San Diego’s housing market slowing down. Is it the new normal?

San Diego’s housing market slowing down. Is it the new normal?

Roger Pettingell Sarasota Real Estate

Housing prices in San Diego are continuing to climb, but the pace at which they’re rising is slowing, reveals a newly released report that tracks pricing trends across the nation.

In May, the county saw prices rise by 25.6 percent annually, down three percentage points from the year-over-year gain a month earlier, according to the S&P Case-Shiller Indices, which measure the change in single-family home values.

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The report marks the second month in a row that annual price growth in San Diego has slowed, likely driven by rising mortgage rates. The Federal Reserve, which is meeting Wednesday, is widely expected to increase interest rates by a three-quarter-point hike, boosting its key rate to a range of 2.25 percent to 2.5 percent. It would be the fourth time this year that it will have raised rates.

“We’ve noted previously that mortgage financing has become more expensive as the Federal Reserve ratchets up interest rates, a process that was ongoing as our May data were gathered,” wrote Craig J. Lazzara, managing director at S&P DJI, in the latest Case-Schiller report. “Accordingly, a more-challenging macroeconomic environment may not support extraordinary home price growth for much longer.”

A month earlier — in April — San Diego home prices were up 28.5 percent annually, down from a 29.6 percent increase the previous month, which was an 18-year high. It marked the first slowdown since October 2021. The continuation of that trend into May could account for the slide in San Diego’s ranking among metro areas with the highest price gains.

Where it had the fifth-highest increase in April, it slid to eighth in May, just behind Charlotte, NC., and Atlanta. Across the country, there has been a slight deceleration in housing price gains, the Case-Schiller report pointed out, although Lazzara noted that growth rates are “still extremely robust.”

Among the 20 cities tracked by Case-Schiller, Tampa led the way with an annual price rise of 36.1 percent, followed by Miami at 34 percent. San Diego had the highest increase of the two California cities — Los Angeles and San Francisco — that are included in the monthly report.

The calculation of the Case-Shiller indices relies on repeat sales of identical single-family houses. The numbers are seasonally adjusted as they turn over through the years. The median price for a resale single-family house in San Diego County in May was $940,000, a $10,000 drop from the previous month, reported CoreLogic/DQNews.

Despite a still strong housing market, rising mortgage rates are clearly making it that much more challenging to buy in a housing market that already boasts some of the highest prices in the nation. In May, Freddie Mac reported that the interest rate for a 30-year, fixed-rate mortgage was 5.23 percent. By June, it had risen to 5.52 percent. Compare that to 2.98 percent in June of last year.

Zillow economist Nicole Bachaud says she is seeing similar fallout in the new-home sales market.

“After months of racing to put up homes in order to meet the red hot housing market conditions,” she wrote this week, “builders are suddenly seeing more and more contract cancellations, sellers of existing homes cutting prices, and homes lingering on the market.”

S&P Case-Shiller Indices

May 2022 annual price growth by metro area

Tampa: 36.1 percent

Miami: 34 percent

Dallas: 30.8 percent

Phoenix: 29.7 percent

Las Vegas: 27.4 percent

Charlotte: 26.4 percent

Atlanta: 26.3 percent

San Diego: 25.6 percent

Seattle: 23.4 percent

Denver: 22.2 percent

Los Angeles: 22.1 percent

San Francisco: 20.9 percent

Portland: 17.4 percent

Boston: 15.7 percent

Detroit: 15.0 percent

New York: 14.5 percent

Cleveland: 14.3 percent

Chicago: 12.9 percent

Washington: 12.2 percent

Minneapolis: 11.5 percent

Nationwide: 19.7 percent

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