Call us 619.435.0145

Blog

Increased Demand is Driving the San Diego Real Estate Market

Posted by: raindrop 5 years, 6 months ago

(Comments)

In looking for investment properties for clients, it has been frustrating not being able to find the screaming good deals that existed in 2009-2011. 

The 10% CAP properties don't exist, and the Cash on Cash percent on a leveraged property (30% down) has dropped significantly.

Real estate investors are driving the market right now, and the investors with the foresight to have bought income property between 2009-2011 made great buys that may not be available again for many years.  As market CAP rates drop in conjunction with the low-risk marketplace, my clients are wondering if the market has rebounded for multi-family homes.

To analyze the market, below please find graphs from loopnet.com, a commercial real estate listing service.

Across San Diego, asking prices for multifamily properties have gone up from the end of last quarter, rising 4.7% to $152,745 per unit. Asking prices have risen 17.3% on the year. Asking prices for multifamily properties hit a three-year peak in September 2006 at $190,196 per unit. In comparison, the median asking price is now 12.4% lower. The lowest asking price in the past three years was $128,153 set in December 2010.

Increased consumer confidence, a volatile stock market, a microscopic vacancy rate, and inexpensive money, in my opinion, have encouraged Buyers to invest their money in real estate. The increased demand has reduced the supply of available multi-family properties.


Over the past 3 months, there has been a 17.5% decrease in Total $ Available for Sale in San Diego Multi-family real estate, and a 20.3% decrease year-over-year.

Available multifamily properties have fallen for the past four months month-over-month, a 9.7% decline. This month, the number of multifamily properties available in the San Diego Metro Area fell, hitting its lowest point in three years. Last month marked the previous low. The number of multifamily properties available in the San Diego Metro Area has fallen 20.3% over the past year.


Demand on LoopNet for multifamily properties spiked in the San Diego Metro Area market, rising 13% since December 2011, 4.6 percentage points less than the 17.5% increase in the national average. Demand for multifamily properties also increased by 4.5% over the past year. The yearly change ranks the San Diego Metro Area thirty-fourth out of the top 48 metros.


For the past four months, available units for sale has declined month-over-month for multifamily properties. The number of units available for sale for multifamily properties in the metro area decreased 33.9% year-over-year and 30.3% compared to the end of the fourth quarter of 2011. The number of units available for sale marks a 33.9% decline over the past year. The drop in supply and the rise in days on market could be an indicator that people are currently holding off putting their properties up for sale in the current economic climate. A decrease in supply also appears to be making the market more favorable for sellers, which could be why prices are going up.


Despite the detailed graphs indicating the current market climate for multi-family investment in San Diego, the question remains if we have hit the bottom. In my opinion, the political climate is a driving factor, and feel the interest rates will remain low through at least 2012. However, when interest rates begin to increase, which they inevitably will, the market will level off. When the real estate market recovers, investors will own a huge percent of the market. However, in my opinion, the market cannot recover fully until unemployment drops substantially.

Comments

Testimonials

Our initial experience with you, especially with your demonstrable expertise, knowledge, and willingness to both educate and work with us regarding the market and related considerations particular to Coronado, resulted in a gratifyingly helpful and positive experience for us.

—Robert R. READ MORE