By SARAH WARD
I just represented the sellers on a closed transaction for an upgraded three-bedroom, one-bath, single-family residence here in the College Area. We had nine offers at and above list price within the first few days. So what is the story with this surging demand in housing right now? There are some factors contributing to both the increase in prices and demand.
First of all, this is not the Great Recession of 2007 to 2009. That fall in prices was related primarily to the U.S. government relaxing qualifying terms on mortgages to purchase a property with the idea that “everyone should be able to own property.” Certainly a noble goal — but one that ultimately failed.
The book (or movie) the “Big Short” explains it all pretty well. Millions of mortgages were being written with little to no qualifying criteria on the borrower, which then lead to millions of borrowers defaulting on their mortgages and a flood of homes hitting the market all at once. Prices naturally decreased.
It is really frustrating, as I know quite a few buyers right now stating that they wish to wait until home prices drop 10% to 30% before looking for and closing on a property. Well that is unlikely to happen as our national Mortgage Backed Securities market is much stronger than it was in 2007.
In the last 10 years, people have qualified for mortgages based on strong fundamentals. And anyone needing to sell right now is not “under water” on a property, so the market remains smooth, stable, and efficient. Home prices in San Diego (a jewel of the nation and world) are surprisingly discounted compared to other parts of California such as Orange County, Los Angeles coastal areas and parts of the northern coast.
Another factor driving the huge demand for housing right now is that renters are valuing homesteads more than even just a few months ago. Suddenly people are wanting to own a property with at least a small yard and extra room for a home office. I have one buyer who was renting in Pacific Beach and traveled quite a bit but who has now settled down by purchasing a property. The virus has caused some soul searching and changes in lifestyles, no question.
Buyers are now having more confidence that we are closer to the end of this pandemic than the beginning or at least there is an end in sight with maybe being back to normalcy sometime in 2021. Sadly, most of the pandemic job losses are among those making less than $50,000 and with lots of the higher paid workers, keeping their jobs, and able to qualify for a property. Loan programs abound requiring just a 3.5% down payment and some of that can often be in the form of a gift.
If you are thinking of purchasing a property, I believe San Diego real estate is an excellent long-term investment with both appreciation opportunity and amazing tax advantages that I will explain.
Additionally, an important aspect to real estate investment currently is that it is a hedge against inflation. With all the government money-printing and stimulus right now, real estate acts as protection form the weakened purchasing power of the dollar. As the dollar gets weaker, home prices typically increase.
Call me and together, we can get you qualified and get started on the path to homeownership. I can answer all your questions either in-person or over a Zoom meeting. There has never been a better time (or a more important time) to purchase real property.
— Sarah Ward is realtor with Fine & Coastal Real Estate. Reach her at firstname.lastname@example.org or by calling 858-431-6043.