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How Has COVID-19 Affected the San Diego Real Estate Market?

COVID-19 has had an impact on the San Diego real estate market. Read to find out how the sales and rental markets have changed.

The real estate market has experienced some changes as a result of COVID-19. Two questions San Diego real estate investors are asking are:

1. How has COVID-19 affected San Diego real estate?

2. How will COVID-19 affect San Diego real estate in the near term?

1. How has COVID-19 affected San Diego real estate?

Many sellers have taken their homes off the market. Data shows 12.7% of all listings were removed, without selling, from March 7 to April 3 in San Diego. Compared to 4.8% in January 2020. It is not easy to show property right now, especially if tenant occupied. There are fewer buyers, so we advise our clients to only sell if absolutely necessary. Open houses have stopped. The average days on market for homes in San Diego County have increased from 46 to 66. Homes priced $700,000 and below are still seeing strong demand.

Due to economic conditions and mortgage forbearance, risk for mortgage lenders has increased. Most lenders are not doing jumbo loans right now (loans above the conforming loan limit for San Diego County of $701,500). Due to low-interest rates (3.73%, 30 year) there is a rush to refinance. Many lenders are raising rates because they have too much demand to handle.

On the rental side of things, demand for rentals has slowed down. People are not moving unless they need to. Some tenants are moving in with family or additional roommates to save on housing costs. We are seeing prices soften due to reduced demand.

Most cities of San Diego County placed a moratorium on eviction filings through May 31st. If your mortgage is backed by Fannie Mae or Freddie Mac, the federal CARES act has a longer freeze of 120 days beginning on March 27th 2020.

Over 95% of our tenants paid rent in April. We expect non-payments to increase in May. A study shows about 1/3 of tenants in the U.S. living in apartment buildings did not pay rent on-time (Source: OC Register).

2. How will COVID-19 affect San Diego real estate in the near term?

It’s really hard to say as the situation changes so rapidly. Supply is likely to remain low, but demand is likely to lessen. Most people are savers now (cash is king) and are not in a rush to buy. They want to see how this plays out.

“Post-pandemic, I expect the widespread unemployment / furloughing to take a toll on personal finances (reducing active buyers).” Austin Neudecker, Weave Growth.

There will be more distressed sales, possibly leading to lower prices.

“Low inventory should stop home prices from falling sharply.” David Ely, San Diego State University

Lack of jumbo loan financing could cause prices to fall. With all the challenges in the market, I remain optimistic about the future of San Diego real estate.

If you are considering renting or selling your property and need assistance during this time, please contact our office.

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Steve Welty

Steve Welty is the founder and CEO of Good Life Property Management. Since its establishment in 2013, Steve and his team have made owning rental property easy for over 1,000 San Diego homeowners.Their purpose is Life Improved–creating opportunity, enjoyment, and impact for their community is what matters most. DRE #01744610

