Updated: Dec 29, 2022
With the current high inflation and mortgage rates, local media claims: San Diego Home Prices Falling 2022 into 2023. This is great for investors.
San Diego home sales are tanking creating investment opportunities for housing investors.
We’ll show potential housing investors why San Diego is the ideal place to buy rental properties and profit.
SOME KEY TAKEAWAYS
Understand what is happening to the national real estate market with rising inflation, interest, and mortgage rates.
Follow Warren Buffett’s investment advice to learn how fear and greed work in real estate investing.
Learn why historically real estate does well during inflation.
Find out what happens to debts during inflation.
Find out why now is the time to buy San Diego rental homes.
San Diego ranked as the #2 Most Desirable To Rent City in the U.S. for 2022.
Read why Bankrate says San Diego is a great location for rental investments.
Our Nation’s Current Real Estate Crisis
Before explaining San Diego’s current home prices, let’s explore what is happening in our country.
Read any newspaper to see how a national real estate crisis looms with higher mortgage rates, inflation, and fears of a coming recession.
This creates fear among home buyers and housing investors.
But wait, there is a solution.
Follow Warren Buffett’s Investment Advice
A recent Housing Correction post quoted Warren Buffett advises investors to become “fearful when others are greedy, and greedy when others are fearful.” Let’s break this into two parts.
1. Fearful when others are greedy plays into the last two years when home sales prices were high creating a seller’s market. This made it a bad time to invest.
2. Greedy when others are fearful springs up when rising mortgage rates make it difficult for the average buyer to purchase a home.
Let’s look at each part.
On November 8, 2022, Forbes asked: “Why Are Mortgage Rates Going Up In November 2022?” Forbes complained about the 6.95% average mortgage rate for a 30-year loan and 6.29% for a 15-year loan.
Also, a few days ago Kiplinger proclaimed: “Interest Rates Likely to Continue Climbing”.
A Freddie Mac recent survey shows that home values fell in 2022 and will decline in 2023.
Rising rates generate fear among buyers and investors. According to Buffet’s second part, fearful investors create value investing opportunities. This is when investors buy assets appearing underpriced relative to their intrinsic value.
Buffet’s predictions come into play when inflation and rising mortgage rates make home prices fall in 2022 and into 2023. A perfect time for investors to buy rental homes.
Forbes summed it up, “historically, real estate does well during inflation.”
Why? Inflation increases costs and that includes rents. When current leases expire rents will increase. This is especially true with the end of government foreclosure moratoriums enacted during the pandemic.
Thus, rents will rise into 2023. This is good for housing investors who buy when prices are low.
What Happens to Debts During Inflation?
Real estate investors love to leverage income-producing properties. Locking in a low fixed interest rate withstands inflation when new loan interest rates rise. Payments remain the same during inflation.
“Inflation punishes savers and rewards borrowers.” That’s because money left in a bank suffers during inflation earning lower interest rates. Yet, fixed long-term interest rates remaining the same means lower monthly payments compared to new mortgages.
Better yet, proper due diligence and good planning result in lower fixed long-term debt for rentals appreciating in value during inflation. That’s why leverage becomes a good hedge against inflation.
Why San Diego Home Prices Falling in 2022 and into 2023 Great For Investors
The San Diego Union-Tribune ran a story last week claiming "Pending Home Sales Dropped By Half in October". Also, the La Jolla Light newspaper ran a similar story last week.
The Times of San Diego recently ran a story titled: “Realtors Forecast California’s Home Prices Will Drop 8.8% in 2023” that included San Diego.
On November 8, 2022, the First Tuesday Journal published its “San Diego housing indicators”. It claims:
“Today’s bubble market has now passed its peak, reacting to downward pressure from rising interest rates and slowing sales volume, resulting in plunging home prices.”
Future Foreclosures: First Tuesday points out that San Diego’s home sales volume slowed by “August 2022 at 22% below the prior year”. Also, it pointed out that because of the statewide pandemic foreclosure moratorium ending, “these homeowners will find themselves heading toward a forced sale”.
According to the National Bureau of Economic Research, a rise in foreclosures means lower surrounding home prices.
Now is the Time to Buy San Diego Rental Homes
Don’t let inflation, higher interest, and mortgage rates scare you.
We recently published a post here about "How Real Estate Protects You During Inflation". It explains important facts and benefits of housing investments like:
Learning how real estate housing investing protects you from inflation;
Enjoy tax benefits like business deductions and depreciation;
How inflation accelerates value appreciation not taxed until you sell;
Your fixed-rate long-term debt on rental properties appreciating during inflation lets you enjoy more benefits;
Learning how accelerating your depreciation using a Cost Segregation Study gives you more tax benefits; and
How you can defer all your capital gains taxes when you sell by using an IRS 1031 Tax-Deferred Exchange.
Likewise, the WeLease Property Management Company published an article about, "How To Invest During The Housing Correction". It explains:
What the current Fed housing market correction is and how you can profit;
Find out about housing investments to take advantage of future falling prices;
Learn how the right timing to buy helps housing investors;
Learn why housing rentals investments are profitable;
Understand how to profit from housing rentals; and
Learning how to quickly calculate rental profits.
Forbes sums it up, “When the market takes a downturn is when some of the most successful real estate investors have piled up their rental portfolio.”
Why San Diego is a Great Location for Rental Investments
“San Diego Ranked #2 Most Desirable to Rent City in the U.S.” for 2022 by Rent Cafe. This headline speaks for itself. Here are the reasons:
San Diego ranks #1 most fun place to live in the U.S.;
Retire in San Diego among the best places to retire in 2021;
Niche rates 18 San Diego County neighbors with Overall Grades of A+.
San Diego ranked among the world’s 25 ‘Most Beautiful’ cities to Visit; and
San Diego renters enjoy year-round warm weather, beautiful beaches, highly rated public schools, great restaurants, and parks.
On November 7, 2022, Bankrate published a report on the “Cost of Living in San Diego”. It reports that:
Houses remain on the market much longer than earlier this year;
The pace of sales for homes dropped 10.7% in September compared to the previous month;
San Diego is moving towards a buyer’s market;
Yet, San Diego still offers a “strong job market”; and
In September, the unemployment rate was 3.1% lower than the rest of California and the national unemployment rate.
In conclusion, the Bankrate report recommends:
“Moving to San Diego with its vibrant quality of life, great weather and growing job opportunities is alluring.”
San Diego Home Prices Falling 2022 into 2023 Great For Investors - Conclusion
Taking advantage of the falling home prices in San Diego for the rest of 2022 and 2023 is great for investors.
Benefit from current high inflation, interest, and mortgage rates by becoming a housing investor. Forbes claims that the most successful real estate investors increased their rental portfolios during times of market downturns.
San Diego offers housing investors a rental atmosphere rated 2nd most desirable rent city in the U.S.
Bankrate recommends moving to San Diego because of our quality of life, growing job opportunities, and great weather. Yet, they forgot to mention our numerous beautiful beaches, parks, and outdoor activities.
Your Dream Team Starts with an Investor-Friendly Realtor
What’s standing between you and your real estate investing goals? Information overload, analysis paralysis, uncertainty, time, fear of failure?
Overcome these obstacles by partnering with an expert.
Our investor-friendly Realtors will help you find, analyze, and close your next deal.
SoCal Lifestyle Realty knows the greater San Diego area neighborhoods to find the best rental homes bargains.
Contact us today to get ahead of the falling home prices throughout San Diego County.
Steven Rich, MBA – Guest Blogger