Just when we thought we were putting Covid behind us, it was another crazy, Covid year. All the while, the residential real estate market in San Diego was jumping in big spurts and hitting new highs. Here’s the stats from the 4th quarter of 2021 and the yearly review for San Diego real estate, along with predictions for 2022. Always hand-written with stats direct from our local MLS.
2021 Q4 Year End Summary
Sales Volume Up: 2021 saw ~ 8% more closed sales than 2020 in total
Inventory Record Low!: Down 58.6% from end of 2020. Down 58.5% from Q3 2021
Loan Rates Low: Started 2021 at 2.76%. Started Q4 at 3.10%, ended 2021 at 3.27%
Home Values Up: Median sales price Up 16.7% this year!
Govt./Policy/Life Changes: Covid-19 Shift, Stimulus Money & Fed Fund Rate
The Above image is a visual summary of my statistics reference from our local San Diego Association of Realtors.
2021 Year Review – The Details
I was actually surprised to see that Closed Sales Volume was up 8% this year over last. Why? Because new listings were down 5.6% and inventory was down about 45% year over year when we started 2020. As such, there were fewer homes to buy when we started the year, and definitely fewer homes when we finished it.
Record low inventory has been the predominant market factor this year and we just hit another Inventory low point! I have not seen actual inventory this low since before I got into real estate 18 years ago. Considering there are more actual homes built now than 18 years ago, that makes this low inventory even lower when looked at as a percentage of the whole.
New listings were down 5.6% this year and anything that does go on market at a decent price gets purchased within a week, often times well over asking price. As such, active inventory has been hovering around 50% less than last year at the same time, throughout 2021.
Rates have come off their historic lows from last year and pushed up about half a point. They went up in Q1 then retreated in Q2 and then back up again in Q3/Q4. And we just had another bump in the first weeks of 2022.
The lending market normalized after a rather crazy and frantic 2020 due to the onset of Covid.
But with the return of the economy, rising inflation, etc., rates ticked up off their high and are likely to do so again in 2022.
Home loan rate charts:
Long Term Rate Chart: 1971 – 2021 Short Term Rate Chart: 2021
Govt / Policy / Life Changes:
The Federal Funds Rate was dropped pretty quickly at the beginning of the Pandemic in 2020 and has been hovering at 0 ever since. This has allowed banks to borrow money for virtually nothing and pass on those savings to consumers, spurring economic growth. The result in real estate has been lower home loan rates. With super low rates, it became more affordable to purchase a home at higher prices, thus putting upward pressure on home values.
There was also stimulus money given out in the form of personal checks, PPP loans, State grants, and unemployment benefits. For the people that kept their jobs and felt secure, it’s been a great time to buy things at a discount, or to borrow for less. I believe that this influx of stimulus money helped inflate real estate prices (among other things).
And the “Covid Shift” brought homebuyers looking for more land, an extra bedroom and/or an ADU for home office or intergenerational living. I believe this shift will continue and due to our amazing outdoor weather, those seeking refuge from Covid will seek San Diego….the same reason many of us moved here – for our weather.
If you hadn’t already guessed, home values went up quite a bit this year. We had a couple super crazy spurts where homes were going $100k over asking. It was a tough market to be a buyer this year for sure. Extremely low inventory, low rates, and a market shift towards more residential space per household all combined to give us an average 16% equity gain countywide.
What does the future hold? My theories & predictions are below…
Of course, these are just predictions….that said, I’m quite bullish on the first half of 2022. We are likely to see another 5-10% bump by the summertime based on how low inventory is. I was expecting closer to 10% the first 2 quarters, but rates just jumped almost half a percent in the last few weeks, and if that continues, it will eventually put real downward pressure on prices like we saw in 2018.
Despite rates having gone up, they are still pretty low historically and inventory remains historically low. I’m currently seeing offers 5-10% over asking price as I write this article, so it’s possible we jump 5-10% in the first quarter.
For the handful of you that actually read my articles this far, you have likely heard me talk about the sell-off that is supposed to occur at the peak of each market. So far that hasn’t happened because we haven’t peaked yet!! We are a solid year away from any sell-off because inventory needs to build much more before we can start the sell-off. Right now, it feels like we have at least 10-20% to go before our market tops off…..I’ll let you know if there’s more to go when we get there, so stay tuned.
Want a free lunch?
If you got this far and read my entire article, please let me know what you think with an email/text/call. You’ve got a free lunch coming to you! Or, we can share a glass of wine over my front yard fire pit at a safe distance 🙂
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Broker / Owner
73 Degrees Realty
ps. feel free to check out my San Diego Green Homes site if you have a passion for living green/sustainably and contact me (cell: 858-761-1707) for a free consult regarding how to green your home.