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Hey guys! Adam Manly here, Business Development Manager at Good Life Property Management. I hope everyone is staying safe and healthy, continuing to socially distance during these very crazy times. I decided to get a little bit dressed up coming to the office today and shoot a couple of videos, try to bring a little bit of normalcy back to my life, get back into the daily routine, so would love to hear what you guys are doing to kind of keep sane during these very crazy times. Drop a comment below or send us a message on some of the things you are doing to bring a little bit of normalcy back to your lives. But really the purpose of today’s video is I wanted to kind of highlight something that we put out in our recent newsletter that I really just didn’t feel got enough attention. So I wanted to make a quick video here, kind of going over the rental and real estate market here in San Diego and kind of a quick update on that and some of the stuff we’re seeing. So the video is going to be broken up into two parts. One about the rental market and the other about the Greater real estate market here in San Diego County. So let’s jump right into it. So starting with the rental market, some of the stuff we’re immediately seeing right now is that there is a slowdown here in the rental market. We’re feeling it at Good Life. Less people are moving, we’re finding prospective tenants are maybe coming up with some creative solutions to try and save a little bit of money. So maybe moving in with family, maybe having more roommates than they usually would, which is resulting in kind of an overall slowdown in the rental market. And as a result of that, we are also seeing prices starting to soften as well, which is of course not great news. The other piece of that puzzle is that there is an eviction moratorium in most of San Diego County. That means that you cannot file an eviction for your tenant financially related if they were affected by Covid-19, so that’s something very important to keep in mind as well as we move into the summer months here. Another very interesting thing that I wanted to highlight specific with investment properties is a lot of our clients have been asking us about their mortgage and stuff like that, and it’s really going to differ from whoever your loan is with, so talk to your individual mortgage provider about potential loan deferrals or mortgage freeze. I know there’s various different programs floating around, so you’ll want to speak with your provider to make sure that you’re getting the most up-to-date information that’s applicable to you about that. And you know we’ve seen a couple of studies too -one was mentioned in our newsletter from the OC register, as well as I think I saw one from the National Association of residential property managers, that about a third of tenants across the United States who live in apartment buildings did not pay the rent for April. I’m happy to report here at Good Life that we had about 95% of our tenants pay on time for April, which was great news. We are expecting to see those numbers increase a little bit in May, but more to come on that. And that’s pretty much it for the rental side of things. We’ll make a short pivot here into the sales. Alright guys, now let’s transition into part 2 of the video, where we talk a little bit more about what we’re seeing in the greater real estate market here currently. So some of the things that I really wanted to highlight is we saw that over the last about 30 days or so, 12.7 percent of all listings were removed from the sales market without selling here in San Diego County. That’s compared to about 4.8% in January of 2020, so quite a big increase from this year. There are fewer buyers in the market right now, as I mentioned, a lot of people are saving or trying to figure out what’s going to shake out from this whole thing. So with fewer buyers, we’re advising clients to really only sell their property if they have to. It’s much more difficult to show a property without open houses, especially when tenant-occupied. All the additional hoops that we have to jump through in order to get into the place. So those are some things to consider right now if you are thinking about selling your property. We also saw the average days on market increase from 46 to 66 days, which was a big jump. We typically don’t see that large of an increase in such a short amount of time. And we’re also seeing some increased risk from mortgage lenders as well. And with that increased risk, we have seen a lot of mortgage companies not writing jumbo loans right now, which is a big problem here in San Diego, where real estate prices are extremely high. And really the last thing I wanted to touch on with the real estate market is that we are also seeing such a big demand for refinancing. The current situation coupled with how low rates are. We are seeing a lot of rates go up. Mortgage companies raising their refinancing rates because there’s just so much demand. So those are kind of a couple of things we’re seeing here in the sales market. Let’s kind of wrap up the video here and talk about what the future holds for real estate here in San Diego. Alright guys as we wrap up the video here, the last thing I really wanted to highlight or talk about is what the future holds for San Diego real estate. So you know of course nobody has a crystal ball. This whole situation is changing on a very day to day, week by week basis. So stay tuned for more videos about kind of what we’re seeing. We’ll be sure to keep you guys posted with any new information we have about the greater market. But a couple of final thoughts here before we wrap up is that we really expect that because supply is going to remain low in the overall housing market, both on these sales and rental market side of things that’s going to keep demand low. We are also anticipating there’s been a ton of unemployment claims furloughing and we’re really expecting that to take an additional toll on people’s finances. That’s also going to contribute to demand staying low here in the Greater San Diego area. We’re likely to see a few more distressed sales coming up as well, that’s something to keep an eye out for also. Again, this is just kind of what we think may happen. And also the lack of jumbo loans being made available to potential buyers here inSan Diego may also cause prices to fall, which is something to keep our eye on as well. And one really great quote though that we pulled from David Eli from SDSU was that he really feels that the continued low amounts of inventory should really stop prices from falling too sharply, which I do agree with. If everyone in San Diego County lists their home at the same time, obviously that’s a different story. But with the inventory numbers we’re seeing right now, hopefully that keeps prices from just dropping too dramatically. So that’s a little bit about our recent newsletter. I have to give a ton of credit to our CEO Steve Welty for really putting this all together and keeping you guys informed about our greater real estate and investment market. We are your resource here at Good Life Property Management for all things real estate investment related here in San Diego. So drop a comment below on some of the things you’re seeing if you’re an affiliate or work in the industry. We’d love to hear from you as well and thanks for watching guys!