S&P CoreLogic Case-Shiller National Home Price Index analyzed 20 cities for year-over-year jump in house pricing.
The study found that the city with the highest jump is San Diego in California. House prices in the Southern California city increased by 11% in January, according to the report.
A Drop in Demand
It all began in January 2023, when the observation over the housing market in the US. Back then, prices were being corrected as a result of a drop in demand for homes.
That drop was in turn caused by an increase in mortgage rates, thanks to the Federal Reserve’s aggressive hike of the rates in its war against inflation. The correction ended in the spring of 2023.
From New York to Seattle
Since then, the prices have gone up again. The index observed major metro areas, including three cities in California (San Diego, San Francisco, and Los Angeles).
Other cities included in the observation are Atlanta, Boston, Chicago, Denver, New York, and Seattle. In several areas, house prices have gone up, but San Diego recorded the highest increase.
Price Index Report
The price index observes a three-month moving average of home prices. The index accounts for a two-month lag because a house purchase can take up to two months to complete.
The S&P CoreLogic Case-Shiller Index reported that elevated mortgage rates are dampening people’s enthusiasm in buying a home. The rates declined from 8% in the fall but home loan costs rose again in the last few weeks.
LA for Company
But San Diego is not alone in the price surge. Another Californian city also saw a major price hike. That city is Los Angeles.
The percentage is lower in the City of Angels, though. The price surge there only went up about 8.6%. January saw San Diego house prices go up 2% from the previous month, while the uptick in LA was only 0.1%.
Why San Diego?
Why San Diego? Apparently, a moving company called QShark thinks it’s the city’s warm climate and job opportunities that draw people to move there.
The San Diego appeal is still strong for those who have a Californian dream. Some may even be interested in the city’s reputation for holding the largest fan convention in the world, the San Diego Comic-Con. Perhaps, moving there will make it easier for people to attend the event.
Tough Living
But that appeal may soon be lost, thanks to the dire circumstances faced by the fast food industry. How many jobs will be left after the dust settles?
San Diego already has a reputation for the city with the highest living cost in the USA, once again beating Los Angeles for the top honor. It’s hard to imagine that the city will inspire a massive migration to its land.
Gas, Inflation, Fees
Plenty of factors made San Diego the most expensive city to live in. The report that produced the list included different metrics to calculate it like the cost of gas and inflation rate.
Home prices definitely exceeded the national median sale price. Annual costs for housing in San Diego are already high, but then those living in the downtown area must also pay fees to homeowners associations.
California Living Is Expensive
It seems like everywhere in California, living affordably is a challenge. 11 out of 25 areas in that US Most Expensive Cities list are located in California.
Besides San Diego and Los Angeles, the list also has San Francisco, Santa Barbara, Santa Rosa, Salinas, Vallejo and Fairfield, San Jose, Sacramento, Stockton, Modesto, and Fresno. Seven out of these 11 cities are in the list’s top 10 rankings.
Not in Oakland
The situation is not the same everywhere in California. For example, in Oakland, the value of property has fallen and house prices are lower compared to the rest of the state.
The median sale price for a house in Oakland, recorded in 2023, was around $892,000. Based on the same listing, only in Willits and East Palo Alto can you find a home with a median price below the 1 million mark.
Prices Will Rise Again
No one knows when house prices in California will fall. Perhaps, it may never fall. That’s good news for home sellers.
The state will not run out of properties to sell for now. January 2024 recorded over 65,000 houses for sale in the state. And the housing market is not going to crash anytime soon.
Lower the Rates
For the housing market to offer good prices, the mortgage rates will have to settle down first. Whether that happens this year or not (it’s still almost 7% for the 30-year fixed rate at the end of March), some people are optimistic.
Kuba Jewgieniew of the real estate brokerage company, Realty ONE Group, is among those optimistic. Jewgieniew said that Americans can “definitely look forward to a better housing market in 2024 as interest rates start to settle around 6% or even lower.” Let’s hope that optimism becomes reality.
