San Diego County Real Estate Market Forecast 2023

San Diego County, which encompasses several neighborhoods catering to different lifestyles and buyers, is famous for its excellent summer weather and nature views. Although this county and the surrounding area are being impacted by inflation and rising interest rates, buyers and sellers shouldn’t expect too much slowdown within the robust market in 2023. To better understand the forecast for the next year, here’s what you need to know about the current San Diego County real estate market.

For a quick understanding of what’s happening in the real estate market today, review the following statistics (as of September 2022, courtesy of the Greater San Diego Association of Realtors).

Currently, San Diego County is in a seller’s market, with more demand than supply for buyers interested in neighborhoods in the area. As mentioned above, inventory in the area is down to 1.8 months, which is far from what a balanced housing market needs (closer to six months of inventory). Slim inventory is also evident in the number of new listings, which have dipped well below 2,000. Limited supply is pressing in from all sides for buyers.

Homes in the best neighborhoods in San Diego continue to fetch top dollar. When looking for homes in La Jolla or Carmel Valley, buyers must continue to put their best offers forward. The silver lining is that homes in these areas appreciate greatly, so those looking to buy can count on increased home values in the long term.

Many trends buyers and sellers are experiencing in 2022 will continue into next year. Property prices will keep increasing, although factors like rising interest rates and inflation will temper this increase. Even so, demand will stay high as people search in different neighborhoods. A San Diego neighborhood map reveals desirable areas with high median sales prices for buyers. For example, Coronado homes average $3.2 million, and Del Mar homes are approaching $3 million.

San Diego luxury homes will remain popular, and buyers looking for neighborhoods to raise families or work may find it challenging to buy in the upcoming year. Although the housing market may cool, the leading cause of its cooling is increasing mortgage rates. Buyers should expect higher rates into 2023, while sellers can expect to benefit from market conditions leaning in their favor for the foreseeable future.

Those looking for homes in San Diego County next year can expect a few challenges when starting their search. Rising mortgage rates may prove the most significant hurdle, with average rates statewide being 7.40% for a 30-year fixed mortgage and 6.58% for a 15-year fixed mortgage (as of this writing).

Additionally, the cratering months of supply metric reflects a seriously depleted inventory that is unlikely to replenish by early next year. Buyers looking for homes in 2023 will have difficulty finding dream properties that check all their boxes.

When searching for properties next year, it will be essential to act quickly as a buyer. Due to low supply, we can expect houses on the market to continue selling fast. At the same time, higher interest rates and inflation are working to slow the housing market. So even though prices will remain high, once you settle on a shortlist of houses, you can avoid a bidding war by zeroing in on under-the-radar homes (for example, a quality agent can identify houses for sale but not yet publicly listed).

Sellers in San Diego County will continue to benefit from the seller’s market conditions. Demand for properties in great locations will remain high, especially in neighborhoods with high quality of living and appreciation rates. The slow pace of new construction won’t help the housing inventory much in the next year, so competition for properties in desired neighborhoods will remain high.

Sellers should keep their eye on the effects of high interest rates and inflation on buying power. Sellers may notice demand decrease next year as the market prices out buyers. Overall, sellers will have plenty of time to plan their listings and little pressure to accept low offers.

With nearly half of its residents renting, San Diego County provides plenty of demand for investors interested in renting a property. If you’re an investor already established in the area, you can expect to continue benefiting from the county's large renter pool and high rental prices. By one measure, San Diego County has rental rates that exceed the national average by half.

Investors looking to break into the rental scene within the next year will face the same obstacles as buyers in 2023. Low inventory and high demand will make it challenging to find a property; however, if you find something, you’ll benefit from increased rental rates, plenty of demand, and significant annual appreciation.

Buyers and sellers within San Diego County should expect the seller market trends to continue into 2023 as they plan out when to search for homes (or when to list their property). If you could use help with the home transaction process or navigating the market trends, contact trusted local agent Catrina Russell. Her team is the best local resource for homes in the best neighborhoods in San Diego County. Feel free to begin your search via Catrina’s buyer portal, and contact her when you are ready to take a big step forward on your homeownership journey.