The San Diego area is among the local markets expected to get the coldest in 2023, according to a new national report.
Redfin’s long housing website review of next year says the West Coast markets and metropolitan areas that saw the biggest gains during the COVID-19 pandemic will slow the most. He selected the markets by looking at data from February through November that showed price declines, inventory declines, the number of homes for sale and other factors.
The San Diego metropolitan area ranked ninth on the list of markets expected to get the coldest. He said the areas that will drop the most are Seattle, San Jose, Las Vegas and Salt Lake City. Those least likely to experience declines are Lake County, Illinois, Chicago, Milwaukee, and Albany, New York.
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Redfin stopped short of projecting how much prices might decline in metro areas, but instead relied on recent trends to forecast which markets might cool off the most. Through October, home prices in San Diego County had fallen five months in a row. Redfin said prices nationwide should fall about 3 percent by the end of next year.
Here are Redfin’s national predictions and how they might relate to San Diego County:
Home sales will fall
Redfin expects 16 percent fewer home sales in 2023 than the year before. There are two reasons: prospective buyers are affected by rising mortgage rates, and potential sellers don’t want to have to search for a new home, while interest rates are probably higher than your current mortgage.
“People will only move if they have to,” wrote Taylor Marr, Redfin’s deputy chief economist.
Home sales in San Diego County recently hit their lowest point in years. There were 2,354 sales in October, according to CoreLogic, the lowest monthly figure since May 2020, when the initial shock of the pandemic brought the market to a halt, only to cause prices and sales to spike starting next month.
Redfin said its forecast is based on several factors, including inflation and interest rates that reduce affordability. However, he said inflation is likely to continue to ease and the Federal Reserve may feel less pressure to continue raising rates that drive up borrowing costs.
Redfin expects mortgage rates to gradually decline by the end of 2023, to around 5.8 percent. The interest rate for a 30-year fixed-rate mortgage is 6.28 percent on Wednesday, December 21, according to Daily Mortgage News.
Markets with the highest prices will cool down
Redfin said the relatively affordable metropolitan areas of the Midwest and East Coast, which did not experience explosive home price growth like San Diego, are expected to hold up better next year.
Marr wrote that markets that weren’t caught up in the pandemic home-buying frenzy should be more insulated from price corrections.
He said the pandemic boom cities: Austin, Texas; Boise, Idaho; and Phoenix, they can take a big fall.
The San Diego metropolitan area was regularly in the top three appreciating markets in the closely watched S&P Case-Shiller indices during the pandemic. The 20-city index reported a 30 percent annual price increase for the San Diego area in March, but slowed to a 9.5 percent increase. in September.
rents will go down
Redfin said rents will fall, based on rising vacancy rates in recent months and a higher than normal supply of rentals.
The multi-family construction was in a maximum of 50 years as of September, which means there are a lot of new buildings competing for tenants. Additionally, homeowners who had planned to sell single-family homes are now more likely to put them on the rental market.
Real estate tracker CoStar said earlier this month that the apartment vacancy rate in San Diego County was 3.4 percent, up from 2.3 percent at the same time last year. Median requested rent was $2,321 per month, down from $2,352 in the third quarter of this year.
Redfin said rents would have fallen more, but millennials and Generation Z are less likely to become first-time homebuyers and more likely to rent indefinitely. He said higher mortgage rates and fewer homes for sale make renting the more likely long-term scenario for many.
Migration to expensive metropolitan areas will slow
San Diego employers desperately seeking workers may be frustrated to learn that most migration projections say people will prioritize less expensive metro areas.
Redfin said Gen Zers in particular will have more flexibility to move where they want with the growth of remote work. That means they can look for more affordable places that are pay people to move there.
Tucson, Arizona has A program that pays moving expenses for remote workers and provides free internet and other benefits up to $7,500; northwestern Arkansas has A program who pays $10,000 and gives away a mountain or road bike; Savannah, Georgia, pay tech workers up to $2,000 in moving expenses; and Topeka, Kansas. I will give up to $15,000 after renting or buying a home.
San Diego has promotions and an advertising campaign to try to get workers to move here, but does not offer direct financial payments. The San Diego Economic Development Corporation has a “just say no to winter” advertising campaign and a recruiting toolkit that emphasizes tech jobs, craft breweries, and the weather. ◆