Bad time to buy in San Diego California?

Question

I am the process of getting a property but I want to see what others think about buying right now. Here is my thinking on buying right now in San Diego, CA.

1. The Marco Economy debt to income ratio tells me that we are on the verge of hyper-inflation. So even if i'm buying at a high I don't expect it to be the high in 5 years.

2. The local economy in San Diego is less affected from market crashes, in comparison to other counties and cities across the US.

3. If I don't buy I will enter a contract to live somewhere that is a minimum 2200 a month for at least a 6 month lease which will cost 13,200 and 26,400 if I end up getting a year lease.

Tim Stuart · Answer

Hey Anthony,

There are always great opportunities in San Diego to purchase and make the property work. Whether it's purchasing a small house on a large lot and converting or building an ADU or simply house hacking by having roommates/VRBO, it can be done. Looking at the macro picture, the fundamentals of the SoCal real estate market are looking solid. Low inventory, high demand, low interest rates with a potential hyper inflationary environment in the next years ahead. Like you said, you will be $2200/month minimum for rent when you could purchase for $3000-45000 and house hack or rent to roommates or VRBO to make up the difference. The biggest kicker will be the savings on taxes since you will be able to deduct your mortgage interest and property taxes. If you use it as a business instead of a primary residence, you have depreciation to claim against the cash flow. Not to mention the appreciation potential that you MAY be able to capture in the future with a HELOC or cash out refinance. Whatever you choose, buy smart by purchasing with the plan/ability to add value in combination with fixed-rate, long-term debt. If your debt obligation is less than inflation (3-5%) you are winning in the long term. Maintain capital reserves for emergencies and do some sweat equity projects.

Hope this helps,

TIm

Robert Comstock · Answer

dont over think it.....I think that if your planning on living in San Diego for the next 5+ years buying will trump renting.

Christina Labowicz · Answer

@Anthony San

We are 140,000 rental units short of the current rental demand and need to build an additional 20,000 units to keep up with new demand. Last year we built 6,000 units. We were in Covid, yes, but the previous year it still hung around 10,000 units short of building what additional units we needed to. Life Science and Biotech will keep drawing strong employment to San Diego.

Only the top 26% of the community can afford houses, which leaves the remaining 74% renters.

My investor clients are all still buying properties, in fact they are buying now more than ever. There is a flight to safety which housing = safety, especially in San Diego where supply has not and will not meet the demand, for years and years to come.

So, I think it's safe to say that if you buy now you will be better off than if you didn't buy, or if you waited around to see if the market "softens." The 35 year brokers at my apartment brokerage all joke about their clients always wishing they pushed the extra 1-2-3% to buy a deal they thought was "overpriced" and looking back its quadrupled in value. Our clients here in San Diego only regret the deals they didn't buy.

Also, we are at the forefront of inflation so it's better to own a hard asset now rather than after. If you can owner-occupy it even better, since you can raise that unit's rent to market upon moving out in the future. If you have capital to do a "substantial upgrade" even better, because you can evict tenants and obtain leading market rent (once the state of emergency is over). More units is better than less. You can buy a single family home for $650,000 or you can buy two dwellings for $325,000 each.

Feel free to private message me for more details. There's a lot more to it and I'd be happy to go through it with you.

Twana Rasoul · Answer

@Anthony San Hi There! This question comes up often...Real Estate agents (I am one myself) will never tell you to hold off from buying...Just like going to a dealership to ask if it is a good time to buy a car right now or to wait.  No one can predict the market either and those trying to time the market are usually those that won't end up purchasing  anything and just be too hesitant.

However, I'm also an investor myself and I think it is always a good time to purchase if you are able and it makes sense... (put my money where my mouth is...)I just purchased another multifamily for my portfolio this summer and actively looking for another place before the year is over...doing a 1031 exchange.  I don't care what happens in the market in the short term, long term San Diego has historically done very well in appreciation and cashflow and should continue to do so.

House hacking will be a great way to start and sure beats paying someone else's mortgage as long as you intend on holding for long term and not needing to sell in the next year or two.  :)

Heather Craig · Answer

@Anthony San

Can I ask why your asking this questions when you are already in the process of buying? If you qualify and have a plan of action what does it matter if someone else thinks it’s a bad time to buy. You can only decide if it is right for you. Lmk if you need any other advice. I’m a local Realtor from San Diego.

JJ P. · Answer

This!  My friends and I passed on so many deals 10 years ago over $10K or less price differences.   Now the difference would have been $140K in appreciation or $150K.

I would just point out that if house hacking of any sort is part of your strategy, be sure to get at least 3 bedrooms.

Bruce Woodruff · Answer

It depends on the house as well. Regardless of the market...one can always find a good deal and a horrible deal. As far as a good time to buy we're all guessing. Even the good ole 'supply and demand' theory will not always prevent a cras....errr correction. Sometimes the economy or just people's attitudes say no mas....

Cody L. · Answer

I hope not. I’ve only bought one place in San Diego. The home I live in now. That was like 15 years ago.

But Monday I’m closing on a new home. Way more than I ever though I’d spend on a non income property. So it better not crash now :)

Bad time to buy in San Diego California?

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