In 2016, San Diego County home values increased 6% over the previous year. By year-end, the cumulative value of all San Diego real estate was $596 billion, up 5% from 2015. This increase mirrors national shifts, and analysts believe San Diego County real estate values will continue to rise. Here’s a closer look at what’s happening.
Historic San Diego Property Values:
In 1998, San Diego real estate values were only $234 billion. Two years later, they jumped to $296 billion, an increase of more than 25%. Five years later – in 2005 – San Diego real estate values peaked at a whopping $603 billion. That means home values doubled over a five-year period.
Not long after that, in a painful turn of events, the markets fell. By 2011, San Diego home values fell to $404 billion. While that’s not as low as 2000 numbers, it does represent a loss of 1/3 the market’s value over a six-year period.
Since that low, however, the market has improved, and it has regained most of the value it lost between 2005 and 2011. In fact, the San Diego real estate market only needs to experience a $7 billion increase over 2017 to beat its historic 2005 highs. That’s less than a two percent increase, and the market stands to manage that type of growth easily.
Comparisons to Other Major Metros:
Some of the value in the San Diego County real estate market can simply be attributed to the area’s high population. To compare, Los Angeles and New York City, the two most heavily populated areas in the country, have the highest real estate values in the country. In 2016, the total real estate value in Los Angeles reached $2.5 trillion with New York City following close behind at $2.4 trillion.
However, there’s more to San Diego’s high property value than just population. San Francisco and Washington DC, the other most expensive markets, but are less populous than San Diego. Furthermore, Philadelphia and Dallas are similar to San Diego in terms of population, and their real estate values are significantly lower. Additionally, Indianapolis is not that much smaller than San Diego, and yet its real estate value of $111.7 billion is worth less than 20% of San Diego’s real estate.
Where Growth Happens in San Diego:
All of San Diego County is experiencing growth, but the biggest increases are occurring in affluent areas. To contrast, during the housing boom (prior to 2005), most increases were happening in inland areas. This made it easier for first-time homeowners to get onto the property ladder, sell their first homes, and move to a more expensive property. Today, that’s a big challenge, which why many would-be first-time home buyers are living with family or are choosing to rent rather than to buy.
So what drives property value growth and dictates where increases occur? One of the main contributors is related to new construction – or a lack thereof. The less available land exists that can be built upon, the more the value of existing homes increases. When construction starts to increase, existing home property value increases will slow. However, that’s not expected to happen anytime soon in California, and demand for housing continues to be high. That’s good news for you if you own property in California.
Now you understand what’s driving property values up in California and what’s expected to happen this year. If you own a home and are considering selling, use this insight to determine whether you should take advantage of demand and list soon for high returns. You could also consider renting your home out for a healthy passive income.