When it comes to the subject of whether or not we’re in a housing bubble, I often get asked three related questions:
1. Is it considered expensive to buy a home in San Diego right now?
2. Are we in a housing bubble?
3. Should I buy a home now or rent?
Let me answer these three questions for you.
First, yes it is considered expensive by most standards to buy a home in San Diego right now, but not as expensive as it was back in the mid-2000s.
Second, no I don’t think we’re in a housing bubble. A bubble is more than a market that’s merely expensive—it’s a market that has reached extremes in both pricing and investor sentiment. Think back to the years between 2003 and 2005 when a lot of people were advising other people to buy California real estate because they believed prices would never go back down. We don’t really hear that kind of thing right now. There’s a healthy level of caution, and a lot of people are cognizant of the fact that prices could go down. That’s indicative that our market hasn’t reached an extreme sentiment at this moment.
“We are not in a housing bubble.”
Also, home prices aren’t increasing in San Diego right now the same way they did between 2003 and 2005. If you look at the graph I’ve attached in the video above, you’ll see that the pace of home price appreciation from 2015 to 2017 has only risen 20%, whereas the pace from 2003 to 2005 rose 60%.
It’s important to know that we’re not in a bubble, because what happens to bubbles? They pop, values burst, and they go back to where they started. I think we’re in an expensive market, which affords us the chance for a soft landing.
Lastly, if you’re buying a home and plan on being there at least five to seven years, by all means, buy it. Any short-term price fluctuations won’t matter as much to you, and you have the opportunity to lock in low mortgage rates right now.
If you only plan on being in your home for a short period of time, I recommend that you try renting instead. One thing we know for sure though is that rents are going up, so consider doing a two- or three-year lease.
Also, if you’re a seller and you’re sitting on inflated gains, now is an exceptional time to sell. You’ll have a good chance at dictating both the pricing and terms of your sale.
If you have any more questions about our current San Diego market or you’re thinking about buying or selling a home, don’t hesitate to reach out to me. I’d be happy to help you.