Home prices in San Diego are skyrocketing, and many wonder when prices will peak.

In June, the median home price in the county hit a record high of $750,000, up from the previous record high of $725,000 set in May. The latest all-time high is nearly 25% higher than the median price of $600,500 a year ago.

The record activity appears to be the product of limited supply, low mortgage rates and buyers willing to pay thousands of dollars above asking prices – in one case, $45,000 above asking price – to obtain properties in demand.

Q. Are home prices in San Diego approaching their peak?

Phil Blair, Manpower

YES: Approach being the key word. As long as interest rates stay low and landlords are concerned about ongoing COVID issues, I think normal housing turnover will remain slow. With each price increase, more and more buyers are forced out of the market. I think we will see house prices stabilize, but I don’t see any conditions on the horizon that will cause prices to drop significantly.

Gary London, London Moeder Advisors

YES: As the scarcity of supply, coupled with strong demand, continues to drive prices up, the affordability gap is widening for many, a situation that is not sustainable. In addition, the forbearance, rental assistance and moratorium programs are coming to an end. I think the best we can hope for is a price spike and then some price stability. It is possible that prices will fall if inflation and interest rates continue to rise. However, our region is better positioned than most to weather a downward trend as the local economy remains strong.

Alan Gin, University of San Diego

NO: Economic growth is strong and will likely strengthen as businesses reopen. This will lead to solid increases in incomes, which will continue to stimulate the housing market. People who kept their jobs were able to accumulate enough money for installments (the “COVID piggy bank”), because there were fewer expenses for travel, restaurant meals, etc. On top of that, San Diego has its usual supply problem, as geography and politics limit the amount of construction that can occur.

Bob Rauch, RA Rauch & Associates

Do not participate this week.

Austin Neudecker, Weave Growth

NO: In the short term, the supply-demand balance continues to move in the wrong direction and prices may continue to rise. While the market will likely normalize over time, in the long run, San Diego remains a very attractive place to live. As long as we continue to attract and create innovative businesses that generate well-paying jobs, the near-perfect climate, countless activities, and thriving cultural establishments make our hometown hard to beat!

James Hamilton, UC San Diego

NO: The Fed is on track to keep interest rates below inflation for some time. It’s a caveat to holding your money in bonds or stocks, and makes real estate one of the most attractive investments available today. Rising house prices may not last forever, but it’s too early to call the peak. Don’t sell your home at the first offer, because a higher offer may come up.

Chris Van Gorder, Scripps Health

NO: I don’t see prices peaking in the foreseeable future unless there is a significant downturn in the economy that dampens demand. While house prices and surging sales could be hit by rising interest rates, it will be a long time, if ever, before supply catches up to demand. There are just too many people trying to buy. And homeowners are reluctant to sell for fear of losing their price by buying another home in the area.

Norm Miller, University of San Diego

NO: We have a trail of higher prices, driven by low rates, low inventory and modest new construction. Sellers fear they won’t be able to find new accommodation if they sell. Keep in mind that it is not so much income that determines second and third home prices, but rather the equity acquired on previous homes and a buoyant stock market that is priced into the next purchase. The hardest part for new home buyers is getting on that carousel.

Jamie Moraga, IntelliSolutions

NO: We are currently seeing reduced inventory and high demand resulting in bidding wars and thousands of asking price overruns. Add to that low interest rates and a prime location, San Diego continues to have a booming housing market. The pandemic has also boosted the market in unique ways, as homebuyers are looking for more space because they’re spending more time at home. Until demand recedes and interest rates rise, we should continue to see San Diego home prices rise through 2022.

David Ely, San Diego State University

NO: Housing demand has outstripped new home construction for years. A dramatic expansion in housing supply needed to resolve the imbalance seems unlikely in the foreseeable future. Low mortgage rates over the next few years will continue to stimulate home buying. Home price increases in San Diego may slow as more residents are pushed out of the market, but market imbalances will continue to drive home prices higher for some time.

Ray Major, SANDAG

Do not participate this week.

Reginald Jones, Jacobs Center for Neighborhood Innovation

YES: House prices will stabilize. Not fast, however. Historically low interest rates have increased buyers’ purchasing power. A limited inventory is essential for the seller. The trend will likely continue through 2022. Looming economic factors are worth watching. Some are predicting mortgage rate hikes sooner rather than later. The lifting of the moratorium on foreclosures leading to overdue inventory could also shake the market. All told, San Diego has an affordability problem that keeps too many working families out of home ownership.

Lynn Reaser, Point Loma Nazarene University

NO: Low mortgage rates, job growth and rising incomes continue to support housing demand. Local resistance, regulatory constraints and construction costs continue to weigh on supply. The City of San Diego is producing less than half the number of units needed to meet its state-set goal by 2029. As more households are shut out of the market, price increases are expected to slow , but without a recession, a peak is not within reach.

Kelly Cunningham, San Diego Institute for Economic Research

YES: Prices are going to peak, but San Diego isn’t there yet. The median home price ratio in San Diego is currently 7.0 times the median household income. This ratio had previously peaked at 8.0 in the fourth quarter of 2005 before collapsing to 3.6 in the first quarter of 2009. Los Angeles’ home price ratio is currently 10.1 times their median income, while that Orange County is already contracting from the recent peak of 8.3 to 7.9.

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