San Diego Market Update - May 2020

[Kenneth Donaghy]

I've been writing offers everyday for the last couple weeks for my clients, mostly house-hackers buying 1-4 units. Each property has had multiple offers, on average 3-6 offers within the first week (Demand). 

San Diego is still seeing an all-time low in inventory (Supply), and interest rates are still at an all-time low (Stimulating Demand). 

What does that tell you? 

[Dan H.]

Originally posted by @Kenneth Donaghy:

I've been writing offers everyday for the last couple weeks for my clients, mostly house-hackers buying 1-4 units. Each property has had multiple offers, on average 3-6 offers within the first week (Demand). 

San Diego is still seeing an all-time low in inventory (Supply), and interest rates are still at an all-time low (Stimulating Demand). 

What does that tell you? 

 That sellers are waiting on the sideline.   I have seen the stats that in San Diego the new listings are down ~30% for April and where down over 30% for March versus a year ago.

That the effect of $0 STR rents have not resulted in many LL already placing the RE on the market.

That any result of lost LTR rents (which we have had 0 lost LTR rents so far) or difficulty finding new tenants for LTR units has not yet resulted in units hitting the market.

Logic seems to be that if it were not for artificially holding units off the market, that we should see more RE on the market in 2020 that 2019 because of the various lost incomes (not just lost rent, but people making less money due to layoffs, reduced hours, etc.).  But what we have seen so far is a reduced number of listing.  This is creating a backlog of potential listings.

No one knows what local RE prices will do, but there is a lot of evidence that there is a backlog of listings.  I personally am forecasting between -20% to 0% appreciation in the 2020 year (so up to a 20% decline in value).  

Investors should be including the various risks in any offers.  They should not be using the same buy criteria as they used last year.  People buying homes to live in do not typically analyze risks, returns, etc.