, and government.

Home Prices

San Diego has a strong track record of property appreciation, growing a staggering 270% from the lows of the great recession in 2009 to today, according to the S&P/Case-Shiller Index. As a result, San Diego has a relatively high entry point with a median sale price of about $831,000 as of May 2023.

Inventory

The baseline housing supply in San Diego has steadily crept up now that we are past the official pandemic years. Seasonality has a big impact on the months of supply, as you can see below, but it’s currently trending in an upward direction overall.

This shift presents both opportunity and risk for real estate investors. With high-priced markets that appreciated rapidly during the pandemic, the risk of price corrections going forward becomes considerable. We’ve already seen prices come down this year. They are, however, on their way back up, but it’s still uncertain which way they’re going to keep moving.

Increasing inventory means that buyers have pricing power. If you are looking to buy in the market, you should do your best to buy properties below asking price to insulate yourself against potential future price declines. 

Rent Trends 

For investors, one of the most attractive reasons to invest in San Diego is the strong rent growth. The median rent in San Diego is above $3,100 and has grown around 10% in just the last two years alone. While rent growth started to slow down around the end of last year, it’s proven to be resilient and is already climbing back to where it was prior to the correction. It’s a highly desirable place to live, and the demand for rental units is strong.

Cash Flow Prospects

With potentially falling home values combined with high rents, cash flow prospects in San Diego are likely to increase in the coming months. That said, cash flow is relatively hard to come by as measured by the rent-to-price ratio (RTP). 

Generally speaking, the higher the RTP, the better. Anything with an RTP close to 1% is considered an excellent area for cash flow, but it’s not a hard and fast rule. But that doesn’t mean cash flow cannot be found. There are good strategies for real estate investors to employ to generate excellent returns in San Diego.

These are the top three ZIP codes by RTP:

• 92108 – Mission Valley East (0.60%)
• 92114 – Skyline (0.46%)
• 92110 – Loma Portal (0.45%)

How to Invest in San Diego Real Estate

According to David Greene, a local market expert, short-term rentals, medium-term rentals, and house hacking are all excellent ways to find cash flow in this market. Traditional buy-and-hold investing can still work but will likely require some value-add work to make the numbers pencil out.

If you can generate a good cash-on-cash return with some of the strategies mentioned above, San Diego could be a winning market for investors, given its reputation for great appreciation.

To learn about investing in San Diego, partner with a local investor-friendly real estate agent like David Greene, who can help you find, analyze, and close the right deal. 

Here’s how to contact David on Agent Finder. It’s easy:

• Search “San Diego” 
• Enter your investment criteria
• Select David Greene or other agents you want to contact

David is a nationally recognized authority on real estate—he’s an agent, lender, investor, author, and co-host of the BiggerPockets Real Estate Podcast. He’s been featured on CNN, Forbes, HGTV, and more. David is the first to know which strategies work, when the market shifts, and the best areas for investing that will meet your goals.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.