Rising Median Prices and Balanced Supply-Demand Dynamics in San Diego

The San Diego real estate market experienced a rise in median prices for single-family homes and condos in January 2024, despite the impact of higher mortgage rates. Low inventory levels have offset downward price pressure, and the market is showing signs of a more typical seasonal pattern. In this blog, we will explore the current state of median prices, inventory levels, and the supply-demand dynamics in the San Diego real estate market.

Median Prices and Price Contractions:

In Southern California, the median prices for single-family homes and condos in January were 4.9% and 4.8% below their August peaks, respectively. Slight price contractions are normal in the second half of the year, and prices are expected to remain slightly below peak levels during the winter months. However, as interest rates decline, prices are predicted to reach new highs in the first half of 2024. The low but rising inventory and new listings entering the market will contribute to price growth as demand continues to increase.

Impact of Mortgage Rates on Supply and Demand:

High mortgage rates have softened both supply and demand in the San Diego real estate market. As rates fall, it is anticipated that more sellers will enter the market, addressing the supply shortage. Rising demand alone cannot fully stimulate the market without an adequate supply of homes. Unlike 2023, the inventory in 2024 is expected to follow more typical seasonal patterns, with inventory levels increasing in January or February and peaking in July or August.

Inventory Trends and Sales Activity:

After hitting all-time lows in December 2023, single-family home and condo inventory, sales, and new listings have shown an increase from December to January 2024. The low inventory and new listings, coupled with high mortgage rates, contributed to a slower housing market. However, 2024 is already demonstrating signs of a more normal year, with a nearly 100% month-over-month increase in new listings and a 52% increase in homes coming under contract. While inventory and sales are down year over year, new listings have seen a 7% increase.

Balanced Market Conditions and Supply-Demand Indicators:

Months of Supply Inventory (MSI) is a key indicator of the supply-demand relationship in the real estate market. In January 2024, MSI for both single-family homes and condos indicated a more balanced market, with the current supply able to meet the current rate of sales. Additionally, the percentage of list price received by sellers is expected to be higher in 2024 compared to 2023, suggesting a stronger seller's position in negotiations.

The San Diego real estate market is experiencing rising median prices and a more balanced supply-demand dynamic. Despite slight price contractions and the impact of high mortgage rates, the market is showing resilience and signs of recovery. As interest rates decline and inventory levels increase, the market is expected to gain momentum in the coming months. Stay informed about the local trends and consult with real estate professionals to make informed decisions in this evolving market.