San Diego Real Estate Inventory Way Down in 2017

A recent report from the real estate data company Trulia revealed that home buyers in many cities are dealing with very limited inventory. The San Diego housing market was near the top of the list for cities with the greatest inventory reduction since 2012.

According to the March 2017 report, the number of homes for sale in the San Diego real estate market dropped by 66.5% from Q1 2012 to Q1 2017. That put it among the top three cities in the U.S., in terms of housing market inventory reduction.

Meanwhile, home prices in San Diego are approaching the peak levels reached during the last housing bubble. During the first quarter of 2017, house values in the Southern California city rose to 96.6% of their pre-recession peak.

According to the report:

“A strong recovery may be partly to blame for the large drop in inventory some markets have experienced over the past five years. Housing markets … which have had greater home value recovery since 2012 have experienced larger decreases in inventory.”

San Diego Among Housing Markets with Big Inventory Drops

Here are the five housing markets with the largest decreases in total inventory since 2012. The percentage beside each city shows how inventory (the number of homes for sale) has changed from Q1 2012 to Q1 2017.

• Salt Lake City, UT: -69.5%
• Seattle, WA: -66.6%
• San Diego, CA: -66.5%
• Nashville, TN: -66.0%
• San Jose, CA: -63.5%

The San Francisco housing market also made the top-ten list, with a five-year inventory change of -62%. California dominated the list with a total of three cities in the top ten.

Related: 5 tips for San Diego buyers

Home Price Forecast: Is San Diego Leveling Off?

When real estate inventory levels drop considerably, home prices tend to go up. This is due to an imbalance of supply and demand, which puts upward pressure on house values.

And for the last few years, that’s exactly what has happened in the San Diego real estate market. Demand has exceeded supply, pushing prices north. That’s why San Diego home values have nearly reached their pre-recession peaks, as of March 2017.

But there’s a different kind of trend happening here — or at least, a projected trend. The housing analysts and economists at Zillow recently predicted that home prices within the San Diego housing market would remain level over the next year or so, with little to no upward movement.

In March 2017, the company stated: “San Diego home values have gone up 5.3% over the past year and Zillow predicts they will rise 0.0% within the next year.” They also labeled this particular market as being “hot.”

So we have something of a paradox here — a hot real estate market with limited inventory where home prices are expected to remain relatively flat over the coming months.

Is it a good time to buy in San Diego?

Tips for Buying a Home in a Tight Market

With the San Diego real estate inventory situation being what it is, local home buyers should be prepared for stiff competition. Fortunately, there are some specific steps you can take to succeed in a tight housing market like San Diego.

• Get pre-approved for a mortgage loan before entering the market. Sellers will be more inclined to accept your offer, if it has a pre-approval letter attached.
• Narrow your home search to the kinds of properties you can realistically afford. Get a basic housing budget on paper before you start your home search, and get pre-approved by a lender (if you’re using a mortgage). These steps will help you narrow the field based on your purchasing power.
• Don’t quibble over nickels and dimes, or minor issues on a home inspection report. If you find a reasonably priced property that meets most of your needs, seize the day! Chances are, other buyers will be waiting in the wings, ready to make an offer on that same home.