San Diego Ranks As The Least Affordable City In USA To Buy a Home

[Kyle Schroeder]

A few weeks ago, San Diego was rated as the least affordable city in America to purchase a home.  This does not mean that we have the most expensive homes, but rather wages have not caught up to the skyrocketing prices of homes on the market.  When I moved to San Diego from Los Angeles 3 years ago, one of the first things I noticed was that companies were paying their workers ~25% less than what they would pay in L.A.  Fast forward 3 years and here we are with record housing prices.  In February 2022, the AVERAGE sale price in San Diego was $1,002,871.  That is crazy!  On top of it all, interest rates have almost doubled since this time last year.  With all of this being said, how do you think we will get through this situation?  Will the market crash?  Will wages increase?  And how does this situation affect the way you advise your clients?  For me, I don't foresee a crash considering there is still an extreme shortage in properties available.  I think that wages will catch up with this housing trend as well, considering how hard it is to find a good employee these days.  I would love to know what you all think about this!  

[Dan H.]

I can think of few cities as desirable to live as San Diego if you do not include the cost of living or the crowds.  In addition, I can think of few cities that are as geographically constrained as San Diego.  To the West is the Pacific Ocean.  To the South is Mexico.  To the North is Camp Pendleton and Orange County, To the East quickly test harsh (and you get Imperial County that no one would mistake for San Diego).  The supply is more difficult to add to than virtually anywhere else.

Therefore, San Diego is justifiably an expensive place to live.  The term for the low wages with respect to the cost of living is the Sunshine tax.  Housing, gas, electricity, water are all near top of nation in price, but out wages are near middle of nation.   People who are not from San Diego do not realize how low our wages are.  

When I had a W2 job there was an employee that came out here from Dayton for a short assignment and decided he would rather live in San Diego.  He applied assuming our engineer wages were higher than Dayton and that he would get a cost-of-living wage increase.  He was informed that the salaries SW engineer salaries in Dayton were slightly higher than San Diego.  He did negotiate a raise because San Diego wanted him and he indicated he was not going to move for that much of a decreased income to cost-of-living.  He was able to negotiate a salary above the market salary because he was not willing to pay that high a price for the sunshine.

My family has been in San Diego RE quite a few years. It is my belief that anything can happen in the short term to affect prices whether it is the Great Recession, Dot Com bust or Corvid.  I, therefore, am leery to try to predict the near-term appreciation.  However, I have a lot of confidence 15 years from now the price of San Diego RE will be higher priced than today even accounting for inflation.  This has always been the case and I do not see any indicators that would lead me to believe it will not be the case in the next 15 years.

As for wages, the Sunshine tax has been present for decades.  The exact amount of the tax varies, but wages will always to low compared to the cost-of-living because that is the price paid to live where people want to vacation, where the weather is as good as anywhere in the US, where you can be in the beach, mountains, and dessert in the same day, where there are world class attractions like the zoo, safari park, Sea World, Legoland, etc., where it is so difficult to increase the supply.