San Diego County Residential Real Estate Market Analysis: 2nd Quarter 2018
By Mark A. Melikian California Certified Residential Appraiser appraisals@san.rr.com P.O. Box 3051 Del Mar, California 92014 858-945-8996 ©2018
The following is a market data summary of detached and attached properties as reported by the San Diego County MLS system. The data includes all zip codes in San Diego County. All projections discussed in this analysis will be updated throughout the year in subsequent quarterly reports.
Market Overview – Number of Sales: The data provided analyzes residential real estate sales beginning in the year 2000, which is used as the base year. The number of sold listings in San Diego County peaked in 2003 at 42,746 units and decreased through 2008 to 23,972 units. In 2018, the total number of units sold, based on the first and second quarter results, is projected to be 32,394, down from 35,200 sales in 2017 (see Figure 1).
Market Overview – Absorption Rates: The monthly absorption rate (number of units sold in a month) will mirror the trend we see in the number of sold listings. The peak monthly absorption rate occurred in 2003 with 3,562 units selling per month. In 2008, the monthly absorption rate decreased to a low of 1,998 units. The 2018 projected monthly absorption rate, based on first and second quarter results, is 2,700 units, down from 2,933 units in 2017 (see Figure 2).
San Diego Real Estate Market Analysis
Market Overview – Sales Price: The mean sold price for a housing unit in San Diego County is projected to reach a new high this year, based on first and second quarter results. The current 2018 projection is for a mean sale price of $705,412. This would surpass the previous peak of $666,903 set in 2017. The currently projected mean sold price reflects a 5.8 percent increase over last year’s mean sold price (see Figure 3).
Market Overview – Days on Market: The mean number of days a property is on the market, based on first and second quarter data, will be at 28 days in 2018. In 2011, that number peaked at 79 days on market. In 2015, the number of days on market hit an all-time low of 21 (see Figure 4).
Detached Housing Market Specifics – 2nd Quarter 2018 compared with 2nd Quarter 2017: Detached home sales data for the 2nd quarter of 2018 shows the highest number of sales were in the $500,000-$600,000 price range (1,285 units). This is an upward shift from last year when highest number of sales for the 2nd quarter of 2017 were in the $400,000-$500,000 price range (1,445 units) (see Figure 5).
Attached Housing Market Specifics – 2nd Quarter 2018 compared with 2nd Quarter 2017: Attached home sales data for the 2nd quarter of 2018 shows the highest number of sales were in the $300,000-$400,000 price range (902 units). The highest number of sales for the 2nd quarter of 2017 was in the same $300,000- $400,000 price range (994 units) (see Figure 6).
Detached and Attached Housing Market Specifics – 2nd Quarter 2018 Housing Supply: Normal residential real estate markets typically have a six to seven-month supply of housing inventory. Based on 2nd quarter 2018 absorption rates, current supply levels for detached properties are at (or below) normal market levels across all price except the $1,500,000 and up category. Similarly, current supply levels for attached properties are at (or below) normal market levels across all price ranges except the $1,500,000 and up category (see Figure 7).
Comments and Outlook – Based on the second quarter MLS data, the San Diego County housing market projections for 2018 are:
➢ Sales volume is on pace to decrease compared to last year (see Figure 1).
➢ Absorption rates are on pace to decrease compared to last year (see Figure 2).
➢ Sales prices are on pace to increase by 5.8 percent over those of 2017. The county’s mean sales price is set to reach a new high of $705,412, surpassing the previous high set in 2017 (see Figure 3).
➢ Days on market are on pace to decrease compared to last year (see Figure 4).
The highest concentration of detached housing sales includes inventory priced below $600,000 (see Figure 5). The highest concentration of attached housing sales includes inventory priced below $500,000 (see Figure 6). Most sales activity continues to remain in these relatively lower price ranges, which is largely comprised of entry level housing.
Inventory levels increased in the second quarter of 2018 over the first quarter of 2018 by 30%, and 76% over the past two quarters. Despite this recent increase in inventory, supply levels of active listings across most price ranges are still at relatively low levels (see Figure 7). Specifically, more detached home listings priced under $600,000 are needed, and attached home listings priced under $400,000 are needed.
Despite recent inventory increases, housing supplies remain below normal levels in most price ranges. This will likely cause a continuation of a competitive environment for buyers during the third quarter of 2018, assuming interest rates remain relatively stable. Many real estate professionals continue to report multiple offers on entry level listings. There is evidence of a two-tiered market, although the lower tier is very competitive because of a dearth of listings: Multiple offers are being reported on fixer properties which have the potential for renovation and resale. Multiple offers are also being reported on renovated houses that are priced competitively. Based on the first quarter data, the expectation in 2018 is for a new high in county sales prices with a reduction in the number of homes sold. Subsequent reports will continue to analyze the trends in local housing supplies, sales volume and sales prices.
