Take a look at the factors contributing to the current market.
Today I’m discussing whether we’re in a housing bubble or not. First and foremost, no one can predict the market with 100% accuracy. To try and do so is a fool’s errand, but here are a few reasons why I believe the San Diego market is not in a bubble right now:
1. Tighter lending standards. Everyone seems to look back to 2008 and think that we’re going into that same cycle now because housing prices have gone up so dramatically in the last few years. However, there are a few major differences. The lending standards to give buyers loans are much tighter now. Stated income loans were what really led to the housing crisis. That’s a loan where a buyer is given a loan based on what they say their income is, not what’s actually verified. They aren’t used anymore.
“The market doesn’t show any signs of slowing down for the next couple of years.”
2. Incredibly competitive interest rates. Right now we’re at 2.9%. We are so far below the historical average for mortgage rates and we’re predicted to stay low for the next couple of years. Even if we have a rise up to 6%, most buyers will understand that they’re still at a historical advantage. I don’t really see that being a reason why housing values would plummet.
3. New construction is not keeping up with demand. Right now you may hear some people talking about Californians leaving the state in favor of other places. The truth is that we still have a net inflow and slow population growth. For a long time, San Diego has not built enough housing units to keep up with the demand there is in the market. The number of housing units needed to keep pace with demand in San Diego per year is about 20,000. We haven’t reached that goal in the last 15 years.
If you take all three of these factors into account, the market doesn’t show any signs of slowing down for the next couple of years or so. If you have any questions about this topic or the San Diego market in general, please reach out to me. I’d love to help you.