Following reports that first-time home buyers are ready to brave the market and other economic factors are working to spur home sales, it seems the San Diego real estate market is being primed for an excellent year in 2015. Recently, Fannie Mae executive Jeff Hayward echoed those sentiments with a sterling vote of confidence for San Diego at the Commercial Real Estate Finance Multifamily Housing Convention.
“If you look at anybody’s forecast the market will be a pretty large market this year,” Hayward said to U-T San Diego reporters at the convention. “And as long as our lenders are there sharing risk with us we’re going to be there with them.”
One of the largest factors behind Hayward’s optimism for San Diego is the broadening job market, which is bringing more people to the city than are leaving. With the population of millennials, those between the ages of 24 and 35, rising, the city is likely to see a large influx of renters as well as buyers as this demographic is finally being empowered by gainful employment.
“You’re still going to have job growth here even though in the defense sector you’re going to have some cutbacks,” he said. “This really is a pretty robust economy. There’s net in migration, so there’s more people coming to this area. Anytime you have more people coming to the area you’re going to have a bit more demand, so I think this is really the classic supply-demand, there’s not as much supply as maybe need be.”
San Diego Rent Appreciation May Eclipse Home Values
Throughout the years since the recession, San Diego has been one of the regions that has been crippled by rapidly increasing home prices. With the sudden rise in demand for apartments and rental units this year, rent is expected to increase and may no longer be the affordable option that millennials are looking for.
On the flip side, home appreciation rates are expected to regulate even further in 2015, giving home buyers the chance they need to pick up affordable properties. According to the S&P Case-Shiller Home Price Index, which measures repeat sales of single-family homes on a two-month lag time, that trend already began in the fourth quarter of 2014.
After hitting a two-year low in October, the pace of home price appreciation increased by 4.7 percent in November. This is a drastic improvement from a little over a year before when home prices were practically out of control with appreciation rates topping out at 21.5 percent in August 2013.
“The market can’t sustain that pace, that’s a bubble,” said Mark Goldman, a loan officer and real estate lecturer at San Diego State University, to U-T San Diego. “That’s leading into a period where prices will go beyond the market’s ability to absorb them and somebody is going to get left holding the bag, and indeed we saw that in 2013.”
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