There is no doubt about it – 2013 has been a wild ride for the San Diego real estate market. Many homeowners started January off still underwater from last decade's housing crisis. So far this year though, an increasing number of property owners are seeing their real estate holdings increase in value back towards pre-recession prices. According to Leslie Appleton-Young, Vice President of the California Association of Realtors, distressed properties made up around one out of three sales last year. Now, that number is fewer than one out of five.
As the recovery continues both in San Diego and across California as a whole, the California Association of Realtors has released their annual housing market forecast. In 2014, some of the things that real estate markets around the state can expect, according to CAR predictions, include:
- The number of home sales will increase by 3.2%. Although an inventory shortage earlier in the year dampened 2013's results, 2014 figures are expected to top the 439,400 single-family resales seen last year in 2012.
- More workers will be re-entering the job market as unemployment declines to 8.3%. This will represent continued gains in reducing unemployment from the 9% expect this year. In 2012, California's unemployment rate topped 10.5%.
- Across the state, housing markets will see continued increases in value. Although the 28% price increased expected in 2013 will likely not be repeated, analysts expect to see mid-to-high single-digit gains across the state. Those figures are averaged across the entire state, and local numbers in high-growth areas such as San Diego could potentially be higher.
- Although they've already increased a full percentage point over the past year to greater than 4.5%, interest rates on 30-year mortgages are anticipated to increase further in 2014. The California Association of Realtors predicts that mortgage rates will rise to 5.3% by the end of next year. While this will represent a significant jump over the 3.5% the market became accustomed to over the past couple of years, it is still a historically-low figure – one lower than was seen during the last housing market boom.
Potentially, one of the biggest changes expected to be seen in the California real estate market in 2014 is the type of buyers that we are seeing make purchases. Over the past couple of years, investors have made up one of the largest demographics of homebuyers. This was thanks to severely depressed property prices and a lack of access to capital for many traditional buyers. Now, as the economy recovers, a larger number of Californians are employed and a greater percentage of potential homebuyers are financially solvent and able to buy, it's likely we will see a shift in the market. As investors back off, traditional homebuyers are expected to make the majority of purchases next year.
Although this year's real estate growth was a savior for many homeowners that had been facing financial difficulties since the beginning of the recession, the huge, double-digit figures seen recently are not expected to continue into next year. Instead, the California Association of Realtors predicts that 2014 will bring steady growth, more in-line with traditional, pre-boom numbers. In 2013, we saw a flurry in the market as both investors and traditional homebuyers took advantage of remarkably low prices and interest rates. For homeowners, this continued growth means that San Diego property values will likely continue to rise as California's housing recovery marches on well into the future.