San Diego is the 8th largest city in the United States and has a diverse population of 1.4 million people. The San Diego real estate market is popular for a reason.

San Diego is not only one of the best places to live in California but also in the entire country. The city boasts great weather and some amazing homes.

If you're interested in living in California, it's not surprising that you may be considering San Diego. However, just like with other areas of the country, the last few years have brought some big changes to the local real estate market. Buying a home in the city is not the same as it was just a few years ago.

Fortunately, we're here to help. In this guide, we'll help you understand the San Diego real estate market.

Why Buy Real Estate in San Diego?

There are many reasons to live in San Diego and the city regularly makes the list of some of the best places to live in California as well as the nation.

With plenty of sunny days each year, a mild climate, access to the ocean, and lots of cultural activities and entertainment options, San Diego is known as a great place to live. There are also plenty of jobs available in the city and the unemployment rate tends to be lower than the statewide average. 

While San Diego is considerably more expensive than other cities in the nation, it has a more affordable cost of living than many other popular areas in California including larger cities such as San Francisco and smaller cities such as Oakland and San Jose.

How Are San Diego Real Estate Prices?

The price of real estate in San Diego has been going up fast over the past 2 years, with the median single-family home price rising from $590,000 in March of 2020 to $850,000 in 2022. However, there has recently been a drop in home prices. Home prices have begun to drop again and hit $825,000 in July of 2022.

Keep in mind that interest rates affect the overall price of a home and monthly payments as well. The dropping prices of San Diego real estate over the past few months are likely due to the recent increase in mortgage interest rates.

How Many Homes Are Available?

Part of the reason that the median price of San Diego homes has risen so much in the past couple of years is that there is lower inventory available than has ever been recorded before.

The peak inventory for San Diego was 26,166 in August of 2006 but has now sunk to the lowest recorded amount. Over the past couple of years, the inventory has gone down, reaching less than 2,000 available homes in early 2022.

Although inventory remains low, the inventory has gone up a bit since then. There were 4,550 available in San Diego in July of 2022.

It's important to realize that inventory is still low in San Diego. Although this trend seems to be changing, it's likely going to take you a lot of effort to find a home that's right for you.

Things to Consider When Buying a Home in San Diego

If you've got your heart set on buying a home in San Diego, you need to know that you'll have your work cut out for you. Not only are home prices high but inventory is low as well. This means that you'll need to move quickly and put in a lot of effort to find the perfect home.

Here are a few more things that you should understand about buying a home in San Diego right now.

What You Need When Buying a Home

Like when searching in other areas of the country, you'll need to follow some best practices to buy a home in San Diego.

To start with, you'll need to make sure that you have enough money for a down payment. On average, you can expect to need a down payment of between 15% to 20% to buy a home in California. However, you may be able to pay as low as 3/5 - 5% depending on what you qualify for.

Keep in mind that the higher your down payment is, the lower your monthly payment will be and the higher amount of equity you'll have in your house. If you pay a down payment of at least 20% of the price of the home, you'll also be able to avoid the need to pay private mortgage insurance (PMI).

In addition to saving up a down payment, remember that you'll also need to have enough money to pay your monthly mortgage payments. You'll typically need to have a debt-to-income (DTI) ratio of around 30%, although some loans will allow the ratio to be even higher.

In addition to this, you'll also need to have a reasonably good credit score to buy a home and to get good loan terms. For a conventional mortgage in the state of California, you'll typically want to have a credit score of at least 600. 

Understanding Financing Options

It's important to consider the types of financing that are available when buying a home in California.

While this wasn't always the case, these days, there are many different loan options that you can make use of when buying a home in San Diego. This includes VA, USDA, and FHA loans.

There are many traditional mortgage options as well as financing options that are a little bit untraditional as well. The CA Housing Finance Agency also offers programs for first-time homebuyers that can make buying your first home in San Diego a reality more easily than you might expect.

San Diego Cost of Living and Salaries

Remember that while the cost of living in San Diego is better than other larger cities in the state, it's still costly. It can be a shock if you're moving to San Diego from a more budget-friendly city or state.

San Diego's cost of living is 44% higher than the national average while the average salary in San Diego is only $68,565, which is $1,900 more than the national average. The costs can be difficult to handle if you aren't prepared for what to expect.

Keep in mind that if you're moving from another city in California, San Diego could seem like a great improvement in the cost of living at first. However, it's not as simple as it seems. While a city such as San Francisco has a 25% higher cost of living, the wages tend to make up for it. 

You'll want to consider the salary you'll be making in San Diego as well as the cost of living carefully when deciding what the best choice for you and your family is.

Best Neighborhoods to Consider In San Diego

If you're thinking about buying a home in San Diego, there are many different neighborhoods to choose from. Here are a few of the neighborhoods that you might want to check out when buying a home in the city.

Point Loma

If you want to have stunning views of the city and the harbor, Point Loma is a great area to consider moving to. The neighborhood is located right next to the hip Ocean Beach community but also has a lot of its own to offer as well.

There are a variety of home types available. Many are waterfront properties that feature ocean breezes and the neighborhood is laidback and comfortable.

Prices are fairly high in this area, but the cost can be well worth it.

El Cerrito

El Cerrito is another great neighborhood to check out in San Diego. The neighborhood is considered "up-and-coming" and will likely grow and become even more desirable in the coming years.

The diverse neighborhood is close to other popular neighborhoods such as Talmage and Kensington but is relatively more affordable. There are great ethnic restaurants and trendy spots in the neighborhood and it's located just west of San Diego State University.

This is definitely an area to consider if you're buying real estate in San Diego. 

Little Italy

If you're looking for a great downtown neighborhood to make your home, you might want to consider Little Italy.

The neighborhood offers a great walkable community and offers a balance of excitement and comfortable downtown living. There are some great cafes and restaurants to choose from and plenty to keep you busy.

The neighborhood features a mix of affordable historic houses. While renting can be pricey, buying a home in Little Italy is very reasonable compared to other San Diego neighborhoods.

Normal Heights

Another neighborhood that you'll want to keep an eye on in San Diego is Normal Heights. This diverse neighborhood features reasonable home prices that are higher than some neighborhoods and lower than others.

Normal Heights is considered a cool and artistic area to hang out in. You'll find plenty to do in the hip neighborhood, which has gastropubs, craft beer bars, and unique cafes.

If you're looking for a vibrant neighborhood in San Diego, Normal Heights is worth checking out.

Gaining a Basic Understanding of the San Diego Real Estate Market

If you want to find a great place to live, you should consider San Diego. While San Diego real estate market prices have gone up in the past couple of years, it's still possible to find a great home in the area. Be sure to consider all of the information above before buying a home in the city. 

Need help with your home search? Click here to find your San Diego home now.