July 17, 2021

Can You Afford to Buy a Home in San Diego Right Now?

Home Buying in San Diego California

If you are shopping for a home in San Diego right now, you probably are astonished by how much housing costs have climbed. In fact, the San Diego Union-Tribune recently reported that home prices in the city have skyrocketed 20% in a year.

There are many factors contributing to the soaring housing costs. Some of these include recovery from the pandemic, heightened pressure to make speculative investments (including on real estate), low interest rates, high demand for housing, and low supply. You can find out more by reading Why Are Homes in San Diego So Expensive Right Now?

But here is something that is important for you to know: San Diego housing is not as unaffordable as you think. Actually, it arguably is not unaffordable at all.

Homes in San Diego Are More Affordable Today Than They Were in 2007, 1990 or 1980

We have to consider what “affordability” means. That means not just looking at home prices, but putting them in context of consumer finances.

Things to Consider When Buying A Home

To do that, we can consider the average 30-year rates on mortgages, median detached sales prices, median incomes, and payments on housing as percentages of income across the decades.

When we do that, here is what we find:

  • In 1980, homeowners had to spend 60% of their incomes on housing payments.
  • In 1990, homeowners had to spend 48% of their incomes on housing payments.
  • In 2000, homeowners had to spend 39% of their incomes on housing payments.
  • In 2007, homeowners had to spend 57% of their incomes on housing payments.
  • In 2012, homeowners had to spend 28% of their incomes on housing payments.
  • In 2020, homeowners had to spend 34% of their incomes on housing payments.
  • In 2021, homeowners had to spend 38% of their incomes on housing payments.

In other words, homeowners spend far less today as a percentage of their income on housing in San Diego than they did back in 1980, and quite a bit less than they did in 2000 or in 2007 (the recession).

The drop to 28% in 2012 happened right around when the economy started to emerge from the recession. And as you can see, housing today is actually marginally less expensive than it was back in 2000 with respect to income.

So, if you felt like it was affordable to buy a home back in 2000, there is really no reason to feel differently about it now.

Moreover, here are a few other facts that play to your favour:

  • Median household incomes are on the rise. You will need to think about your own household budget, of course, but on the whole, homebuyers and homeowners are making more money. That makes housing more affordable.
  • Housing values will keep rising. A home is both a place to live and an investment. Since home values are still climbing, the property you are purchasing today is going to be worth more tomorrow.
  • Interest rates are still low. The interest rate you pay on your mortgage has a huge impact on its affordability now and years down the line. Today, you have a chance to lock in very affordable rates. If you choose a fixed mortgage rate, you will still be paying those low rates years from now.

Buy a Home Now in San Diego With a Competitive Mortgage

Now you know why this is a great time to be shopping for a home in San Diego, even with home prices increasing. Low interest rates and rising household budgets make for affordable housing.

If you have questions about how much home you can afford, Community Mortgage can answer them. We can also walk you through the application process quickly so you can close on your dream home before prices rise further. To get started, please call (619) 692-3630 to schedule your consultation.

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